Little is afoot in Tokyo to create the sustainable domestic demand-led growth that has eluded the Japanese economy for two-plus decades

The Nikkei’s 19% rally isn’t completely irrational. Companies are cash rich and underpinned by an economy enjoying its best run in 16 years, unemployment at 23-year lows and investment banks heralding that Japan Inc. is back.

The missing link, though, is wages. Average monthly cash earnings rose by just 0.6% in October, year-on-year. Worse, labor unions are lowering their ambitions for bigger gains in 2018.

This disconnect raises valid questions about whether Nikkei bulls ran ahead of economic fundamentals not just this year, but in the last few.  Since Prime Minister Abe’s tenure began in December 2012, the Nikkei has gained an eye-popping 128%.

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