Japan still looks troubled. To be sure, the economy recorded a surprisingly strong 4.1% annualized real GDP growth in the first quarter, much of which reflects government spending. Otherwise, the flow of news still points to the same tepid growth that has troubled Japan for more than 20 years now. Four of the last six quarters have shown real declines, including last year's fourth quarter. This once powerful exporter faces a deficit in its balance of international payments, while spring data releases show industrial production is declining. The country also continues to face the threat of deflation. Consumer prices have risen only because of past fuel price hikes. Now that the cost of a barrel of oil has declined, Japan will likely see aggregate price declines again. The stock market has not missed the point either. It has fallen some 15% since April. The recent downgrade by Fitch in part reflects this economic picture. Still, there are opportunities.

Commentators have identified four proximate causes for Japan's relapse into weakness. Most obvious is the lingering effect of 2011's earthquake and tsunami. These have left Japan with only four of its 54 nuclear power reactors in operation, constraining industrial capacities generally and forcing a 25% increase in fossil fuel imports. Recession in Europe and severe flooding in Thailand have hurt Japan's critical export sector. Most important is the rise in the yen, which has gained almost 40% against the dollar and even more against the euro since 2007. The initial up move in the yen occurred because Japan was seen as a haven during the 2008-2009 financial turmoil. More recently, the yen has offered a haven from the uncertainties of Europe's debt crisis. Whatever the cause, the yen's rise has hurt Japan's export performance and encouraged a greater reliance on imports.

But something more fundamental is also holding Japan back, as it has for more than 20 years now. The advancing average age of Japan's population is a part of that problem. Japan has already reached a point where it has barely over three people of working age for each over 65 years. Such a shortage of working hands and minds, especially relative to a huge, dependent group of retirees, cannot help but hold back the pace of growth. Making the problem worse is that Japan, in all this time, has failed to adjust its economic model for this demographic reality. Its economic emphasis remains on manufacturing for export. No nation can stay the workshop of the world, as Japan once was and still strives to be, when so much of its population has reached retirement age, especially when surrounded by youthful, eager, cheaper populations elsewhere in Asia. No doubt if today's particular problems were to lift, Japan would do better. Even so, its economy would still face these fundamental constraints, as it has for two decades when other particulars have lifted.