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ECONOMY > Economic Indicators

Editorial: Japan gov’t ‘moderate economic recovery’ assessment at odds with reality

  • May 25, 2019
  • , The Mainichi
  • English Press

The government has released its monthly economic report for May, partially revising its economic assessment downward based on lingering weaknesses in exports and production. Nevertheless, the government maintains that on the whole, the economy is recovering at a moderate pace.


Minister in charge of Economic Revitalization Toshimitsu Motegi explained that the economic fundamentals supporting domestic demand remain solid.


The partial downward revision stemmed from a decline in exports of semiconductors and other items due a slowdown of the Chinese economy, and dropping domestic production. The government, however, maintains that Japan’s economic recovery is continuing, on the basis that preliminary figures for real gross domestic product (GDP) for the January-March quarter rose an annualized rate of 2.1 percent, while employment and company profits remained solid.


The problem is whether this explanation matches the actual state of the economy. When looking at the GDP figures for January-March, in addition to a decline in exports, both capital spending and individual spending — pillars of domestic demand — dropped for the first time in two quarters. What enabled the economy to maintain positive growth in spite of this is that foreign demand, subtracting imports from exports, appeared to rise significantly because imports marked a large decline due to slumping domestic demand. Looking at these figures, it is evident that neither domestic nor foreign demand is faring well, and there is no force pulling the economy along.


Following the inauguration of the second administration of Prime Minister Shinzo Abe in late 2012, the government has continued to express the position in its monthly economic reports that there has been a continuing “recovery” since the economy turned upward in July 2013. Insisting on a recovery even as a cloud spreads over investment and consumer spending raises speculation that the government is trying to stress the benefits of the Abe administration’s economic policy mix, dubbed Abenomics, ahead of the House of Councillors election this summer.


But no matter how hard the government attempts to fan a recovery mood, this will not prevent a downturn in the economy. Meanwhile, there remain concerns stemming from the economic impact both in Japan and overseas of the move by the administration of U.S. President Donald Trump to impose more tariff increases on China, and the effects of sidelining Chinese communications device giant Huawei Technologies Co. Stock prices are accordingly turning downward as investors expect company profits to fall.


Due to continuing food price increases and wage stagnation, Japan saw the index for household consumer confidence fall for seven straight months through April. In the distribution sector, the tendency to save instead of spend money appears to be growing stronger ahead of an increase in Japan’s consumption tax planned for October.


The government should take a square look at the state of the economy, and also carefully consider the risks, such as the effects of the trade war between the United States and China. If it doesn’t, then it won’t be able to respond appropriately to the uncertainties of the domestic and overseas economic situation.

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