The important thing is not to let the economic slowdown drag on.
The estimate for the country's seasonally adjusted gross domestic product during the July-September period fell 0.3 percent from the previous quarter, or down 1.2 percent on an annualized basis. The GDP has contracted for the first time in two quarters.
The negative growth primarily stemmed from a succession of natural disasters during that period. For example, there were heavy rains that hit the western part of Japan, Typhoon No. 21, and a massive earthquake that rocked Hokkaido, which was followed by a large-scale power outage.
Consumer spending, a major pillar of domestic demand, was down 0.1 percent from the previous quarter, marking the first decline in two quarters. This was apparently because people refrained from going out amid unseasonable weather, while prices of fresh vegetables soared.
Exports also marked a decline of 1.8 percent from the previous quarter, registering the first drop in five quarters. While external demand was sluggish, the decline in the number of foreign tourists coming to Japan and the closure of Kansai Airport due to damage from Typhoon No. 21 have further battered the economy.
Even though there was the extraordinary factor of natural disasters, it is a cause for concern that both domestic and external demand plunged.
In light of the index of business conditions for September, the government revised downward its overall assessment of the economy from "improving" to "weakening." The Japanese economy, which had been experiencing slow but prolonged growth, may have entered a temporary lull in its recovery.
Boost resilience to shocks
While some are optimistic that the economic standstill is only temporary, others believe that as the decelerating trend in overseas economies strengthens, the sluggishness of the Japanese economy could drag on. Japan should avoid letting its guard down at all costs.
There are a host of risk factors in the global economy, including turmoil in crude oil markets in the wake of the increasingly tense situation in the Middle East, and the flight of capital from emerging economies accompanied by rises in U.S. interest rates.
In the U.S. midterm elections, Republicans fell into the minority in the House of Representatives. There are also concerns that U.S. President Donald Trump, in a bid to gain more support, will take even a tougher stance in trade negotiations, thus escalating friction with other countries.
What counts most is to reinforce the Japanese economy's true strength and enhance its resilience to shocks coming from abroad.
Companies' capital investment registered a slight drop for the first time in eight quarters.
Yet the demand for capital investment is strong for such purposes as boosting production capacity and saving labor to cope with the labor shortage. Companies, without flinching from the current economic slowdown, should continue making such investments that will lead to their future growth.
Not to be forgotten, either, are human resource investments, including wage hikes.
Raising wages for workers would boost consumption. That would lead to additional production, further boosting companies' business performance. This kind of domestic demand-led, virtuous-cycle economy should be steadily realized.
The government's support is also crucial. Carrying out deregulation that will create new industries; and promoting the employment of women and elderly people so as to solve the labor shortage. These structural reforms should be promoted.
(From The Yomiuri Shimbun, Nov. 15, 2018)
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