On the Present State of the Japanese Economy Motoshige ITOH - PowerPoint PPT Presentation

On the Present State of the Japanese Economy Motoshige ITOH Council on Economic and Fiscal Policy, Japan Gakusyuin University

Japan’s nominal GDP: recovery process under Abenomics 1

Nominal GDP of Japan; revised data revised data original data 2

Expanding money balance Monetary Base （％、 GDP ratio ） 80 70 US Euro Area UK Japan 60 50 40 30 20 10 0 3

Shifting trend of inflation rate CPI inflation rate excluding Inflation rate energy prices and fresh foods Three month moving average 4

Necessary Policy Coordination ◆ Three arrows of monetary stimulus, flexible fiscal policy, and structural reforms are required . ◆ Fiscal Stimulus which complements monetary policy plays an essential role under the current situation. ◆ Quality investment and expenditure to boost potential demand are keys. 5

Ratio of Current profit to sales 6

Trends of unemployment rate and job-offer job-seeker ratio 7

Return of deflation? 8

Growth rate of world GDP and world export; world economic trend is against Abenomics 9

Secular Stagnation? ◆ Lack of Demand ◆ Legacy of the Global Financial Crisis ◆ Demographic changes such as ageing ◆ Slowdown in innovation and technological diffusion Output Gap of G7 countries Share of older population 3 40 2 35 1 30 0 25 -1 20 -2 15 Japan US -3 10 Germany France UK Italy -4 5 Canada 0 -5 10 (Source)United Nations, World Population Prospects, the 2015 Revision (Source) IMF, World Economic Outlook Database Apr 2016

Sluggshi innovation: TFP has been very low since 1980s 11

Low interest of major countries Policy Rates ( ％） 7 6 5 US Euro Area 4 3 UK Japan 2 1 0 12

growth rate seasonally adjusted Whole world Industrial nations emerging nations 13

Trump effects; long-term interest rate US election USA 10 year bond German 10 year bond JGB 10 year 14

JGB yield curve Most recent yield( middle of February 2017) duration (year) 15

Three aspects of fiscal consolidation ◆ decreasing budget deficit achieving primary balance surplus by 2020 ◆ preparing for aging population social security reforms ◆ lowering the level of public debt budget surplus and nominal GDP growth mild inflation? 16

Primary fiscal balance （％） 2.0 0.0 -2.0 -3.0 -4.0 半減目標 -5.5 -6.0 -6.3 -8.0 -10.0 2005 07 09 11 13 15 （年度） 17

Abenomics in Progress: Growth Strategy ◆ Corporate Governance Reform ◆ Pro-growth corporate tax reform ◆ EPA(FTA) and agricultural reform ◆ Expansion of private participation in public services (PPP, PFI) ◆ Increased labor participation of women and elderly people 18

Acceleration of Growth Strategy １． Realizing Productivity Revolution - The 4 th Industrial Revolution - Regulatory reform ２． Increasing investment in new growth areas - Environment (Investment in energy saving, renewable and alternative sources) - Healthcare, medical and other senior market - Education, human resource development ３． Mitigating the impacts of labor force decline - Further active participation of women and the elderly - Utilization of foreign human resources - Labor market reform 19