Economy of Japan in Nosedive: Prime Minister Abe and Bank of Japan
Noriko Watanabe and Michel Lebon
Modern Tokyo Times
The economy of Japan continues to be blighted by negative economic data therefore the usual signs of hope appear to be hitting new depressive waves. Latest statistics stress that the Japanese economy between July and September shrank by 1.6%, when applied to GDP (Gross Domestic Product) in this period. This news will send shockwaves to political members who are close to Prime Minister Shinzo Abe.
However, on the positive side for the Liberal Democratic Party (LDP), it currently appears that the main opposition party is in real limbo. Abe must make the most of this reality because it should enable him to stay on a path that he firmly believes in. Therefore, it remains to be seen how this will alter the economic path that the LDP proclaims under PM Abe.
Prior to the GDP figure being released some economic experts had believed that the economy of Japan would hit a decent upturn. Given this reality, many experts had hinted at a 2.1 per cent rise in GDP. Obviously this optimistic figure didn’t materialize therefore Abe must act quickly.
The BBC reports: “Gross domestic product (GDP) fell at an annualized 1.6% from July to September, compared with forecasts of a 2.1% rise … That followed a revised 7.3% contraction in the second quarter, which was the biggest fall since the March 2011 earthquake and tsunami.”
Abe had promised a new approach to the public debt issue and other areas of the economy. Yet, just like other nations, throwing good money at negative economic realities often achieves little despite signs of initial promise. The same reality applies to many European Union (EU) nations. Similarly, the United States (US) seems to be little better because real issues are not being addressed outside of state socialism. This applies to propping up an inept capitalist system that is generating more debt and so forth – along with growing economic gaps between rich and poor.
However, Japan, unlike EU nations and the US – and other nations spread all over the world – can somehow absorb decades of limited growth to stagnation. Of course, some signs of economic growth in the last two decades and more have materialized. Yet in reality these positive signs were a false dawn. Therefore, it was hoped that Abe would tackle this reality head-on in order to galvanize a very complex system.
It must be stated that if America or any EU nation had economic indicators over the last 20 years like Japan, then one can only imagine the severe consequences. After all, look at the mass unemployment rates in nations like Greece and Portugal, and in others nations in Europe, after a limited time of economic negativity. Meanwhile, in America many people lost their homes and America’s national debt keeps on rising. Yet in Japan the unemployment rate keeps on ticking at impressive rates despite decades of mainly economic negativity. In this sense, Japan is a real enigma because international institutions like the IMF and UN gain enormously from the generosity of Japan.
The BBC reports: “The economy shrank 0.4% in the third quarter from the quarter previous … The data also showed that growth in private consumption, which accounts for about 60% of the economy, was much weaker than expected.”
Obviously, the increase from 5 % to 8% in sales tax in 2014 created yet another obstacle to rejuvenating the economy based on several internal factors. In saying this, it is clear that the huge public debt mountain must be tackled. At the same time, the government needs to generate capital in order to maintain the entire system. However, was squandering vast sums on so-called “economic stimulus spending” warranted given the reality of past attempts in this area? Likewise, the Bank of Japan also appears to be out of step – therefore, Japan is once more moving in a negative economic direction.
Lee Jay Walker at Modern Tokyo Times says: “Despite this, it appears that the Abe political bandwagon will continue because the main opposition party is in disarray. Likewise, it is doubtful that Abe and the Bank of Japan under the current leader will put up the white flag. Yes, certain adjustments may occur like putting off the next sales tax hike until better economic conditions prevail. However, it seems more than likely that Abe and the Bank of Japan will remain loyal to certain fundamentals that they believe in – albeit, if curtailed to some extent.”
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