Renewed turmoil in global markets is beginning to erode investor confidence in Japanese Prime Minister Shinzo Abe's pledge to revitalise the economy through his massive 'Abenomics' stimulus programme.
Doubts over the efficacy of Abe's cocktail of monetary easing, fiscal stimulus and structural reforms have been growing for several months as the world's third-largest economy fails to motor on and inflation remains a long way off the Bank of Japan's 2 per cent goal.
Those doubts have heightened in the past few weeks as the freefall in oil prices and concerns about China's slowing economy and its perceived policy missteps sent global financial markets into a tail spin at the start of the year.
"The perception on Abenomics is changing," said Tomoichiro Kubota, senior market analyst at Matsui Securities. "It has been boosting share prices essentially by working on expectations. But after all expectations were just expectations."
Speculators, who were firm believers of a weak currency under Abe, became net buyers of the yen in the past couple of weeks, helping to drive the Japanese unit to one-year high of 115.97 to the dollar earlier this week.
