Track to Recovery is No Bullet Train

Reviewed by Hitoshi URABE

Article:
Track to Recovery is No Bullet Train
(Stephen Dabkowski) Sydney Morning Herald
http://www.smh.com.au/news/business/track-to-recovery-is-no-bullet-train/2005/07/03/1120329328529.html

Comments:

This article is a favorable analysis and comment on Japan's economy - with a slight touch of Australian view and a number of casual topics around the town thrown in to make the reading lively.

The article cites a number of economic surveys released recently.

It starts out by briefly referring to the MOF Hojin Tokei Quarterly corporate survey. This survey is conducted by an arm of the Ministry of Finance based on the data required by law to be published by corporate entities, and scrutinized according to the formula rigidly stipulated so there is no room for distortions, political or whatever. It covers basically all companies with the capital base of more than 10 million yen. The report publicized in June covering January-March this year showed the sales increase of 6% over the same period the year before, and the profit increase of 15.8%. Profit margin on sales improved to 4.2% from 3.8% a year before. Capital investments rose 7.4% and the equity ratio recorded the highest in decades.

The report, in fact, was a confirmation of what was rumored that the corporate sector had been doing well. This rumor, or the sentiment among the companies themselves, was confirmed by another popular survey, Tankan report, compiled by the Central Bank, publicized on July 1.

Tankan is an acronym for the lengthy Japanese name, which is translated as "Short-term Economic Survey of Enterprises in Japan." It is a simple summary of the replies on the sentiment of business corporations, submitted and collected for over 10,000 companies across Japan, as to whether they feel the economic/business environment is favorable or not. Then the index number is calculated as those replied positively minus those who did not over the denominator of 100. The simplicity, not only in terms of reading the report but for the repliers of the questionnaires to begin with, is deemed to be a good indication of raw feelings of those actually running the private sector economy, and the recentness of the data is received favorably by the analysts.

In the Tankan released on July 1, the most referred to item, the business confidence index for large manufacturers was 18, up from 14 the previous quarter. It was the first rise since the July-September quarter last year. The index for large nonmanufacturers showed a sharp rise to 15 from 11 the previous quarter, recording its highest since February 1992. The smaller companies sector also recorded improvement, 2 points better than the last time for both small manufacturers and nonmanufacturers.

There are, however, concerns already evident in the Tankan itself. When the corporations are asked of how they think of their business environment three months ahead, almost all of the categories and sectors showed their anxiety of not faring well as they are now. The largest factor apparently is the price of oil, which has repeatedly surpassed past records in recent months. The others expressed concerns over the U.S. and the Chinese economy losing their thrusts.

Optimists, including government policy makers, have expressed that Japan's economy is taking its breath before another phase of climbing, and that the people may have become overly cautious for not experiencing a strong economy for over a decade.

The writer of the article introduced above is seemingly concerned more on the long-term issue of Japan's aging population and decreasing children. After introducing some efforts by the Japanese to tackle the issue, including a recent TV show, however, the commentator sums up the report by providing hope, saying, "Japan, it seems, has come a long way to confronting the challenges ahead."

A very encouraging comment indeed.