Economy failed to reach 73-month postwar growth record: gov’t panel

 

Japan’s economy expanded for 71 consecutive months through October 2018, a government panel concluded Thursday, meaning that the country fell two months short of a record-long post-war growth period as suggested by the administration of Prime Minister Shinzo Abe.

The panel of economists and experts for the Cabinet Office, which retrospectively determines the length of an economic boom, said the expansion began in December 2012, when Abe returned to power, and ended in October 2018, a time when exports were dampened by an escalating U.S.-China tariff war.

In January last year, the Japanese government said the domestic economy was likely in the midst of its longest expansion phase since the end of World War II. But the panel said it did not break the record 73 months of growth achieved between 2002 and 2008.

The panel said in late 2018 that the economic expansion since late 2012 had become its second-longest in the postwar era, surpassing the 57-month boom between 1965 and 1970, which came after the 1964 Tokyo Olympics as Japanese consumers flocked to buy color televisions, cars and air conditioners.

The longest economic expansion ended in February 2008, and then experienced a setback until March 2009 during the global financial crisis.

Japan’s economy had been growing with the help of strong exports, drastic monetary easing and large-scale public works projects, which to some extent had helped improve business and consumer sentiment.

Still, as pointed out by many economists, the middle class in the world’s third-largest economy slowly eroded away during the latest booming period, with real wages for many not increasing, unlike other developed countries, and a large proportion of the populace did not benefit from the recovery Abe has touted.

During the period, the Japanese economy grew on average an annualized real 1.2 percent.

Abe initially planned to raise the consumption tax rate for a second time in 2015, having raised it from 5 percent to 8 percent in 2014. But the second hike, to 10 percent, was delayed to October 2019, when the economy was already entering a recession phase in the panel’s view.

“The characteristic of the latest economic expansion is that exports grew while consumer spending was sluggish, and wages didn’t increase despite a labor shortage,” Hiroshi Yoshikawa, president of Rissho University who chairs the panel, told a press conference.

In the era of the novel coronavirus, the outlook for the Japanese and the global economy remains uncertain.

The Japanese economy shrank an annualized real 2.2 percent in the January-March quarter, contracting for the second consecutive quarter pushing the country into a technical recession.

Many economists expect Japan’s gross domestic product, the total value of goods and services produced at home, to post around or over a 20 percent contraction in annualized terms in the April-June period from the previous quarter.