TOKYO - All I want to do is relax and get out of
the heat, said one hot salary man caught by the NHK noon
news camera. And that's just about what Japan's economy
is saying these days.
While Tokyo is suffering a record-breaking
series of hot days (over 30 degrees Celsius
for more than 38 days in a row), Japan's now remarkably
robust economy, which continues to record among the
highest growth rates among the mature major industrial
states, may also be asking for a break.
Make no
mistake: Japan's slow recovery from the dark,
deflation-racked 1990s and early this decade are still
fresh in people's minds. The central Bank of Japan (BOJ)
maintains an anti-deflation stance, as property and some
other prices continue to fall.
And the recent
climb of oil prices to record highs sends chills of
oil-crisis memories through the monetary authorities.
There is some comfort for Finance Ministry officials
that such price rises reflect the strong growth (as well
as threats to supplies) of economies in China and the
United States that has helped spark Japan's domestic
growth.
Still, international confidence remains
high.
After a recent show of confidence in
Japan's growth from the Organization for Economic
Cooperation and Development (OECD) this week, the
International Monetary Fund (IMF) revised upward its
estimate of Japan's real economic growth in 2004 to
4.5%, a number on a par with the US. An earlier estimate
put growth at 3.4%.
As others have noted, the
ever-vigilant IMF looked askance at Japan's slow pace of
reform of its debt-ridden public sector and
still-fragile banking system. But: "There are clear
indications that Japan's long-standing economic problems
have eased," the IMF said.
A look at other
domestic human indicators this week, however, reveals
some of the uneasiness that may be lurking beneath the
surface.
GDP grows, but pace slows from past
quarters Take two of them. According to a total
of 15 private think-tanks polled by one news service,
Japan's gross domestic product (GDP) continued growing
in the April-June quarter, but the pace of the growth
may have slowed from the powerful expansion of the
previous two quarters.
By their collective
reckoning the seasonally adjusted GDP rose by between
0.4% and 1.6% from the January-March term. That means an
average forecast of about 1% growth, compared with the
robust previous two quarters (covering October-March)
when the reported expansion was 1.8% followed by 1.5%
quarterly growth. (A poll of 38 economists at private
think-tanks surveyed by the government Cabinet
Office-affiliated Economic Planning Association shows
they believe Japan's GDP grew at an annual rate of 3.7%
in April-June in price-adjusted real terms.)
In
the view of some of the economists polled by Jiji Press,
there is little to raise concerns. Akiyoshi Takumori,
chief economist at Sumitomo Mitsui Asset Management Co,
reports that a rise of some 1.0% would still confirm
that the nation's economic growth remains strong, on the
back of solid expansion in both domestic demand and
exports.
Naoki Murakami, senior economist at
Goldman Sachs (Japan) Ltd, noted that the estimated
slowdown in GDP growth is attributable to a pause in
inventory investment. But Murakami reckons demand in the
economy is expected to remain as brisk as it was early
in the year, in January and March.
Meanwhile,
exports are believed to have expanded at a faster pace
than imports, boosting overall GDP readings. The
government's numbers will be out shortly.
That
good news on the trade side was already evident in the
preliminary trade numbers just released. Japan's current
account surplus in January-June grew 31.9% from a year
before, the Ministry of Finance said. The
goods-and-services trade surplus, measured on an
international balance-of-payments basis, expanded 49.6%.
The second indicator this week that economists
will ponder during their mid-August vacations has come
from the central bank itself and in its own language.
On Tuesday, the BOJ said that its overall
economic view was unchanged in its August monthly
report. This was released during a meeting of regional
central bank branch managers. The August report did
point out the need for caution over higher crude-oil
prices and their impact on the economy.
The
Japanese economy continues to recover Then came
the key words: "The Japanese economy continues to
recover."
BOJ watchers note that "continues to
recover " was repeated in the August report. BOJ adopted
the view in June, which is the most upbeat wording used
by the central bank to describe the state of the economy
since Japan's "bubble" economy collapsed in the early
1990s.
The assessment was left intact in July
and again in August.
Maybe it is just the heat,
but some would take that to mean that BOJ governor
Toshihiko Fukui is looking ahead to the not-too-distant
future when the Bank of Japan will have to focus on
official interest rates, which are still at 0%, and the
huge amounts of money (also known as liquidity) into the
banking system in its successful effort to bring about
the current era of high economic growth.
That
day of reckoning could come some time in the fall, after
the summer heat abates.
So in the meantime, BOJ
is happy to report this month that the downward trend in
household income "is coming to a halt" and personal
consumption "continues to show some positive movements".
The employment situation is continuing to improve. Banks
have become more willing to lend money. Borrowers say
this has "been improving noticeably".
The BOJ
issued a warning over the record-breaking advance of
crude-oil prices, saying attention is needed to the
oil-market uptrend as well as its impact on the
economies of Japan and other countries.
Of
course, there is the problem of oil prices. Otherwise,
the BOJ maintained its judgment that the domestic
corporate goods price index is rising and the
non-perishable core consumer price index keeps falling
at a moderate pace year on year.
Meanwhile, the
average salary man this week, when most companies go on
short vacations to mark the return of the spirits of the
dead (known as Obon), will be looking to seek recreation
and ways to fend off the heat.
This in itself is
a good sign for the economy.
Food, beverage and
air-conditioner makers are going great guns in the heat
of August. Some try to stay cool. Others escape. Japan
Airlines reports that domestic and international flights
are running at near full.
Others will just stay
home and watch the Athens Olympics on the wide-screen
plasma television sets that have sold heavily, along
other digital gadgets, and helped boost domestic demand
and the GDP.
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