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Friday, June 12, 2009
Half of economists see moderate recovery: poll
Even though the economy posted a record 14.2 percent contraction in the three months to March, Finance Minister Kaoru Yosano has suggested the worst may be over, while the Nikkei stock average briefly topped the 10,000 mark Thursday.
With contradicting signs on the state of the world's second-largest economy, some analysts have become slightly upbeat, while others remain pessimistic.
The Japan Times asked 10 economists what the future holds for Japan's economy and, if possible, to project its future course.
Not surprisingly, most of them replied that the economy bottomed out in the first quarter of the year. Their opinions, however, varied regarding its path from this point.
Half of the economists said they anticipate a moderate upturn, with something between a V-shaped or L-shaped recovery taking place.
Junya Morizane, senior economist at Fukoku Mutual Life Insurance Co., said the economy bottomed out in March after manufacturers started to slash production and inventory last fall.
But as inventory gradually returns to normal levels, production is rebounding, while the government's timely stimulus package has also helped prop up the economy, said Morizane.
However, he predicted the pace of the U.S. economic recovery will remain moderate and thus it will take time for Japanese exports to recover.
To help the economy rebound, Morizane said the Bank of Japan and the government must take further measures.
"The BOJ should continue its monetary easing and the government needs to expand the (employment) safety net," he said.
Some economists said the economy is exhibiting an uptrend now because of the stimulus package.
Hidetaka Yoneyama, senior research fellow at Fujitsu Research Institute, said the economy is unlikely to make a V-shaped recovery because the global economy remains weak and the effects of the government's stimulus will eventually wane.
Hiroshi Watanabe, an economist at Daiwa Institute of Research Ltd., agreed, saying the economy will follow an L-shaped course after the summer once the rebound is over and the stimulus ebbs.
However, two of the economists who predicted a recovery had a slightly more pessimistic outlook on the timing and scale of the rebound.
Shin Takayama, senior economist at Bank of Tokyo-Mitsubishi UFJ, suggested the economy is headed for a recovery as exports to China and the United States increase, production revives and the government's measures take effect.
However, Takayama predicted the economy will only rebound at the end of the next fiscal year, which ends in March 2011, to the level of 40 percent of the previous GDP peak of the January-March quarter of 2008.
The U.S. economy and Japanese exports will recover slowly and the yen could also remain strong against the dollar, he forecast.
Taiki Saito, chief economist at Shinkin Central Bank Research Institute, said it will take about four years for the economy to return to its previous peak.
Saito urged the government to take further steps to prop up the economy.
"Additional economic measures should be implemented next year when the effects of the current measures disappear," Saito said.
Among the pessimists, Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co., said the trajectory of the economy is most likely to be L-shaped, as the recovery will remain extremely sluggish after bottoming out in the first quarter.
While the government's measures and the increase in exports are helping, Kodama predicted corporate investment in plant and equipment and personal consumption could further weaken.
Companies regard their plants as redundant and people still have a gloomy outlook on the economy, which is making them tighten their purse strings, he said.
As for employment, Kodama predicted that companies will continue to slash jobs and incomes will remain flat.
All in all, the economic recovery will remain slow, he said.
Since the government's stimulus will cease to be effective around the first half of the next fiscal year, Kodama said uncertainty could again prevail over the economic outlook.
According to Takeshi Minami, the economy's course will be W-shaped, referring to a double bottoming out.
Minami, economist at Norinchukin Research Institute Co., claimed the economy will hit bottom again by early next year.
He said the economy hit its first trough around February and is regaining strength as exports recover and manufacturers' inventory adjustment ends.
However, as the U.S. and European economies remain weak and Japanese companies further slash staff and investment in plant and equipment due to sluggish sales, Minami predicted the economy will soon reach its second peak from this summer to fall, before declining again.
Minami said the second trough will come around the January-March quarter of next year and the economy could slowly recover afterward, depending on the global economy.
Three other economists meanwhile said they could not describe the path of Japan's economy by using letters.
Tatsuo Takahashi, manager at Chuo Mitsui Trust Holdings, Inc., and Tsukasa Koizumi, chief economist at Hamagin Research Institute Ltd., both said the economy will continue to slightly recover by the first half of fiscal 2010.
The government's stimulus package has led to a boost in personal consumption, causing the economy to rise, they said.
Even so, the stimulus will be less effective by around this fall and uncertainty will remain over the employment and income situations, Takahashi predicted.
Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute Inc., said the economy is heading upward again as production and exports revive, while the government's measures are also expected to help prop it up.
But Shinke said the economy could slow around the latter half of next year since the government's stimulus will have ceased to be effective by then.