JAPAN S ECONOMIC OUTLOOK

Transcription

1 JAPAN S ECONOMIC OUTLOOK Nobumitsu Hayashi President (PRI) Ministry of Finance of JAPAN 3 rd ICRIER-PRI Workshop, March 18, 2013

2 Understanding - or misunderstanding - Japan and its Economy Japanese economy has stagnated and underperformed for the past twenty years two lost decades. Is Japanese economy growing at all? Japan s fiscal situation is most serious with debt to GDP ratio highest in the world. How will aging society continue to aggravate the fiscal situation and to affect economic growth? Japan s trade balance has turned deeply into a deficit. Has Japan been eclipsed as the manufacturing center by China, and has it lost the technological edge to Korea? As a result, Japan no more wields positive influence to the rest of the world. Is Japan a second-tier economy that does not merit an attention? 2

3 Economic Indicators Analysis GDP Growth : Underlying trend has remained low (Year on Year %) 1960 s:10.0% s:4.4% 1980 s:4.1% 1990 s:1.2% 2000 s:0.9% Source : Cabinet Office, Ministry of Internal Affairs and Communications, Japan 3

4 Economic Indicators Analysis GDP Growth was steady until Lehman crisis and Great Tsunami hit 6 (Change from the previous year, %) Projection GOJ For FY Private demand IMF Outlook (2013.1) 4 External Demand 5 Public Demand 6 Real GDP (CY) Source : Cabinet Office, Japan, IMF 4

5 Economic Indicators Analysis Growth per Working Age Population : Japan is not bad at all 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Japan United States United Kingdom Germany Italy 1980s 1990s 2000s Source : Eurostat, IMF Source : Ministry of Internal Affairs and Communications, JAPAN 5

6 Economic Indicators Analysis Nominal vs. Real GDP : Level is the thing (tril Nominal GDP Real GDP GDP Deflator (Y-o- Y, %) (Outlook) (FY) Source : Cabinet Office, Japan 6

7 Economic Indicators Analysis Primary Balance : Budget deficit is surely a problem 6 4 (Percent of GDP) Dotted line represents projection Debt to GDP Ratio (2011) Italy % Spain 69.12% United States % Japan % Italy Japan United States Spain Source : IMF WEO database 7

8 Economic Indicators Analysis Demography : Japan is aging very rapidly (ten thousand) 14,000 Projection 75~ 12, , Aging of senior 65~ 10, ,517 2, ,000 6,000 6,250 7,590 7,497 1,407 2,385 1,383 2,336 1,128 6,278 4,000 4,643 4,105 2, ,389 3,249 2,287 1,698 1,297 1,105 Decreasing of junior (year) Source : Ministry of Health, Labor and Welfare Source : National Institute of Population and Social Security Research 8

9 Economic Indicators Analysis Demography : So is China, and so will India in the future Males Females Source : United Nations, Department of Economic and Social Affairs 9

10 Economic Indicators Analysis Female Employment : Women can save Japan 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Female Labor Participation (FLP) rate by age group (2009) Sweden United States Japan Netherla nds Italy IMF Working paper 2012 Key point Japan is under the rapid decline of working-age population accompanied by aging society. A key for revitalizing Japanese economy is to promote female worker s employment. Analysis M-shaped curve is not observed in other developed countries. If Japan can raise its Female Labor Participation (FLP) ratio to the level of the other G7 member countries, GDP per capita would increase by approximately 4%. Japan should increase the number of female managers and board members. Better balancing of family life and work is necessary. Successful example Netherlands The hourly wage of part-time workers is now equal to that of full-time workers. FLP ratio in 70 s was only 30%, but it had risen up to 70% in Japanese FLP ratio was surpassed by that of Netherlands in1995. Female workers contributed economic recovery. Source : OECD Database LFS by sex and age Source : IMF Working paper Can Women Save Japan? 10

11 Economic Indicators Analysis Balance of Payment : Trade in goods turned into red, but income surplus remains high Goods Services Current Transfer Income Current Account 11

12 Japanese Competitiveness Produced Globally : Who makes a jet fly? Ex) Boeing 787 dream liner Japan s ratio of components number in air plane Model Ratio Boeing % Boeing % Boeing % Source : JETRO - The trade structure of East Asia and international value chain From trade of goods of to trade of "value" 12

13 Japanese Competitiveness iphone 3G : Made in China? Not quite Ratio of Materials in iphone 3G Country Cost (USD) Share Japan % Germany % Korea % United States % Others % Total Bill of Materials % China (Manufacturing costs) % Grand Total % (2009) Source : Meng and Miroudot (2011) 13

14 Japanese Competitiveness The Global Competitiveness Index rankings Where Japan does or does not excel Category INDICATOR RANK Infrastructure Quality of railroad infrastructure 2 Macroeconomic environment Government budget balance, % GDP 143 General government debt, % GDP 144 Health and primary education Malaria cases/ 100,000 pop 1 Life expectancy, years 1 Goods market efficiency Imports as a percentage of GDP 143 Degree of customer orientation 1 Labor market efficiency Cooperation in labor-employer relations 7 Hiring and firing practices 134 Technological readiness Firm-level technology absorption 4 Mobile broadband subscriptions/ 100 pop 3 Market size Domestic market size index, 1-7 (best) 4 Business sophistication Local supplier quantity 1 Local supplier quality 3 Control of international distribution 1 Production process sophistication 1 Innovation Capacity for innovation 1 Company spending on R&D 2 ~ Source : 2012 World Economic Forum 14

15 Japanese Competitiveness Technology Balance of Payments : Japan is No.2 behind U.S. The technology balance of payments (TBP) registers the commercial transactions related to international technology and know-how transfers. It consists of money paid or received for the use of patents, licenses, know-how, trademarks, patterns, designs, technical services and for industrial research and development (R&D) carried out abroad, etc (million dollars) United States Japan United Kingdom Germany Italy Korea Source : OECD Database (year) 15

16 Present Cabinet s Economic Policy Abenomics three-arrowed economic booster plan Aggressive Monetary Policy Bank of Japan has adopted 2% inflation target New Governor and Vice Governors of BOJ to be appointed Flexible Fiscal Policy Supplementary budget to boost the economy and create jobs Priority on reconstruction after tsunami and disaster resilience Medium-term plan to halve the primary budget deficit by FY2015 Growth Strategy for Promoting Investment Tax incentives, deregulation and other policy measures to stimulate private investment and to spur innovation Assisting Japanese companies operation overseas New growth strategy to be formulated mid-2013 Source : Ministry of Finance, Japan 16

17 Present Cabinet s Economic Policy Japan is baaaaaaaaaaaaaack!! (JPY) Nikkei Stock Average Price Began to Recover Reflecting Expectation for Abenomics Adoption of Emergency Economic Measures for The Revitalization of the Japanese Economy Inauguration of the Abe Cabinet Sauce: Prime Minister of Japan and his Cabinet LDP s Victory in the House of Representatives Election /1/2012 7/1/2012 8/1/2012 9/1/ /1/ /1/ /1/2012 1/1/2013 2/1/2013 3/1/2013 Source : Bloomberg 17

18 Toward good relationship; Japan and India Survey of 22 tracking countries, : Japan s influence is viewed to be most positive Source : BBC WORLD SERVICE 18

19 Toward good relationship; Japan and India Survey of 22 tracking countries, : But not necessary by the Japanese Views of Japan s Influence Mainly positive Mainly negative Views of India s Influence Source : BBC WORLD SERVICE 19