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2014年7月 4日 (金)

日銀短観悪化 増税ショックを軽視するな

The Yomiuri Shimbun
Govt should not underestimate impact of consumption tax hike
日銀短観悪化 増税ショックを軽視するな

The findings of the latest business survey suggest that we should keep a cautious and close watch on economic prospects in the days ahead.

The Bank of Japan’s Tankan quarterly survey for June showed that business sentiment among both large manufacturers and nonmanufacturers deteriorated for the first time in six quarters. The diffusion index for large manufacturers’ current business confidence stood at plus 12, and that of large nonmanufacturers at plus 19, both down from the previous survey in March.

Business sentiment deteriorated particularly among automakers and retailers, the sectors hit hard by a drop in demand after the last-minute surge prior to April’s consumption tax rate hike.

The leading index reflecting business outlook toward September among large manufacturers came to plus 15, a modest three-point improvement over the June outlook, while the same leading sentiment index among nonmanufacturers remained flat.

Finance Minister Taro Aso said the nation’s economy “continues to be in a moderate trend of recovery, while keeping the impact of the consumption tax hike to a minimum,” showing the government’s confidence that the economy will weather the tax hike’s effects.

However, the momentum of the recovery is not so strong that we can allow our guard to fall.

Worrisome economic indicators have also emerged, including a marked decline in household consumption. The key to pushing consumption upward is an increase in household income.

Partly due the urging of Prime Minister Shinzo Abe’s administration, the pace of wage hikes, negotiated through annual labor-management talks, rose to around 2 percent, which has been a boon for Japanese households.

The consumption tax hike has been passed on to consumers through the prices of goods and services since April, and as a result, prices have risen by around 3 percent. The reality is that the wage hike has not kept pace with the price increase.

Wages must grow

The government needs to use policy measures to support the momentum toward an “economy in a virtuous cycle,” in which companies with strong business performance give part of their profits back to employees in the form of wage hikes and increased bonuses, helping to drive overall consumption.

The government must steadily implement measures included in the new growth strategy recently adopted by the Cabinet, including a reduction in the effective corporate tax rate and regulatory reforms.

One cause of concern is the increasingly serious labor scarcity in the construction, restaurant and other industries, forcing construction firms to stop accepting new orders and chain restaurants to temporarily close outlets, among other adverse effects. As reality stands now, this development may put a damper on the recovering economy.

We should also expedite other efforts such as eliminating the labor market “mismatch,” in which the needs and desires of businesses seeking manpower fail to match those of people looking for jobs.

Labor scarcity is bound to spread through a wide range of sectors of the Japanese economy, parallel to the declining population.

The public and private sectors should cooperate on earnest efforts to secure a sufficient labor pool over the medium and long term, for instance by better incorporating more women, elderly people and foreigners into the workforce.

In order to steer a private-sector-led economic recovery on a steady track, it is also essential for businesses to make full-fledged investments in plants and capital equipment. We would urge businesses to invest proactively in growing sectors, taking advantage of such measures as the law concerning the strengthening of industrial competitiveness.

The steady resumption of operations at nuclear power plants whose safety has been confirmed, and restoring a secure and stable supply of electricity are essential conditions to establish a firm foundation for sustainable economic growth.

(From The Yomiuri Shimbun, July 3, 2014)


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