____________________________________________________________________________ ______________ Umm, although I live in Japan, I am terribly uninformed on politics here but I do know that there is a massive public pension system and that there has been recent moves to reform it since it will be facing crisis due to the shrinking population (tax base).
Anyhow, I'd like to hear more about it also. I imagine factors such as deflation, bank bailouts and exchange rates play a role in the current situation. Here's a general over view of the current economic situation:
Japan's economy may move to US model
www.chinaview.cn 2004-07-01 10:01:41
BEIJING, July 1 (Xinhuanet) -- Japan's economy may be moving towards a US-style pattern of consumer-led growth, said Hideo Hayakawa, director-general at the Bank of Japan's research and statistics department.
"There might be a possibility that the Japanese economy is getting closer to a US model," Thursday's China Daily quoted Hayakawa as saying in an interview in Tokyo. "There is no doubt that Japan's consumer spending has gained momentum more than we had expected."
Hayakawa also said that Japan's economic growth and higher commodities prices haven't put a stop to the deflation that has sapped the world's second-largest economy for more than six years.
Consumer spending, which accounts for more than half the economy, fuelled a third of Japan's 6.1 per cent annual pace of growth in the first quarter. Consumer spending has been a missing element in two previous recoveries since Japan's asset-price bubble burst in 1991.
"We don't necessarily expect consumer spending to be a leading force," Hayakawa said. "But it will be fair to anticipate consumption will become a sort of supportive factor for the Japanese economy."
In Japan, rising exports and industrial output cause companies to increase investment and lift corporate profits during an economic recovery. Higher profits lead to higher wages and more consumer spending, Hayakawa said.
Hayakawa supervises the compilation of most statistics and surveys issued by the Bank of Japan, including its quarterly Tankan survey, the most closely watched gauge of business confidence.
Shoppers are spending more freely even as wages fail to rise, and are dipping into savings because they are less worried about job security, he said. Increased spending among retired baby boomers may also support growth, he said. Wages have risen in only three months in the past four years.
Japan's unemployment rate unexpectedly fell to 4.6 per cent in May, the lowest since August 2000, as fewer people looked for work, a government report showed on Tuesday. The economy lost 110,000 jobs, and the labour force shrank by 210,000 people.
"People have had a pessimistic view about future incomes when companies pushed for restructuring," Hayakawa said. "Their outlook is changing as corporate profits are improving and companies' businesses become stable."
Rising oil prices will soon have an impact on overall consumer prices because refiners cannot avoid passing higher costs of products such as gasoline on to their customers, Hayakawa said.
"We probably can't avoid seeing the impact of higher oil prices," Hayakawa said. "For all that, it's unnecessary to change the view that price movements would be slow even though economic expansion continues."
In the case of industries such as automobiles, rising prices are being absorbed by manufacturers because of productivity growth, he said.
He said there's no inconsistency between the central bank's predictions in April that core consumer prices would fall 0.2 per cent while the economy expands 3.1 per cent in the fiscal year ending March 31.
"Some people said the central bank was very bearish about prices while it had a very bullish view on growth," he said. "They said the bank might have intentionally understated price prospects.
"That's wrong. Consumer prices have been moving as we had expected."
Nationwide core consumer prices, which exclude fresh food and which the central bank watches as a key price indicator, fell 0.3 per cent in May, the government said on Friday.
Excluding the impact of higher rice prices because of a cold summer last year that affected the harvest, core consumer prices would have dropped about 0.5 per cent in the month, Hayakawa said.
Bank of Japan Governor Toshihiko Fukui said last week more time is needed to halt the decline of consumer prices.
The central bank is watching if the Tankan this week will show Japan's recovery is spreading to small companies and non- manufacturers and how much rising oil prices will affect corporate profits, Hayakawa said.
"One focus is how far the recovery that started at manufacturers and major companies is spreading," he said. "Oil prices have risen, and another focus is how their impact will be reflected on companies' profit forecasts."
Executives at Japanese manufacturers are the most confident in 13 years because of surging demand for their exports from China and the US, the Tankan survey may show today, economists said.
The index of confidence among large manufacturers probably rose to 17 in June from 12 in March, according to the median of 45 forecasts in a Bloomberg News survey of economists. The index for large non-manufacturers probably rose to 9 from 5, the highest since 1992. A reading above zero means optimists outnumber pessimists. The report is due at 8:50 am today.
The impact of rising oil prices may be found in a detailed version of the Tankan report the bank will release on Friday, Hayakawa said.