The below covers economic projections by private-sector economists for fiscal 2005, data and analysis for Japan-China trade in 2004 as well as January CPI, retail sales, and industrial production. Also includes societal shifts such as employment and changing attitudes toward the graying workforce in corporate Japan.
Economy
GDP
Compared to government projections, private-sector economists are in general painting a gloomier picture for Japan's economic growth in fiscal 2005. Key risks cited were slower exports to the US and China, the abolishment of a tax break that may undercut consumer spending, and heavy corporate debts that will curb plant and equipment expenditures -- debts that may be yet more difficult to service if deflation continues.
Yet most economists are more optimistic that Japan's economy is indeed slouching toward recovery. The 2005 slowdown is expected to be mild due to higher corporate earnings, major banks' offloading of bad loans, and a near-term burn-off of ICT inventories.
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Table 1 |
GDP Projections by Major Private Economic Organizations, Fiscal 2005 |
|
Research Institute |
Projection |
Comments |
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NLI Research Institute |
0.3% |
Increase in taxpayer burden to curb consumer spending, exports will slow |
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Daiwa Institute of Research |
0.6% |
Credit tightening in China, uncertainty of US market pose obstacles for exports; despite upbeat data for machinery orders in January, there remain debts that could curtail plant, equipment outlays |
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Mitsubishi Research institute |
1.1% |
Fiscal 2005 will be an adjustment phase; sustainable recovery thereafter |
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Normura Securities |
1.1% |
|
|
CSFB Japan |
1.5% |
Acceleration by mid-year in light of uptrend in capital spending, Oct. ~ Dec downturn in consumption due to temporary, special factors |
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Mizuho Research Institute |
1.5% |
|
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Fukoku Mutual Life |
1.8% |
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Norinchukin Research Institute |
2.0% |
Pulled by growth of exports, capital spending |
|
BPN Paribas Securities Japan |
2.0% |
Strong exports, machinery orders, capital spending pushing the economy |
|
Source: Kyodo News, Nikkei; compiled by MIC, March 2005 |
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Trade
Trade between Japan and China set its sixth consecutive record in 2004. Excluding Hong Kong, trade between the two nations climbed 26.9% to US$168.05 billion. The rise was attributed to the larger number of Japanese companies with sites in China, which resulted in more imports of Chinese-made ICT goods as well as exports of materials and components for manufacturing in China.
Exports to the country totaled approximately US$73.8 billion, rising 29%. Imports amounted to US$94.2 billion, a 25.3% climb.
JETRO expects trade with China to reach US$190 billion in 2005.
Consumer Price Index
Continuing to fan concerns of deflationary pressures, consumer prices in Tokyo saw their 65th month of consecutive decline in February, falling 0.5% year-on-year. Tokyo's CPI (Consumer Price Index) recorded 96.3 against a base of 100 for 2000, according to the Ministry of Internal Affairs and Communications. Tokyo's CPI is seen as a leading indicator for prices nationwide.
Price declines in the ICT sectors are seen as major contributors to the CPI's decline. Desktop PC prices tumbled 31.2%, while those of notebook PC fell 28.4%. Telephone and other communications fees dropped by 7.6%, and electricity prices slipped by 4.2%.
Retail Sales
Outperforming economists' previous projections a modest 0.3% increase, retail sales recorded a 2.2% year-on-year rise in January. The increase has underpinned confidence that the economy will return on a path to recovery after the spring of 2005.
Industrial Production
Industrial production rose at a faster pace than expected for January 2005, rising 2.1% compared to previous forecasts of 1.7%. The ICT sector grew 5.0% due to strong demand from telematics applications, as well as video camera purchases running up to school enrollment in the spring. The rise was also chalked up to demand from China and the US -- reasoning supported by a similarly higher-than-expected climb in Korean industrial production. There is also evidence that some output was funneled toward stock rebuilding, as January manufacturing inventories rose by 2% sequentially.
Still, the Ministry of Economy, Trade, and Industry left its assessment of industrial production at "unchanged" -- the same assessment used for the previous five months. Some analysts have pointed out that the upswing is simply a rebound after a half-year of decline, and that industrial production is still vulnerable to reversal.
The ministry projects a fall of 0.5% for February, mainly due to adjustments in the digital home appliances segment. A decline of 1.0% is expected for March owing to limp demand in the general and electrical machinery sectors.
Society
Unemployment Remains Low
January's seasonally adjusted unemployment rate remained at a six-year low of 4.5%, unchanged from December. According to the Ministry of Internal Affairs and Communications, the number of jobless people fell 270,000 to 2.96 million year-on-year. The total number of jobholders hit 62.6 million, the first year-on-year rise in three months. The government has maintained that the employment situation in Japan is undergoing improvement -- an assessment shared by private-sector economists who broadly feel that the situation likely to bring about an increase in worker incomes.
Jobless rates among women were particularly low in January, hitting a 77-month valley of 4.1%, while the total number of female job-holders climbed 310,000 to 25.8 million. The jobless rate for men moved up 0.2 percentage points from December to 4.8%, while the number of employed men grew at a more sluggish 90,000 to 36.9 million.
The number of people fired or laid-off saw a sharp decline of 230,000 year-on-year to 720,000. Those who quit accounted for 1.1 million, growth of approximately 80,000.
Embracing a Graying Workforce
Attitudes toward senior pay packages are changing in corporate Japan. Toray Industries, Japan's largest synthetic fiber producer, plans on introducing a regular pay raise system applied to all employees aged 18 to 60, the company's retirement age. Traditionally, workers between 55 and 60 were paid lower wages, as the common perception was that elderly workers have lower living expenses. Yet with the building trend of marrying and bearing children later in life, heavier financial burdens remain around retirement age. Meanwhile, declining birthrates and the looming mass retirement baby boomers bode for an ever-tighter labor market, putting more power into hands of seniors.
By as early as fiscal 2006 Toyota plans on implementing a program to hire back previous employees that had retired after reaching the retirement age of 60. The company is expected to hit a new high in domestic production during 2005, but currently has a severe shortage of staff in its production and development units. Added the impending surge of retiring baby-boomers, Toyota is working to higher back old talent up to 65 years in age. Returning personnel are also hoped to play a key role in passing on innovation and technological development to younger workers.
In a report by the Population Division of the United Nations Department of Economic and Social Affairs, more than 15% of Japan's population will be more than 80 years old by 2050. Japan, which currently enjoys the highest life expectancy of 81.9 years, is expected to see life expectancy jump to 88.3 between 2045 to 2050.