Japan’s economic recovery may be coming to an end once again, as the previous two upturns the country has experienced since the early 1990s proved to be of short duration.

Concern was provoked by the release of private-sector machinery orders that help to assess the corporate investment showing a 3.1% drop in October as opposed to a 1.9% drop in September. Other macroeconomic data have been equally disappointing. Revised GDP figures show sluggish growth in the third quarter preceded by fall in out put in the fourth quarter. October industrial output dropped 1.6%.

There are however a bunch of positives the government achieved on the economic side: the structural problems have been tamed, zombie firms with piles of debt from the roaring 80s have been taken care of, and deflation quiets down.

"Japan had to get through a lot of issues," says Ryo Hino, an economist at J.P. Morgan in Tokyo. "It is in better shape to try and stand on its own feet."

Where to grow is another issue. Japan has not yet generated a sustainable domestic demand, and the exports prospects remain bleak as US and China show signs of slowing down. Japanese exports are also largely dependent on the volatile dollar-yen exchange rate, driven by the seemingly never-ending dollar decline.

"The first half of next year will be the moment of truth for the economy," says J.P. Morgan’s Mr. Hino as most economists predict slowdown or even contraction in that period.

Oil prices have been as negative for Japan as for any oil-importing country, and oil prices are expected to bounce back on top of OPEC willingness to cut quotas.

Hiring slow picks up with the rate of decline for full-time hires shrinking to 0.1% year-to-year in October. The employment prospects are closely interwoven with the consumer spending. Taken together, these factors will determine the fate of the Japanese economy.