Weak Consumption and Exports

Is it a positive sign of getting rid of deflation or eclipse of current economic policy in Japan? The Cabinet Office released gross national products in the fourth quarter in 2013, which showed 1.0% annualized growth, while it marked consecutive growth for four quarters. Good news is that capital investment rose in manufacturers and constructors. Bad news is that positive individual consumption, mainly brought by preoccupation of purchase before consumption tax hike in April, was relatively weak. There will not be a lot of chances to enjoy fruit of Abenomics rest of the year.

One of the key points was public investment, which had been leading current Japan’s growth. It showed immediate decline from 7.2% growth in previous quarter to 2.3%. The growth in individual consumption did not cover the decline of public investment. While export showed a slight rise with positive demands in emerging economy in Asia, import grew by 3.5% with the increase in liquidated natural gas, computers and smart phones.

Assessments vary. Yomiuri positively reported the individual consumption as a following wind for Japan economy. Nikkei was neutral, stressing the role of exports to lead sustainable future growth. Asahi and Mainichi were negative, raising the relative weakness of individual purchase and exports. Those trends make sense, because the legendary boss of Yomiuri takes close stance to current administration. Nikkei also support Abenomics, because it never wants the revival of DPJ administration. Asahi and Mainichi basically oppose Abe administration, mainly in handlings of diplomacy, historical disputes or energy policy.

As long as watching reports of foreign media, future of Japan economy is not positive. Both Wall Street Journal and Financial Times labeled the trend as disappointment. “Disappointing growth numbers from Japan show that a weaker yen has failed so far to rev up the nation’s export engine, putting a greater onus this year on the nation’s consumers,” contemplated WSJ. CNN was pessimistic, telling that “The poor results come just months before a sales tax increase is scheduled to take effect.”

Abe administration is closely watching whether wage will rise this spring, which may maintain positive consumption. However, decline of individual consumption is inevitable after the tax hike, and market already included it in their forecast. Another factor Japan relies on is resurge of emerging economies. It is unrealistic, however, for them to show dramatic growth in the situation of salvaging U.S. money in tapering policy of Federal Reserve. Abenomics is obviously turning a corner.