A few months ago, Stephen Williamson posted this unfortunate picture.
It turned out that the large drop in inflation that he thought was evidence in favor of his views on monetary policy was actually the result of an accidental misuse of Japan data (as I pointed out in this post and in the comments on his blog). He corrected the mistake and adopted a wait and see attitude, "Thus, the Bank of Japan seems to have had some difficulty in producing inflation - but this time may be different. Given that the Bank seems intent on holding the short-term nominal interest rate at zero (essentially), I don't see it, but I'm curious to see how the data unfolds."
Well, we've waited a bit and can see a little more. Let's update the graph:
Wow! It's almost directly opposite of the original. Japan yoy inflation is up close to 4%. What liquidity trap?
It's interesting to note that way back in April of 2013, we noticed that markets were predicting a rapid rise in the second year of Abeonomics. The market predicted .35% for year one (until April 2014) and then 2.3% the following year. Well, the market estimate was obviously low. Inflation actually averaged about 0.89%, but we may be seeing that the dynamics of back loaded inflation is substantially correct. Now will the BOJ be able to hit their target? What is their target?