GDP 'growth' does not reflect depressed household economy -- Akahata editorial, May 20

Japan's gross domestic product (GDP) grew in the January-March quarter, following the positive growth in the previous quarter. Takenaka Heizo, minister in charge of economic, fiscal, and financial policy, stressed that Japan's economic recovery is "relatively smooth, due mainly to an increase in domestic demand."

Prime Minister Koizumi Jun'ichiro tried to use the recent economic data to emphasize that his "no growth without reform" policy was correct and to express his determination to strengthen this policy. This shows that his policy is no different from previous Liberal Democratic Party approaches.

Dependent on exports as before

Despite Takenaka's talk of domestic demand recovery, the present economic expansion is export-driven. Exports began to rapidly increase in the middle of last year, marking a 20 percent increase at an annualized rate (in real terms) for the October-December quarter and 16.6 percent in the January-March quarter. These increases are being driven by strong domestic demand in the United States and China.

The successive Liberal Democratic Party governments in the 1990s used to declare economic recovery and state that their policy was appropriate every time GDP data inflated due to increase in exports or additional national spending on public works projects. The proclaimed "recovery," however, always ending up as a temporary phenomenon.

A rise in profits for large corporations does not have a ripple effect on small- and medium-sized enterprises which employ 70 percent of workers or on the household economy which accounts for the greater part of the national economy. This is why the economic boom is always short-lived. The household economy is further impoverished by the government policy of imposing more burdens on them. The government economic policy has not only failed to remove obstacles to self-sustainable economic recovery but also aggravated the situation.

The Koizumi Cabinet has forced major banks to dispose of bad loans and encouraged large corporations to carry out arbitrary restructuring. As a result, the unemployment rate doubled over the last decade. The cabinet has adversely revised the labor laws to allow the manufacturing sector to use temporary workers and help increase unstable and low-paying part-time jobs instead of hiring full-time workers, thus increasing job insecurity.

Backed by the government, major corporations are cutting labor costs and forcing subcontractors to offer the lowest possible prices for supplies in order to ensure that they can make profits even when their sales are sluggish.

The GDP data confirms that the government "structural reform" policy has narrowed the possibility for ripple effects from business recovery. Major exporters are thus breaking records for profits, but employee compensation in this year's first quarter fell 1.4 percent (nominal) from the previous quarter, and 2.8 percent from the previous year. This is extraordinary.

Defend living standards and jobs

The household economy is in a precarious state. More than 20 percent of households have depleted their savings. The ratio of savings to the household economy is declining sharply.

Decline in the saving ratio is a common phenomenon in Western countries, but this is because people are spending more money. In the case of Japan, people are discouraged from spending and at the same time using up their savings as a final resort.

Ignoring the household economy crisis, the Koizumi Cabinet and the ruling Liberal Democratic and Komei parties are attempting to shift more burdens onto the people through cutting pension benefits and increasing tax rates.

If the present policies continue, the household economy won't improve and no autonomous recovery of business can be expected. The recovery of people's living conditions and employment is the surest way to achieve a real economic recovery. The task now is for the government to change its policy to pay more attention to the living conditions of the people instead of attaching importance to the interests of large corporations, and to establish rules for protecting jobs and defending rules in defense of the right to work. (end)