JAPAN-ECONOMY: Finally, Things are Looking up Again

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Apr 30 1996 (IPS) - A smile is back on the face of Kyoko Sato, a 43-year-old housewife who has for the past three years been stocking up the household with goods obtained from supermarket and hardware store sales.

“For the first time in three years my husband’s bonus has been increased and he is also expecting a salary increase. That means I can loosen-up on the purse strings,” she explained.

Her thoughts now are on some new clothes, eating out at restaurants and maybe a holiday out of Japan, maybe in Asia, the United States or Europe.

Not all Japanese are as upbeat as Sato, but there growing signs that Japan’s economy is really on the road to recovery after a slump that saw unemployment figures reach a record high 3.4 per cent last year.

The statistics bureau of the Management and Coordination Agency released figures earlier this month showing that Japan’s jobless rate fell to 3.3 per cent in February, the first decline since June last year

And just last week, the International Monetary Fund (IMF) released a report saying that Japan’s economy looks to be on the upswing after years of sluggish growth.

“There are…now clearer signs of an upturn in Japan,” said the IMF in its semi-annual World Economic Outlook, which forecasts growth of 2.7 per cent this year and 3.1 per cent next year.

Compared to the height of the bubble years during the 1980s when Japan’s economy galloped 10 per cent annually, that outlook might seem rather grim, but it would represent a major improvement on the 0.9 per cent growth recorded in 1995.

More than anything else, says Masayuki Matsuhima, Director at Japan’s Research and Statistics Department, the forecast gives the public and investors a sense of “optimism” and that in itself can be a stimulus for economic growth.

A survey taken by the “Mainich” group of newspapers this month indicated an “upward swing” in business activity in 1996 — albeit moderate — compared to the gloom that had hit most corporations these past few years.

While most respondents worried about the persistent housing loan company or jusen crisis, the general mood showed expectations for much greater economic growth in a few years time.

The jusen crisis concerns last year’s collapse of a number of home mortgage companies that chalked up billions dollars in debt in bad loans.

A government plan to liquidate the companies has come under stiff opposition from a public deeply opposed to the use of six billion dollars in taxpayer’s money to carry out the scheme.

But in another indicator of renewed confidence in the economy, the two largest Japanese long-term credit banks announced earlier this month that they would forgive loans to two of the seven failed housing loan companies.

The Industrial Bank of Japan said it would forgive a 376 billion yen (3.5 billion dollar) loan to Nippon Housing Loans, while the Long Term Credit Bank of Japan said it would similarly forgive a 236.7 billion yen loan (2.2 billion dollar) to Dai-Inchi Housing Loan Co.

Analysts say one of the reasons for the predicted upturn in the economy is the weaking of the Japanese yen which dropped from a high of 78 yen to the dollar last year to around 107 yen to one dollar in recent weeks.

This has eased pressure on Japanese exporters who had began to see their products lose competitiveness in the global market. “The new exchange rates are very welcome,” commented Minoru Saito, an industrial consultant.

Industrial production on a year-over-year shows an increase of more than three per cent in the first two months of 1996 when compared to 1995, according to the Bank of Japan.

The stock market — another important indicator of growth — has climbed to its highest level in more than four years, up about 50 per cent from its nine-year low last July.

The Bank of Japan said in its quarterly economic report released in April that the modest recovery is led by private capital investment and consumer spending.

Corporate profits are likely to have risen in the latter half of fiscal 1995 and are also expected to rise further in the first half of 1996 thanks to increased sales, staff reductions, lower interest rates and a weakening yen against the dollar, said the finance ministry.

Japanese department stores that had been struggling, also reported that sales in January, 1996, were 5.4 per cent higher than in January 1995.

“During the lean years people avoided shopping at expensive departments stores and looked for bargains at smaller discount stores. But the rise in sales are signs of a return in confidence,” explained Makiko Takao, an economist at the Long- Term Credit Bank of Japan.

Still, consumers, having been taught the valuable lesson that the country’s post-war prosperity was not to be taken for granted, is unlikely to go on sudden shopping sprees.

“Japan has changed so much as result of the recession. Its not the same anymore,” said Sato, who has no intention of booking five-star hotels when she and her family take a long-awaited holiday later this year.

By Japanese standards, unemployment remains high. The Labour Ministry reports that the ratio of job offers to job seekers, an indicator of demand for labour, remained unchanged during the first two months of the year.

The ratio shows that there were only 67 jobs being offered for every 100 workers seeking employment in January and February.

Also, the statistics released by bureau of the Management and Coordination Agency, showed that while employment in small and medium sized business grew slightly in January and February when compared to a year earlier, it reported that companies employing 500 people or more remained reluctant to hire new staff.

Analysts say that more than reluctance to hire new staff, the big companies continue to try to cut costs by encouraging early retirement and shifting production overseas.

For example, Japan Airlines, the nation’s leading carrier reports that almost 20 new cabin crew will be recruited from developing Asia. It also plans to shift maintenance operations to China.

Similarly, automobile companies, that made up almost 60 per cent of Japan’s exports during the heady days, are setting up operations in South-east Asia. “Cutting and cutting is our survival motto,” explained Masnori Okabe of Nissan Motor Company, Japan’s second largest auto-manufacturing company.

In the back of the minds of Japanese businessmen are lingering trade disputes with the United States which may force Tokyo to further liberalise its markets.

“The United States could easily force the yen to climb again if it is not satisfied with the pace of liberalisation in Japan,” explains Saito, the industrial consultant. “That would really blow the flicker, we see now, out again.”

JAPAN-ECONOMY: Finally, Things are Looking up Again

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Apr 30 1996 (IPS) - A smile is back on the face of Kyoko Sato, a 43-year-old housewife who has for the past three years been stocking up the household with goods obtained from supermarket and hardware store sales.
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