Here‘s the news from the Wall Street Journal about Japan’s latest economic numbers:
The country’s gross domestic product . . . expanded at an annualized pace of 1.0% in the October to December period. Economists surveyed by The Wall Street Journal predicted a 2.8% rise.
The anemic growth figure represents a further slowing of the economy after a sharp deceleration in the July-September quarter, when Japan’s economy expanded 1.1%.
The data is likely to raise doubts about whether Prime Minister Shinzo Abe’s push to turn around two decades of lackluster growth has really revived consumer and corporate confidence enough to sustain a recovery.
Now, this is the first time I’ve blogged about Japan, so please bear with me! Any any input is welcome: I’d love to gain more knowledge on Asian economies, about which I know very little.
But from what I understand, Abenomics has not been active for very long: a little over a year perhaps. And I also understand that the policies have generally been good for Japan in (the first half of) 2013. It seems to me that we may need some more time before we jump to conclusions about the effectiveness of Abenomic policies.
After all, it doesn’t strike me as immediately clear that the greatest of Japan’s worries is a consumer confidence problem. Here’s what Japan’s rGDP has looked like over the years (from Google/the World Bank):
It seems to me that from about 1993 to about 2008 Japan, while having some business-cycle like fluctuations, had pretty much 0 growth. It is only recently that the numbers are starting to look more positive. I would imagine that what this really points to is not so much a confidence problem, but some structural one. In the Solow Growth Model, it is possible for some countries to fall into a poverty trap: essentially, they cannot invest enough to sustain growth because they need to pay for the here and now, and not tomorrow. While Japan fairs far better than the most extremely impoverished nations, one has to wonder if some sort of trap is holding it back.
Still, some economists remain optimistic. Yoko Takeda, chief economist at the Mitsubishi Research Institute, thinks that because business profits have done so well, wages and investment will increase. This would be excellent for the economy as a whole: if the country is in some sort of trap, then greater investment is key to lifting it out. What is more, higher wages will surely lead to high spending, hopefully allowing the economy to continue to grow at a healthy pace.
So, Japan’s numbers don’t look fantastic, but at least growth is happening, and there is still much room for hope.