GDP急減速 景気腰折れへ警戒を強めよ

The Yomiuri Shimbun (Aug. 18, 2010)
Govt must prevent economic slowdown
GDP急減速 景気腰折れへ警戒を強めよ(8月17日付・読売社説)

The Japanese economy, which has been recovering thanks to external demand and the effects of the government's economic stimulus measures, has suddenly slowed. The government must ensure that the adverse effects of this do not prevent economic growth.

The nation's real gross domestic product increased in the April-June quarter by 0.1 percent from the previous period. This represents the third consecutive quarter of growth, but the annualized growth rate is extremely low--only 0.4 percent.

Although domestic demand has shrunk, growth in the GDP had finally been maintained through exports and other forms of external demand. But the future of external demand is uncertain because of the rising yen and fears of economic downturns in other countries. In their policy management, the government and the Bank of Japan should give priority to stimulating the economy.

Sharp drops feared

The sluggish domestic demand is the result of previously robust personal consumption that slumped in the April-June quarter to an almost flat level. Government measures such as eco points for purchases of energy-saving home electrical appliances and subsidies for buying environmentally friendly cars seem to be finally losing their impact.

These are only a few economic stimulus measures, but the government is planning to terminate its subsidies for eco-friendly cars at the end of September. Car dealers and auto parts manufacturers are concerned about possible declines in sales and production as a result. Many predict that a sharp decrease in orders cannot be avoided from October.

This summer's heat wave is boosting sales of air conditioners and other summer-related products. However, more than a few electronics retail stores fear sales will drop sharply in reaction after the end of the seasonal demand caused by the blazing temperatures.

The government has said that its child-rearing allowances, which began in June, and other measures will eventually stimulate the economy. However, past handout policies such as the flat-sum allowance show that a significant economic boost cannot be expected from such steps.

Instead, the government should use the reserve fund of this fiscal year's budget to implement measures to prevent the economy from slowing down, such as continuing part of the government subsidy program for purchases of eco-friendly cars.

Block further yen rise

Lower budget allocations for public works projects are apparently affecting the economy. Public investments dropped by a drastic 3.4 percent in the April-June quarter from the previous period. This in particular will deal a heavy blow to regional economies that lack powerful local industries.

Apart from the reserve fund, the budget contains 1 trillion yen as a special allocation for future economic measures. Couldn't this money be used efficiently now to improve the economy?

External demand maintained growth, but the growth rate has slowed. Domestic industries are affected significantly by the yen's appreciation--if it rises by just 1 yen against the dollar, Toyota Motor Corp. will lose 30 billion yen in annual profits and Honda Motor Co. will lose 17 billion yen. This may dampen recovering investment on plant and equipment.

The latest appreciation of the yen was triggered by additional steps taken by the U.S. government to ease the supply of money. To alleviate this influence, this nation's central bank must adopt a more proactive stance toward monetary relaxation.

A strong yen lowers the prices of imported goods and fuels deflation. Sharp appreciation must be avoided.

If the yen soars toward 80 yen to the dollar, the government should stress its willingness to intervene in foreign exchange, if necessary, to prevent further appreciation.

(From The Yomiuri Shimbun, Aug. 17, 2010)
(2010年8月17日01時22分 読売新聞)

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