Japan Says Economy Stable on Exports

Reviewed By Hitoshi URABE

Article:
"Japan Says Economy Stable on Exports"
http://www.washingtonpost.com/wp-dyn/articles/A17879-2002Jul17.html
(by The Associated Press) Washington Post

Related Article:
"BOJ upgrades outlook despite yen fears"
http://asia.cnn.com/2002/BUSINESS/asia/07/17/japan.boj.reut/index.html
(by Reuters) CNN

Comments:

The Bank of Japan on July 17 publicized its "Monthly Report of Recent Economic and Financial Developments." The first paragraph of the report reads, "Japan's economy, despite continued weakness in domestic demand, has almost stabilized as a whole with an increasing upward impetus from exports and production, and an improvement in corporate profits and business sentiment."

The articles cited above, which are in tune with most of the Japanese domestic press, tend to give the impression that Japan's economy is at last rebounding. This could be due to the central bank's expressions used in the report, as it seems to describe the economy somewhat rosier than the reality.

Actually, reading the report carefully reveals that BOJ is very careful in choosing the words to formulate the report. Already implied in the first paragraph is that it is still too early for optimism to spread. In the explanation to follow, the report lists both the encouraging and discouraging signs found in the data gathered.

The positive points listed are:
-- Exports are increasing significantly.
-- Industrial production is picking up due to increasing export.
And the negative aspects itemized are:
-- Business fixed investment continues to decrease.
-- Private consumption remains weak.
-- Employment and household income remain severe.
-- Excessive employment and debt are still being adjusted.

The report summarizes by stating, "... it can be envisaged that the stabilization of Japan's economy will become more secured as the increase in exports and production, through the improvement in corporate profits, will underpin domestic private demand."

As such, about the only true hint of recovery is the increase of export. It must be noted further that the BOJ report was prepared based essentially on data gathered before the recent collapse of the U.S. stock market and the downspin of the dollar in the foreign exchange market.

True, the report does refer to these phenomena saying, "... uncertainty is rising amid a fall in stock prices in the U.S. as well as depreciation of the U.S. dollar." However, the report could state only so far, in a very general impressionistic manner, since this report is, and where its value lies in, the analysis based on the extensive set of data which bulk of the 74-page report is devoted to.

If the prospect in growth of export becomes grim, so does the Japan's recovery. It is pleasant to hear Japan's economy is on a recovering track, but it could be a little premature to relax just yet.