Prime Minister Shinzo Abe commented on the current Japanese economy by saying, “Exports and production partly remain on a weak note and we need to fully pay attention to the trends in overseas economies.” He made the remark at a meeting of the Council on Economic and Fiscal Policy on May 14. He also pointed out, “It’s important to secure a virtuous cycle of growth and distribution by securing support for domestic demand.”
It was the first time for the prime minister to give an assessment of the economy since the Cabinet Office on May 13 released the March diffusion index, in which it downgraded the overall assessment of the domestic economy to “worsening” for the first time in six years and two months. Ahead of the consumption tax hike to 10% in October, the government and the ruling parties are poised to adopt a flexible response with a view to taking economic measures if the U.S.-China trade conflict dampens the domestic economy.
Tuesday’s meeting primarily discussed the economic and price situations. A nongovernment member of the council suggested that “it’s important to carefully watch for risks from overseas and swiftly take macroeconomic measures when such risks become tangible.”
The government incorporated economic measures worth more than two trillion yen, including a system of reward points for cashless payments and shopping vouchers, in the fiscal 2019 budget as a measure to offset the consumption tax hike. The nongovernment member’s proposal eyes additional measures in fiscal and monetary policies.
The prime minister has repeatedly said the government will raise the consumption tax as planned unless something as drastic as the 2008 Lehman Brothers collapse occurs. Prior to the Tuesday’s meeting, Finance Minister Taro Aso held a press conference. He said at this stage he doesn’t think the potential negative impact of the U.S-China trade dispute on the Japanese economy would become comparable to the Lehman shock.