Economy on track to renew postwar expansion record

January 3, 2018

Tokyo- Japan is believed to be on track to enjoy the longest economic growth since the end of World War II, economists say.

The current expansion phase will break the current postwar record of six years and one month, from February 2002 to February 2008, if it lasts until January 2019.

The phase started in December 2012, when Prime Minister Shinzo Abe launched his second administration with his Abenomics reflationary policy.

Speaking to Jiji Press, seven prominent private economists all predicted a new record, forecasting that exports will remain strong on the back of robust overseas economies including the United States and that domestic employment and pay will continue to improve moderately.

They expect the Japanese economy to continue to expand at least until around when the consumption tax rate is raised to 10 percent from the current 8 percent in October 2019.

The expansion "will be sustained until summer 2020, when the Tokyo Olympics and Paralympics will be held," Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co., said.

Nevertheless, most of the economists believe that there is unlikely to be a situation in which companies accelerate the pace of pay hikes so that large numbers of people can feel the benefits of the economic recovery.

In a bid to create a robust virtuous economic circle, the Abe administration is urging the business community to accept a pay rise of 3 percent in the 2018 "shunto" nationwide labor-management negotiations. Tax breaks are offered to companies increasing salaries to workers and capital expenditures.

Despite the government initiative, "pay hikes will be limited to about 2 percent, as in the previous year, as both the labor and management sides are expected to remain focused on job protection," said Takashi Miwa, chief economist at Nomura Securities Co.

"Many workers will be unable to feel the economic recovery, due to delays in promotions and cuts in overtime pay" in line with the government's work style reform, said Shunsuke Kobayashi of the Daiwa Institute of Research.

On possible drags on economic growth, many economists cited overseas risks, such as a slowdown in the Chinese economy's growth, a global stock market tumble and deterioration in the situation over North Korea.

Shinichiro Kobayashi, senior researcher at Mitsubishi UFJ Research and Consulting Co., said domestic corporate activities will be constrained by labor shortages, which are particularly conspicuous in the construction industry.

Such labor constraints "will further tighten as Olympic-related projects begin in earnest in 2018," Kobayashi said. Jiji Press