Sign of Recovery?

The Cabinet Office released temporary data of gross domestic products in the fourth quarter in 2014 on Monday. It showed 0.6% of growth, marking the first growth after introducing new rate of consumption tax last April. Exports led the growth resumption, while personal consumption and asset investment was still lagging behind. Progress of Japanese economy to recover the slump is still slow.

Annual growth of Japanese economy was improved to the level of 2.2%. Export grew by 2.7% from the previous quarter, thanking low rate of Japanese yen. Although personal consumption grew by 0.3%, it was lower than public expectation. Asset investment marked only 0.1% of plus and housing investment declined by 1.2% with a great gap from rushing-in purchases before consumption tax hike.

Minister of State for Economic and Fiscal Policy, Akira Amari, was delighted to the gospel. “With improvement of consumption mind of the people, can’t we expect the future? It is highly important to make actual wage grow,” told Amari at his press conference.

His optimism was based on the tendency of nominal economic growth rate, which overturned actual economic growth rate for the first time in these seventeen years. Higher actual economic growth rate than nominal one has been recognized as a symbol of deflation. For Shinzo Abe administration that embraces fighting deflation as its first priority, the overturning was a great achievement for its success.

However, expectation of private economists for the fourth quarter was 3.5% of growth, far behind of actual result. Personal consumption has not been recovered well from the level before consumption tax hike. Sales of durable goods like toys or bags declined as mobile phones and personal computer grew. Actual wage of last year was 2.3% lower than the previous year. With a great impact of the tax hike, Japanese economy is still struggling.

Tokyo Stock Exchange rallied with the report. Nikkei 225 marked ¥18,000 at the end of Monday, for the first time from July, 2007. But it declined at the beginning of Tuesday. The rally has an aspect of positive impact from international market. Current economic growth is also supported by low price of crude oil. There is an analysis that Japanese economy will down with decline in Europe and China.

The crucial point for Japan to see independent growth is whether the people can have purchasing power. While Prime Minister has been asking the corporations to raise their workers’ salary, managers have been reluctant to do that. Traditional stimulus policy of Liberal Democratic Party is not enough. Abe’s reform agenda are not credible enough, too.