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2009年6月21日 (日)


--The Asahi Shimbun, June 19(IHT/Asahi: June 20,2009)
EDITORIAL: Outlook on the economy

The government on Wednesday effectively proclaimed that the economy has bottomed out, citing signs of recovery in industrial production and exports. No doubt many people felt the announcement is divorced from reality.

The unemployment rate is on the rise, and the ratio of job offers to job seekers is at the worst level on record. People everywhere are gripped by anxiety about their job security. Big companies are slashing summer bonuses. Wages are falling and a growing number of households are feeling the pinch. Consumers are keeping their purse strings tied tightly, and retail sales remain sluggish.
People must be wondering what warrants the government's optimistic view.

That is hardly surprising. While the government is saying the worst appears to be over, both manufacturing output and exports remain at more than 30 percent below where they were last autumn when the global economic crisis surfaced. Indeed, the pace of the steep economic downturn has slowed, allaying fears of a bottomless trough. But there are few reassuring signs of a rebound. That would be a fairer way to describe the state of the domestic economy.

The government may be hoping to stop already weak consumer spending from sinking further by telling the public that the economy has reached its nadir. It may also be trying to strengthen its political position before the Lower House election that must be called by September. The government probably wants to impress upon voters that its massive economic stimulus package has worked wonders.

But this is no ordinary recession that can be overcome simply through measures spelled out in the package.

When Japan finally emerged from the prolonged malaise following the collapse of the late-1980s asset-inflated economy, the U.S. and Chinese economies were in good shape, supporting Japan's recovery by gobbling up this nation's exports. But now, the financial systems in the United States and Europe are unstable, and it will likely be a while before their economies regain strength.

In China, the gargantuan fiscal stimulus package adopted by the government is beginning to produce results. But it is unclear whether the Chinese economy will grow rapidly again when the effects have run their course.

The global situation does not warrant calls for Japan to depend on economic recovery driven by external demand. That explains the cautiousness of Kaoru Yosano, minister in charge of economic and fiscal policy, at a news conference when he declared the domestic economy has bottomed out.
"Japan cannot recover on its own, and there will still be downside risks, depending on the course of the world economy," he said.

The fight against this recession is going to be long and drawn out. Policy measures designed mainly to provide a temporary stimulus won't work. The government should rather make all-out policy efforts based on a long-term perspective. Such efforts should focus on putting the economy on a stable growth track. This can be done by nurturing new industries and creating a sense of security among the public. Fixing the nation's troubled social security system and restoring fiscal health are the key.
Given the nation's demographic decline, there is a clear limit to any growth in domestic demand.

In particular, social security reform is an urgent challenge. We readily acknowledge that it will be difficult to implement drastic tax reform, such as raising the consumption tax rate, before the economy recovers. Clearly though, consumption tax is the most promising source of revenue to finance social security spending. But both the ruling and opposition parties should offer basic plans for overhauling the social safety net as key planks of their campaign platforms for the looming election.

In his recent Diet face-off with Prime Minister Taro Aso, Yukio Hatoyama, president of Minshuto (Democratic Party of Japan), pledged to keep the consumption tax rate unchanged for four years if his party comes to power. Aso ripped into Hatoyama, saying debate on a hike in the consumption tax rate is no longer avoidable.
Both party leaders need to talk more specifically about their policy proposals and their plans to finance them.


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