Business Sentiment Remains Negative in Japan: Wise Words of Shirakawa

Business Sentiment Remains Negative in Japan: Wise Words of Shirakawa

Kanako Itamae, Noriko Watanabe, and Lee Jay Walker

Modern Tokyo Times


Corporate Japan remains unconvinced by the current policies of the government of Japan. Indeed, despite the optimism of Prime Minister Shinzo Abe and the Bank of Japan to beat the deflationary spiral, it now appears that little is developing on the economic front. Therefore, pessimism abounds within corporate Japan because no real economic pick-up appears in sight.

According to several media outlets in Japan the business community believes that the deflationary spiral will remain undefeated even if small shoots of hope may occur from time to time. Equally important, issues related to increased investment in technology that is the latest Abe mantra appear over-optimistic. Similarly, while the minimum wage is significant for the poorest in society, this issue is just one of many ills that befall the business community and common workers on the whole.

Abe and the Bank of Japan initially focused on new monetary policy ideas in order to defeat deflation and kick-start the economy. At the same time, fiscal stimulus by the central government was meant to not only break the deflationary spiral but also to create sustainable economic growth. However, despite certain rays of hope based on this dual approach the overall effect now appears more limited.

Modern Tokyo Times in a past article stated “Recent economic changes based on a not too dis-familiar theory of relying on exporting out of a crisis based on a weakening yen appear to have come off the rails once more. In order to achieve this objective, the government of Prime Minister Shinzo Abe implemented a monetary policy based on being ultra-aggressive. However, from the start, this policy appeared short-sighted and unlikely to break the cycle of deflation.”

In 2013, Haruhiko Kuroda took over from Masaaki Shirakawa at the Bank of Japan. Kuroda, unlike the more conservative Shirakawa, was optimistic that new policies would galvanize the economy of Japan. Yet, from the outset, Shirakawa said, “A lack of cash isn’t what’s keeping companies from increasing capital expenditure.”

According to a survey by Reuters – in relation to the business community – a strikingly high 79% of companies believed that consumer prices will return to deflation either later this year or begin afresh in 2017. At the same time, if the Abe government increases consumption tax then this fact will have a negative effect on household and individual spending. This especially remains true under the current economic prevailing conditions of Japan.

Modern Tokyo Times was worried by the over-optimism of the Abe government and the Governor of the Bank of Japan way back in 2014. Therefore, Modern Tokyo Times stated Shirakawa stated openly that printing money aggressively by itself – or based on other major government intervention – would not solve the long spiral of deflation based on a revitalized Japan. However, Kuroda, sharing the economic mantle of Abe, believes in a Japanese style of shock therapy based on major state intervention. Ironically, for some, this is deemed to be a capitalist approach but it shares much within the area of state socialism – irrespective of the political jargon being used.”

Sadly, two years later and it appears that the above comment remains true. In other words, the caution stated by Shirakawa in 2013 is more in-line with events that are happening now in 2016. This reality highlights the over-optimism of both the Abe government and the Governor of the Bank of Japan.

Shirakawa rightly stated several years ago “If there was a single thing that would have cleared the fog and solved all problems, Japan wouldn’t have been in this situation for 15 years.”


Modern Tokyo News is part of the Modern Tokyo Times group

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