After more than a decade of stagnant growth, the Japanese economy is showing signs of full recovery, with deflation also having come to an end. Since the mid 1990s both supply side and demand side policy solutions to the Japanese stagnation have been suggested. By means of a Factor Vector Autoregressive Model, the paper aims to assess whether the real depreciation of the yen and the quantitative easying implemented by the Bank of Japan have contributed to the recovery of the Japanese economy and to halt deflationary dynamics. The results of the paper point to the effectiveness of these latter policies, as well as to the role exercised by domestic productivity improvements and the expansion of world economic activity.