Up Or Down?

Now the Japanese economy has been said to be going up. However many people still don't think so. I'll pick up the related articles from three big newspapers in Japan, Yomiuri, Asahi and Mainichi.

The Yomiuri Shimbun
The uptrend in personal spending and exports contributed to boosting GDP, the report says. The GDP is the value of all the goods and services produced in a country.
The quarter-on-quarter growth in GDP for nine consecutive quarters was marked for the first time in 10 years since the previous record set from the January-March period of 1995 to the corresponding period of 1997.

Analysts said this indicates that the current business expansion, the longest in the postwar period, is firm. Nominal GDP--calculated based on current prices--for the January-March period rose 0.3 percent over the previous quarter or at an annualized 1.2 percent, marking a quarterly growth for the second straight quarter, but the growth rate was half that recorded for the real GDP. The real GDP growth rate for fiscal 2006, which ended on March 31, stood at 1.9 percent, the same growth rate as projected by the government.

Hiroko Ota, state minister in charge of economic and fiscal policy, told a press conference Thursday after announcing the preliminary report on the GDP, "It's too early to say the country has emerged from deflation, although departure from it is in sight." The government earlier set the goal of declaring a "departure from deflation" in fiscal 2006.

A breakdown of the January-March quarter GDP by demand showed that private consumption, which accounts for more than 50 percent of GDP, climbed 0.9 percent over the previous quarter, registering growth for the second straight quarter. The growth is attributable to the brisk business performance of the fast-food and restaurant industries, and favorable sales of beer and other drinks due to the unusually warm winter. Exports jumped 3.3 percent in the January-March quarter, surpassing the growth rate of 0.8 percent recorded in the previous quarter to mark the eighth straight quarterly growth. Plant and equipment investments dropped 0.9 percent for the first decline in five quarters, a result caused mainly by the drop in investments in communication business and car production. (May. 18, 2007)


The Asahi Shimbun
The nation's economy continued on its record-setting period of expansion, but analysts warn that is still too early to break out the bubbly. They say a number of factors remain problematic, including shrinking corporate spending on plants and equipment and a possible future slump in consumer spending.

Japan's real gross domestic product increased by an annualized 2.4 percent in the January-March quarter, or by 0.6 percent from the previous quarter, according to the Cabinet Office's preliminary report released Thursday.

The seasonally adjusted figures represent the ninth straight quarter of expansion, fueled by growth in personal spending and exports. Although the annualized growth rate exceeded the government's estimated potential growth rate of nearly 2 percent, it was still less than half of the 5 percent rate recorded in the December-October quarter in 2006. The government boasts that the current economic expansion has exceeded the Izanagi boom, which lasted a then record 57 months from 1965 to 1970.

But analysts warn that the current economy lacks dynamism. In fact, some key components weakened in the fourth quarter of fiscal 2006. Corporate investments in factories and equipment, which had been the driving force in the recent recovery, declined by 0.9 percent from the October-December period, when the figure jumped by 2.3 percent. The shrinkage underscored a lack of confidence in the electronics and communications industries, as well as among automakers.
Personal consumption, which accounts for more than 50 percent of GDP, increased by 0.9 percent in the January-March period thanks to the warm winter, according to the Cabinet Office's report. Sluggish consumer spending had long been blamed for the previous economic doldrums. But the rate has been recovering since the July-September quarter of 2006, when spending declined 1 percent.

For the January-March quarter, the warm winter encouraged consumers to spend more on dining out, alcoholic beverages and recreation. However, a Cabinet Office official said the warm weather was about the only factor that contributed to the growth in household spending.
The 0.9-percent growth in personal consumption was, in fact, lower than the 1.1-percent increase recorded in the previous quarter. The declining growth rate--coupled with the sluggish hike in workers' wages--has fueled doubts that personal consumption will stay on track for a sustainable recovery.

Under the central government policy of transferring tax sources worth 3 trillion yen to local governments, the national income tax on individuals has been lowered since January. But local resident taxes will be raised in June to offset the reduction in the national income tax rate. That increase will push down personal consumption by 0.4 percentage point in the July-September period, according to the think tank. "It is too early to determine that personal consumption has fully recovered when considering temporary factors, such as the warm winter and the tax effects," said Takahide Kiuchi, a senior economist of the institute. Exports rose sharply, by 3.3 percent, in the January-March quarter, and contributed to 0.4 percentage point in the 0.6-percent GDP growth. Exports of electronics, communications machinery and chemical products increased to China and Europe. But exports to the United States and Southeast Asia declined.
And deflation has not been licked. The GDP deflator, an index indicating overall price trends, fell by 0.6 percent in fiscal 2006 from a year earlier.
(IHT/Asahi: May 18,2007)

The Mainichi Shimbun
Japan's economy expanded for a ninth-straight quarter from January to March, but the pace of growth in the world's second-largest economy began to slow.
Compared to the previous quarter, the economy expanded 0.6 percent, the Cabinet Office said Thursday. If maintained for a full year, the economy would grow 2.4 percent, just below the 2.6 percent forecast by economists surveyed by Dow Jones News wires.

While the increase marks the ninth straight quarter of growth, the pace slowed from a 5.5 percent annualized growth rate in the October-December period. That was the fastest growth rate logged by Japan in three years.

Japan has staged a recovery from more than a decade of economic stagnation, with help from healthy exports and an increase in domestic consumption. But stable growth is still vulnerable to a possible slowdown in the United States, the world's largest economy and a major market for Japanese exporters. Just last month, the United States reported its worst economic growth in four years on concern that troubles in the U.S. housing market will trigger a recession. The economy crawled at a 1.3 percent pace in the opening quarter of 2007.

Also sapping strength from Japan in the January-March quarter, the country's fiscal first period, was a 0.9 percent drop in business investment. That marked a sharp reversal from a 2.3 percent increase in the previous quarter.
Consumer spending, which accounts for more than half the economy, climbed 0.9 percent from the previous quarter, but the pace of expansion slowed too, from 1.1 percent in October-December.
Exports helped offset slowdowns in other sectors, shooting up 3.3 percent. They rose a meager 0.8 percent in the previous quarter. (AP)
(May 17, 2007)

My insight is that the economy depends on the aggregate demand. As macroeconomics says, the economy would go up faster than the reports say if the demand were even stronger. The fast-increasing growth is not so important to us, but it is important that we can be satisfied with the present condition of the economy and our life. The critical question is: are you happy with your life?