Investors are taking renewed interest in Japan. The Sovereign Society’s Eric Roseman recently says it may be time to invest in the Nikkei. Chuck Butler also thinks the Land of the Rising Sun has a brighter future ahead. But Chuck says a painful period of Japanese-style deflation could be heading to the US soon…

Japan captured some magic in a bottle with their Machine Orders posting a 10.4% rise in May… Here’s the skinny… Equipment orders which signal capital spending in the next three to six months, rose 10.4 percent from April when they climbed 5.5 percent… The experts had forecast a rise of only 1.1%!

The rumors of the Japanese economy’s death have been greatly exaggerated! And I can’t point to it and say its just one report, as this is the second consecutive month of a strong posting in this data! Does this mean the Bank of Japan (BOJ) will react with a rate hike? Not hardly… The BOJ are stuck in the mud, just like the Fed and the Bank of England (BOE) … The BOJ has different problems from the Fed and BOE, who have inflation coming out their ears and no economic growth…

I read my friend John Mauldin’s “Out of the Box” letter yesterday, which was written by Van Hoisington and Lacy Hunt. These two analysts put down a lot of good thoughts that inflation isn’t going to be our problem going forward, but deflation instead… If that’s true, then the Fed’s got an even tougher road to hoe than they do now! And if that’s true… Forget all the rhetoric about raising interest rates here in the U.S. If that’s true, you can take a flyer now on lower interest rates and tons of money supply, and easier credit, and well just about anything else you can throw at deflation. You might as well throw the kitchen sink, because Japan has tried all these things during their decade of deflation… And nothing worked!

Source:  Fighting Deflation Instead of Inflation?