August 21, 2013
The Abe Cabinet seeks to give the final go-ahead for the planned consumption tax hike in April 2014, claiming that Japan’s economy is resuming growth. Is the economy really returning to a recovery track as the government claims? On this issue, Akahata interviewed Fujita Minoru, professor of economics of J. F. Oberlin University. The summary of the interview is as follows.
The growth rate of real Gross Domestic Product (GDP) for April-June stood at 0.6%, marking positive growth for three consecutive quarters, the Cabinet Office announced on August 12. Prime Minister Abe Shinzo, commenting on the result said, “Japan’s economy is going through a process of recovery.”
Examining the growth rate item by item, households’ final consumption expenditure increased only by 0.8% from January-March quarter, and private residential investment and private non-residential investment decreased by 0.2% and 0.1% respectively. In contrast, public investment rose by 1.8% and exports of goods and services increased by 3.0%.
These results show that the GDP growth heavily relies on government spending, which amounts to a total of 10 trillion yen, and exports boosted by depreciation of the yen.
On the other hand, employment and wages show no sign of improvement. Though the number of employees rose by 690,000 during the first half of this year, regular employees decreased by 100,000 while non-regular employee increased by 770,000, according to a government survey. Another survey indicates that the average regular monthly pay for workers has been falling for six straight months since January.
Exports and public investment can initiate economic growth, but it will not be sustainable unless supported by an expansion in job opportunities and an increase in consumer spending.
The GDP growth is far from sustainable and does not provide the conditions for a consumption tax hike.
The growth rate of real Gross Domestic Product (GDP) for April-June stood at 0.6%, marking positive growth for three consecutive quarters, the Cabinet Office announced on August 12. Prime Minister Abe Shinzo, commenting on the result said, “Japan’s economy is going through a process of recovery.”
Examining the growth rate item by item, households’ final consumption expenditure increased only by 0.8% from January-March quarter, and private residential investment and private non-residential investment decreased by 0.2% and 0.1% respectively. In contrast, public investment rose by 1.8% and exports of goods and services increased by 3.0%.
These results show that the GDP growth heavily relies on government spending, which amounts to a total of 10 trillion yen, and exports boosted by depreciation of the yen.
On the other hand, employment and wages show no sign of improvement. Though the number of employees rose by 690,000 during the first half of this year, regular employees decreased by 100,000 while non-regular employee increased by 770,000, according to a government survey. Another survey indicates that the average regular monthly pay for workers has been falling for six straight months since January.
Exports and public investment can initiate economic growth, but it will not be sustainable unless supported by an expansion in job opportunities and an increase in consumer spending.
The GDP growth is far from sustainable and does not provide the conditions for a consumption tax hike.
