Japan's bid to revive its once-soaring economy is on the ropes as an equity market bloodbath and resurgent yen threaten to knock Prime Minister Shinzo Abe's growth plan to the canvas.
Abe met with his hand-picked central bank chief Haruhiko Kuroda for an emergency meeting Friday amid huge volatility on global markets, which is wiping out the gains Abenomics has achieved since the premier swept to power in late 2012.
All eyes will be on Japan's fourth-quarter GDP data on Monday with many economists expecting a contraction of about 0.7 percent in the world's number three economy.
That could deal a near fatal blow to Abe's easy money policies, which he hailed as the answer to beating the deflation blamed for holding back growth in the fast-ageing nation, analysts warned.
"The risk is not that Japan faces an imminent financial crisis or that the Abe administration could collapse, but rather that the government's economic programme simply fails to achieve its goals," said Tobias Harris, political risk analyst at consultancy Teneo.
That would leave "Japan no more capable of reckoning with the implications of demographic decline than before Abe took power".
Abe's plan -- big government spending, central bank monetary easing and reforms to the highly regulated economy -- appeared to bear fruit at first.
The yen weakened sharply, which boosted Japanese exporters' profits and sparked a huge stock market rally that bolstered Abe's claim that "Japan is back".
But sustained growth in the economy has been elusive and Abe's efforts to overhaul the economy have been widely criticised as half-hearted.
"(The plan) actually worked, but now it is moving in reverse," said Takuji Okubo, director of Japan Macro Advisors in Tokyo.
"Policymakers are not really helping to make Japan robust enough so that the economy can actually sustain growth... They have basically failed and need to bear the blame".
- 'Limited impact' -
Japan's benchmark Nikkei 225 is down about 30 percent from its summer highs, while the yen soared nearly four percent on the dollar this week.
Tokyo appears to have little ability to control the yen, which jumped as traders bet on currencies seen as safe in times of turmoil.
The huge forex moves have sparked speculation that the central bank will intervene in markets for the first time since 2011 to stem the yen's rise -- just weeks after the BoJ adopted a widely-panned negative interest rate policy.
The shock move was aimed at penalising banks for storing excess reserves at the BoJ rather than making loans which could boost growth.
But many observers disparaged the move as desperate, while the yen soared on the back of fears about a slowdown in the global economy, marking a serious threat to Japan Inc.'s bottom line.
That in turn could dash Abe's hopes the companies that benefited most from his policies will lift employee wages during the annual spring labour talks.
"The negative response to the BoJ's (negative rate) decision threatens gains made since Prime Minister Shinzo Abe returned to power in December 2012," Harris said, of the two-time premier whose first term ended ingloriously in 2007.
"To the extent that the stronger yen is driven by external factors –- slowing growth in China and its impact on emerging markets, and weak demand in other advanced economies –- any additional measures undertaken by the Abe administration or the BoJ may at best have a limited impact."
Tokyo is calling on cautious firms to raise pay so workers have more money in their pocket to spend, which would drive inflation toward the BoJ's ambitious two-percent target.
But few seem willing to answer those calls and a shrinking economy could deal a death blow to Tokyo's spending hopes altogether.
"Businesses have already begun cutting profit forecasts, a trend that could continue as the yen strengthens," Harris warned.
Now, Abe must decide whether to follow through on another consumption tax rise next year, seen as critical to containing Japan's massive national debt.
A tax hike could further damage consumer spending, as doubts about Abenomics mount.
In a recent survey by the influential Nikkei newspaper, 42 percent of responders said they did not approve of Abe's growth plan, against 37 percent who did.
"Although a recession is not our main scenario, we expect the Japanese economy to stay lacklustre in 2016," BNP Paribas said in a commentary.