The economy has continued to expand, but its growth has been slow. It is hoped that an economic environment in which people can feel the benefits will be developed while corporate earnings are upbeat.
Toshimitsu Motegi, minister in charge of economic revitalization, has presented a view that the current period of economic expansion, which began with the December 2012 launch of the second Cabinet of Prime Minister Shinzo Abe, reached its 74th month in January this year, "likely marking the longest expansion in postwar history."
The expansion period will be officially determined following discussions by experts.
During this economic expansion period, corporate earnings have been boosted by the weak yen associated with monetary easing by the Bank of Japan as well as by a global economic recovery. With demand having expanded, the nation's economy has pulled out of the deflationary state in which prices continued to decline.
Employment has also improved, leading the jobs-to-applicants ratio to surpass that seen in the economic bubble years. The policy measures implemented can be said to have achieved some positive results.
However, the nation's annual gross domestic product growth rate was 1.2 percent in real terms on average during this period. The figure is lower than those in the past expansion periods, and the economic recovery has been only weakly felt.
Wages and consumption have lacked strength. This is due to sluggish net income growth with the public burden from taxes and social security premiums increasing. The nation will be put to the test as to whether companies and households can reverse their defensive stance and growth led by domestic demand can be realized.
Prepare for uncertainty
Internal reserves held by companies have reached an all-time high of about 450 trillion yen. Cash and deposits held by households amount to about 970 trillion yen, up nearly 100 trillion yen in the past six years. It is imperative that a vast amount of such idle money be used to vitalize the economy.
Hopes are high for high-performing companies to continue pay increases and contribute to dispelling anxiety about the future among their employees. Improving treatment of non-regular workers is also important. It is hoped that this will be achieved in the upcoming shunto spring wage negotiations.
Furthermore, it is essential that pay increases will spread not only in major companies but also in small and midsize firms, which employ 70 percent of the nation's workforce.
How to cope with serious labor shortages is also a pressing issue.
There is no choice but to increase opportunities for women and elderly people to play active roles and steadily proceed with accepting foreign workers.
The nation's potential growth rate, which reflects the economy's growth capacity, is hovering at around 1 percent. Boosting the productivity of companies is the key to improving this.
Business efficiency should be raised through technological innovation. Companies will then direct their surplus energy to new businesses and increase their capital investment. The government should back the companies through the easing of regulations, structural reforms and other measures.
The government is also urged to create a system to support the development of new industries.
There are many future concerns including U.S.-China trade frictions and Britain's withdrawal from the European Union. The slowdown in the world economy is likely to worsen.
Room for implementing measures has become narrower in both fiscal and financial areas. The government and the Bank of Japan must take all possible measures to respond to these circumstances.
(From The Yomiuri Shimbun, Feb. 2, 2019)
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