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2014年4月 5日 (土)

日銀短観 消費増税の反動どう乗り切る

The Yomiuri Shimbun April 05, 2014
Press on with Abenomics to overcome adverse effects of consumption tax hike
日銀短観 消費増税の反動どう乗り切る

The national economy has been recovering steadily, but the task for the moment is to focus on how to overcome the impacts of the consumption tax hike to 8 percent.

The government and the Bank of Japan must take every possible measure to avert an economic slowdown.

The central bank’s Tankan quarterly survey for March has underscored the briskness of the national economy, but at the same time revealed the uncertainty of business prospects.

The diffusion index (DI) for large companies’ sentiment about current business conditions, said to be a barometer for judging economic performance, rose to plus 17 for manufacturers and plus 24 for nonmanufacturers. Both marked an improvement for the fifth straight quarter and the latter represented the highest level in about 22 years. The DI represents the percentage of companies witnessing good business conditions minus that of those feeling the opposite.

The last-minute surge in demand ahead of the tax increase from 5 percent and a package of economic measures centering on public works investments are believed to have contributed to improvement in the current business sentiment among large firms.

However, the DI for business sentiment looking ahead to June showed a drastic drop of about 10 points from March for both large manufacturers and nonmanufacturers. The index for small and medium-size companies is likely to fall into negative territory.

By industry type, the Tankan survey anticipates the index will decline sharply for car manufacturing and retailing, which saw a sharp rise of sales due to the last-minute demand ahead of the sales tax hike that came into effect on Tuesday.

It is unavoidable that sales will temporarily slacken from April in a backlash after vigorous sales before the tax hike. What is important is to prevent the hike from having a serious impact.

Avoid 1997 consequences

In 1997, when the sales tax was raised from 3 percent to 5 percent, the national economy plunged into a serious slump because it was faced with sluggish personal consumption on top of an Asian monetary crisis. It is imperative to prevent the national economy from suffering such consequences.

The Abe administration needs to steadily carry out its Abenomics economic policy, thereby bringing about the maximum effects of its three arrows—bold monetary easing, flexible fiscal policy and growth strategy.

More important than anything else is for the Japanese economy to recover self-sustainable growth, led by the private sector, and build a “fundamental economic power” that can withstand the adverse effects of a tax hike.

It is encouraging that many large firms have agreed to pay increases in this year’s annual spring negotiations with labor unions. This can be regarded as a first step toward a “virtuous circle” in which an increase in income pushes up consumption, leading to an improvement in corporate profits. The promotion of this cycle must be accelerated.

The government is urged to swiftly carry out dramatic deregulation measures that would stimulate the fostering of new industries, as well as drastic cuts in the corporate tax rate, which is higher than those in other major countries.

The latest Tankan survey covered firms’ price forecasts for the first time.

They anticipate that consumer prices are likely to rise 1.5 percent on average a year from now and will be rising at a year-on-year rate of 1.7 percent three and five years from now, all less than the central bank’s targeted 2 percent year-on-year rate.

This indicates how difficult it will be to end deflation. The central bank should earnestly look into the viability of adopting an additional monetary easing measure, while closely watching the trends of business and prices.

(From The Yomiuri Shimbun, April 4, 2014)


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