Slow and fragile recovery
Weak domestic demand and fiscal deterioration affecting market confidence
JiFeng Zhang: At present, Japan's economy is bright and dark, and although it has recovered somewhat, it is still in a depressed state of hovering. In terms of real gross domestic product (GDP) growth, it was only 0.4 percent in 2015. positive growth of about 1.0 percent is possible in fiscal year 2015 (April 2015-March 2016), but it is lower than the Japanese government's expectation of 1.2 percent, and lower than the average level of developed countries. the weak recovery of Japan's economy in 2015 is largely still Thanks to the "Chinese shopping spree", Chinese tourists spent 1.4 trillion yen (80 billion yuan) in Japan, boosting the Japanese economy by nearly 0.3 percentage points.
There were no major changes in Japan's economic fundamentals in 2015. First, due to the low yen exchange rate, smooth exports, corporate profits continued to maintain an upward trend, but small and medium-sized enterprises did not get out of the doldrums. Second, the Nikkei average stock index stayed above 19,000 points throughout 2015, a rare high in the last 15 years. However, this was mainly due to the Bank of Japan's purchase of traded open-end index funds to pull up the broader market, and a large number of social security funds entered the market to push up stock prices, whose potential risks are high. Third, the employment situation is good, with the unemployment rate at around 3.4%, but the share of temporary workers has increased. Fourth, the wages of employees in enterprises have increased, but the increase is smaller than that of the previous year, and the rise in wages in small and medium-sized enterprises (SMEs) is even smaller. Fifth, tax revenues increased, keeping tax revenues greater than the amount of new treasury bonds issued for three consecutive years, but the deteriorating fiscal situation did not change. Overall, rising profits of large enterprises and rising asset prices have not benefited the general public, but have instead made the gap between the rich and the poor wider and wider.
The core problems plaguing Japan's economy are both a lack of effective demand and a lack of corporate innovation on the supply side, and in the long run mainly the problem of an aging population. Moreover, the situation is getting more and more complicated as deflation and population aging are mixed together.
Zhang Yulai: Japan's economy is in a slow recovery but still fragile state. The biggest problem is that domestic demand, which accounts for 60 percent of GDP, remains weak.
Japan's economic fundamentals and economic structure have seen new changes. First, the labor supply situation has improved; second, corporate profitability has improved, listed corporate earnings and corporate domestic deposits are at record highs, exceeding 30 trillion and 200 trillion yen, respectively, and the bankruptcy rate has fallen to a record low; third, the government's tax revenues have improved significantly, national tax revenues have exceeded 56 trillion yen, and are expected to exceed 100 trillion yen in fiscal year 2016; fourth, the economic structure and industrial transformation has been initiated, and the service trade has grows into a new pillar, enterprises accelerate the strategic transformation, the scale of overseas mergers and acquisitions of Japanese enterprises in 2015 exceeded 10 trillion yen.
The core of the troubled Japanese economy is the fiscal problem and the ineffective response to aging and childlessness. Japan's sovereign debt situation continues to deteriorate, with the government debt balance as high as 246% of GDP in 2015, ranking first in the Group of Seven. However, in its basic economic reform ideas, it has not established a fiscal reconstruction perspective to formulate a response to the aging oligomerization. This sinking disease will be the key to market confidence is difficult to rebuild.
Katsuyuki Hasegawa: Japan's economy is now at a platform stage on the way up. If the overseas economic recovery can be sustained in the future and the willingness of enterprises to invest in equipment continues to improve, the Japanese economy is expected to recover slowly. Japan's real GDP growth rate in 2016 is expected to be around 1%. The Federal Reserve's first interest rate hike in 10 years has triggered unease in international financial markets. Economic growth in China, Japan's largest export target country, and the Asian region is also slowing down, leading to a slowdown in Japan's economic growth. The risk that the turmoil in domestic and international financial markets will have a negative impact on corporate investment and individual consumption intentions is growing.
Tomori Kikuchi: Japan's economy is facing two fundamental challenges: an aging and declining population and growing government debt. The two are clearly interconnected. Increasing pensions, which are one of the reasons for rising government debt, have both led to a reduction in domestic demand, and as a result Japanese companies are increasingly moving their operations and factories overseas, which has led to both record overseas earnings and a record number of merger and acquisition deals for Japanese firms, yet this has not been helpful in stimulating domestic investment.
Tamim Bayoumi: Japan's economic situation is fragile, with inflation still positive but slipping back toward zero growth. Japan's biggest problem is to promote sustained growth in economic output and inflation, breaking the pattern of "growth in a few quarters and then a recession". If the overall economy can not maintain sustained growth, the huge government debt and persistent fiscal deficit is difficult to solve.
Central bank small horse-drawn cart
"Abe economics" did not pry structural reform
Zhang Jifeng: "Abe economics" has failed. First of all, the Japanese economy is not out of the doldrums, the 2% inflation rate in two years did not materialize. "Abe's economics" has been implemented for more than three years, after deducting the impact of raising the consumption tax rate of the core CPI has never exceeded 1.5%. 2013 Japan's economic growth rate of 1.4%, 0 in 2014, 0.4% in 2015, then the average of three years is only 0.6%, and the first 20 years of the real GDP of Japan's average annual growth rate of about 0.9%. growth rate was about 0.9%. Related surveys show that more than 70% of the people did not feel the benefits of "Abe's economics".
Secondly, almost all of the long-term goals proposed by Abe's economics cannot be realized. The first goal is to achieve an average annual nominal economic growth rate of 3% and a real economic growth rate of 2% over the next 10 years, while these figures have been only -0.1% and 0.9%, respectively, over the past 20 years. The second long-term goal is to "halve the national and local fiscal deficits as a percentage of GDP in 2015 compared to 2010, and to realize a surplus by 2020". According to Japan's Ministry of Finance calculations, even if the average annual growth target of 2%, by 2020 Japan will still have a fiscal deficit of 1.6%. "Abe's economics" also identified more than 20 specific targets such as labor productivity, foreign direct investment doubled, but if you can not achieve an average annual growth of 2%, these are a mirror.
Thirdly, in September 2015, Abe threw out the "realization of nominal GDP of 600 trillion yen", "birth rate of 1.8" and "to achieve the caregiver separation rate of zero "The so-called "three new arrows". However, it is almost impossible to realize the goals of the "new three arrows".
Fourth, at the end of January 2016, the Bank of Japan introduced an unprecedented "negative interest rate policy" to stimulate the economy. This just announced the bankruptcy of "Abe's economics". But if you want to change the statistical benchmarks, it's a different story to play the numbers game.
Zhang Yulai: "Abe's economics" will not succeed without changing the "central bank's solo dance". To "reflation" theory based on the design of "Abe's economics" in the direction of the right, but should be monetary policy, fiscal policy and growth strategy, such as the "troika" of the reform framework, in the structural reforms wrapped up in the "Abe's Economics", the "Abe's Economics", the "Abe's Economics", the "Abe's Economics". The reform framework, in the structural reform of the state of stagnation, but gradually evolved into a "monetary policy alone" of the small horse-drawn cart.
The Abe Cabinet's economic growth strategy is lackluster. As of April 2015, the Bank of Japan to the market to put the amount of base money has exceeded 300 trillion yen, its holdings of Japanese government bonds has accounted for 1 / 3 of the amount of issuance, is expected to the end of 2017 will reach the limit of the state. From the central bank treasury holdings as a ratio of GDP, Japan has reached 60%, much higher than the European and American central banks of 20%. Policy tools are exhausted is the real background of the Bank of Japan recently imported negative interest rates.
Shaw Agile: "Abe's economics" has been implemented so far, the fundamentals of the Japanese economy has not yet changed fundamentally, the aging of the young, oversupply of production, the economy depends on foreign demand stimulus and other structural problems have not been resolved. However, the "Abe Economics" has changed the "deflationary expectations" of the society since the Hashimoto Cabinet raised the consumption tax in 1997. Business equipment investment, personal consumption and labor employment data have all shown a positive trend. If this trend can continue for three to five years, Japan is likely to achieve the goal of "2020 GDP 600 trillion yen".
Tamim Bayoumi: The failure of Abe's economics to boost economic growth and inflation is partly a reflection of the state of the world economy. Abe's "economics" has led to a strong expansion of monetary policy, but the fiscal problem has not been fundamentally resolved, and structural reforms need to do more work.
Tomori Kikuchi: The rise in stock prices and the depreciation of the yen are obvious effects of "Abe's economics". But the 2 percent inflation target and 2 percent real GDP growth are far from being realized.
Quantitative easing is not a panacea
Wages continue to fall, dampening consumer appetite
Zhang Jifeng: The Bank of Japan's quantitative easing policy is getting more and more intense, but it has had little effect. The reason for this is that Abe and his think tanks have clearly misjudged the causes of deflation.
Quantitative easing can increase market liquidity, but in fact, the real factor affecting prices is the low level of wages. The starting point of "Abe's economics" is to stimulate people's desire to consume and act by raising the inflation rate. This approach puts the cart before the horse. Without an increase in income, even if there is a desire to shop, it is futile. The cause of deflation comes from the decrease in wages, not from the so-called inflationary expectations, let alone the decrease in liquidity. Since 1995, wages in Japan have been in a state of chronic decline, while those in the United States and Europe have been on the rise. That is why deflation has not occurred in the U.S. and many European countries that are also advanced economies in the last decade or so.
In the context of the rise of emerging economies and increasingly fierce international competition, companies are instinctively cutting labor costs and other operating costs. Japan's deflation problem is mainly reflected in weak private consumption due to low employee incomes. Private consumption accounts for about 60% of Japan's GDP, and raising incomes requires expanding employment. It is true that employment has expanded in Japan and the unemployment rate has fallen sharply, but the increase is mainly in temporary workers. Temporary workers are paid only about 60% of the wages of regular workers, so the overall income of society has not increased.
The Bank of Japan recently introduced a "negative interest rate policy" to further loosen monetary policy. However, the Japanese market is not lack of liquidity, in recent years, corporate profits increased greatly, the retention of expanding, enterprises are not short of money. The side effects of the "negative interest rate policy" are obvious. Negative interest rates hurt the banking sector and may also affect the interests of depositors in general, as evidenced by the recent decline in stocks in the Japanese banking sector. "Negative interest rate policy" will continue to depreciate the yen, which may lead to a new round of international financial war characterized by competitive devaluation.
If there are no major changes in the international economic situation, it is estimated that the Japanese economy will be slightly better in 2016 than in 2015, and it may fall into negative growth again in 2017 because Japan will raise the consumption tax rate from 8% to 10% in April 2017. With the favorable impact of the Tokyo Olympics and the stimulus of the TPP, the economy may improve slightly in 2018 and 2019, but there will be a "post-Olympic depression" in 2020 or 2021. Considering that Japan's potential economic growth rate is about 0.5%, with the deepening of the aging society and the further deterioration of the fiscal situation, in the medium and long term, Japan's economy can reach an average annual growth rate of about 1% would be good.
Zhang Yulai: After the collapse of the bubble economy, it took Japan more than 20 years to eliminate the three major surpluses of "debt", "equipment" and "employment". At the same time, in the wave of economic globalization and IT revolution, German and American enterprises have become the world's leading players, and China, South Korea and ASEAN, which are actively integrating into globalization, have also made great achievements. Self-absorbed Japanese enterprises, on the other hand, have stepped into the misguided area of "isolation", and their product technology has once been seriously decoupled from international standards, and their total factor productivity has lagged behind that of the United States, Germany, Britain, and France. Only through structural reform to realize the effective allocation of resources, and then improve production efficiency, promote technological innovation, increase the potential economic growth rate, in order to promote Japan out of long-term deflation.
Tomori Kikuchi: In order to achieve the inflation target, Japan must expand domestic demand, and in order to achieve this goal, we need to raise wages, solve the status quo of income inequality, and change the labor market tends to men and older workers.
Katsuyuki Hasegawa: Compared with three years ago, the overvalued yen exchange rate has been corrected and the stock market has risen sharply. Therefore, the Bank of Japan's monetary policy should be considered appropriate. But monetary policy is not a panacea, but also need fiscal policy, structural reforms and other **** with the promotion. Japan's inflation rate in the "bubble era" have not exceeded 2%, even in the medium and long term, this target is also a bit high. However, Japan's wages have been out of the situation of 20 years of no increase. As the Japanese economy slowly recovers, inflation will slowly rise. If inflation can consistently exceed 1 percent, it can be considered to be out of deflation, which is feared to be at least three or four years away.
Agile Xiao: The 2% inflation target was "born at the wrong time", when crude oil prices plunged. However, Japan's personal consumption market price rise signs are very clear. Therefore, the ability to achieve 2% of the Bank of Japan may be just "face" problem.
Tamim Bayoumi: Renewed optimism about long-term economic growth could push inflation higher. But this will require structural reforms and bold measures to tackle large government deficits and growing government debt. Japan's problems are largely domestic, but the current world economic situation is not favorable to the Japanese economy.
Why we can't walk away from deflation
Demographic characteristics complicate the problem
Zhang Jifeng: The harm of deflation lies in the fact that it has increased the debt burden and financing cost of enterprises, which has a direct impact on the expansion of production. Moreover, in a state of deflation, consumers deflationary expectations increased, tighten the money bag wait and see, refused to actively consume, the result is to lead to a vicious circle of spiral deflation.
In the economic practice of countries around the world, there are quite a lot of means and experience in managing inflation, but there are very few means to escape from deflation, and the experience is also insufficient. Escape from deflation is much more difficult than managing inflation. Despite entering a new normal of transition from high to medium-high growth, China is still a developing country with far more room for development than Japan. There are also many policy tools, and the danger of falling into prolonged deflation is not great. From the lessons learned in Japan, deflation intertwined with population ageing will further complicate the problem. China's aging population is also a cause for concern, and it is particularly important to quickly establish a social security system that suits China's national conditions.
Zhang Yulai: Japan's long-term economic deflation is a complex structural problem that involves both supply and demand, as well as a game between the government, enterprises and the market. Deflation will also be an important risk to the Chinese economy, Japan's "double easing" policy and its policy mix has reference, but whether the Japanese model is effective is worth studying. Technological innovation and technological progress is the core driving force of economic growth, which is an important experience of Japan's economic development, and technological progress has played an important role in Japan's economic reform process so far.
Katsuyuki Hasegawa: Since the 1990s, economic stagnation has continued in Japan, and people have called these years the "Lost 20 Years". There are several reasons why Japan has fallen into the "lost 20 years": slow processing of non-performing bank debts, slow restructuring of enterprises and industries, and a long period of high exchange rate of the yen. It is very important to give some financial support to promote industrial reorganization to get rid of deflation. The high exchange rate of the yen is an important obstacle to escape from deflation. The foreign exchange market is difficult to control, so it is very important to avoid the high yen exchange rate through monetary easing. With the Fed raising interest rates, the dollar tends to appreciate. The yuan, which is linked to the dollar, should avoid the exchange rate being too high at present. Of course, from the economic stability considerations, but also to avoid excessive depreciation of the yuan.
Shaw Agile: Japan is the world's longest deflationary country, and now look back, Japan's economic bubble after a series of reforms is in fact the "supply-side reform". The "zombie enterprises" and the cleanup of non-performing assets of banks is very thorough, very meaningful. The balance sheet of the Japanese banking system is very strong, and there is no systemic risk in the financial system. Although Japanese banks and companies are often criticized for being too conservative, such prudence is not entirely unhelpful to economic stability.
Tamim Bayoumi: Such a prolonged period of deflation has so far not been seen in other countries, partly reflecting Japan's demographic characteristics. China is a fast-growing economy and Japan a stagnant one, but both should ensure that their economic policies are flexible enough to respond to world economic turbulence.