The Key To Our Recovery Is the Comeback of the American and Chinese Economies

Prime Minister Abe Shinzou has proposed ‘crisis relief,’ stressing that Japan must free itself from deflation, correct the high-valued yen and implement economic growth.

Toward the end of last year, he stated that he would continue limitless monetary easing until an objective of a 2 percent increase in consumer prices was achieved. He also indicated that he would compose a large supplementary budget early in the New Year.

We must finally free ourselves from deflation and put an end to the so-called 20 lost years.

There is risk in foreign problems

The latter half of last year saw the Japanese economy stall due to reverberations caused by problems such as the decline in exports. This year, most of the privately held investigation agencies are predicting economic recovery and anticipating a 12 percent growth rate, excluding price fluctuations. This is based on the belief that the American and Chinese economies will make a comeback, leading to an increase in exports.

Certainly, the Chinese economy is showing signs of having bottomed out and the World Bank is expected to show growth exceeding 8 percent. However, consumer spending is lagging. We must question the ability of the Xi Jinping leadership. There is also concern over a boycott of Japanese products over the recent territorial dispute.

The American economy can shift due to an improvement in the housing market but there is a rough road ahead to avoid the lapse tax cuts and reductions in annual spending. There still remains anxiety over the recently reelected President Obama’s leadership. The European Union has been shaken by debt problems and is in a state of reduced activity and the future of various countries of southern Europe is unclear. The risk of these foreign problems is conspicuous. There is no room for optimism.

The effects of electrical power problems

There is a need for policies helping corporations to recover.

The rising cost of electrical power due to the suspension of nuclear energy is another cause for worry. The Minister of the Economy, Trade and Industry, Motegi Toshimitsu, has made clear his plan to reconsider the objective of zero nuclear power by 2030. The government must deal with electrical power problems adequately because of this sector’s large effect on the economy.

There are indications of a return to the old Liberal Democratic Party politics with regards to measures to boost the economy focused on public works. There is a need to focus on the repair and maintenance of aging facilities that does not devolve to pork barreling.

There is concern that funding these measures to boost the economy by increasing the national debt will cause distrust in the market over Japan’s financial affairs, as its debt is among the worst of the advanced countries.

With the current background of long-term deflation, there is a deterioration of domestic employment and wages due to an overall weakening of industry. In order for continued medium-term growth, there needs to be strong international competition and the nurturing of industries that earn profit domestically and overseas is indispensable. The Abe administration must rework their growth strategy and have a sound and clear implementation schedule.