Fresh macro issues could threaten even modest progress in Japan

Goldman Sachs' David Townshend believes slowing Asian economies and many depreciating currencies in the region bode negatively for the Japanese economy.

Japan bears have recent history on their side. For much of the last two decades, Japan's economy was plagued by low growth and deflation, while many Japanese companies suffered from sub-par corporate governance and profitability. Japanese investors shied away from equities and stocks tended to trade in a boom/bust cycle. The net result was flat returns for the Topix from 1995-mid-2012. Bears will argue Prime Minister Abe's reform results are still mediocre: GDP growth estimates for the next few years still lag other developed markets, while headline inflation is nowhere near 2%. An...