Why Japan's Economic Good News May Be a Dead-Cat Bounce

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In the same vein, businesses will want to borrow money - because paying it back will be cheaper down the road. Because of the demand to borrow, interest rates go up, increasing banks revenues, and giving them still more money to lend. Expanding businesses create more jobs so workers are more confident about their futures - and more comfortable about shelling out for creature comforts. The economy is humming again.

There are signs, in fact, that the Central Bank of Japan may be test-driving Krugmans rather radical plan. "Of course," says Baumohl, "they'd never admit it - a central banks job is to prevent inflation - but I suspect theyve started down that path.

"When youre this deep into a depression, a lot of it becomes psychological and self-fulfilling," adds Baumohl. "A drastic therapy like actually creating inflation may be just the thing."

The upside to inflation therapy is that its akin to psychoanalysis. Once you have dispelled the root neuroses -- and got people shopping again and banks lending again -- the recovery would in theory be self-sustaining. But the current prescription of massive government spending may be more like electroshock treatment. "Give a body a jolt of current when its lying on the table," says Baumohl, "and itll leap into the air every time. Thats what happened with Thursdays GDP numbers. But more often than not, its still dead."

With the rest of Asia in the ward down the hall, on the mend but still feeding through a straw, it may be time for Tokyo to try something else. Otherwise Prime Minister Obuchi's "light at the end of the tunnel" won't be the way out. It'll be just another oncoming train.