Economic Indicators

Japan’s Economic Expansion to Match Second Longest Record

Japan’s Economic Expansion

The Japanese government keeps a positive view on the economic expansion of Japan, as it enters its 57th month of continuous growth in August, matching the Izanagi Boom, which is so far the second longest economic boom in post-war Japan. The Izagani Boom occurred between November 1965 and July 1970 after the 1964 Tokyo Olympics. Heavy consumer purchases buoyed the economy during the aforementioned period. Meanwhile, the longest economic growth lasted for 73 months from February 2002 to February 2008.

Monday witnessed the release of the Japanese government’s monthly report, which described the country’s economy to be “on a moderate recovery,” the same assessment for the third consecutive month. This is also considered an affirmation of the growth in consumption and capital spending.

“We believe it’s highly likely that the current phase of economic recovery is as long as the Izanagi Boom,” Toshimitsu Motegi, who is the Economic and Fiscal Policy Minister, stated in an interview.

The Cabinet Office tasked a panel of experts to investigate relevant data in order to do an analysis, and measure the length and intensity of the economic expansion, which was figured out to have begun in December 2012. The Office similarly marked the economy as “moderately recovering.”

According to the recently released data, the economy of Japan ran an annualized 4.0 percent in the April to June quarter, and this figure is considered as the growth’s fastest pace in two years. Among the catalysts are the buffing consumer and corporate spendings, as well as a boosted public investment.  Public investment was marked “getting firmer” in the previous report in July.

Other information found in the monthly report indicates that both business investment and exports are “picking up,” while private consumption, which accounts around 60 percent of Japan’s gross domestic product, is similarly marked “picking up moderately.”

The Mizuho Research Institute expects this growth to roll continuously until after the consumption tax hike slated on October 2019, “unless a big change happens to the overseas economy.”

Additionally, to further boost fiscal spending, some ruling party lawmakers have requested for a supplementary budget, although the government has asserted that it is difficult to justify additional spending in light of the strengthening economy recovery.

“Under current economic circumstances, I don’t expect the government to submit a supplementary budget at this autumn’s extraordinary parliament session,” Motegi said in agreement with the government’s assertion.

On the other hand, a number of economists cast doubts to the sustainability of this expansion in the previous quarter due to sluggish wage growth.

“Household income growth has not clearly accelerated,” the chief economist at Nomura Securities Co.’s Financial and Economic Research Center, Takashi Miwa, said.

A report suggests that nominal wages per capita grew at a pace of only 0.2 percent, which was quite a plummet lower than the 15.4 percent annual growth during the Izanagi Boom.

According to another report, the number of part-time and non regular workers jumped as a result of the companies’ use of non regular workers to fix their problems related to manpower shortages. Another reason that may hinder continuous economic growth is the curbing of “wages for male workers between 40 and 54,” while companies are “moving back the mandatory retirement ages for their employees.” The latter factor has also been cited by Mizuho Research economist Hidenobu Tokuda.

Yoko Takeda, who is Mitsubishi Research Institute Inc.’s chief economist, stated that the lack of confidence in the sustainability of the social security system “puts a lid on consumption by those in the prime of their working lives.”

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