Japan Experienced Seven Percent GDP Growth in Last Quarter of 2003

It was reported that Japan experienced seven percent actual economic growth in the fourth quarter of last year, from October to December. However, economists offer different positions on this report. The Japanese government greeted the news with great joy, saying, “This proves that the Japanese economy has entered a full-scale economic revival.” However, the Japanese people have reservations in regard to the report, saying, “It is too different from what we feel in our daily lives.” Some experts insist that it is only a revival of the fittest because local companies and small-scale businesses are still hitting the bottom.

This is an economic boom came in 13 years. According the Japanese government, the Japanese GDP rose by 1.7 percent, compared to one quarter before, and seven percent compared to last year, by calculations excluding the factor of price increases.

This is the largest number in 13 years since the bubble boom culminated in the second quarter of 1990 with 2.5 percent (a yearly rate of 10.5 percent). The economy has been on the rise in all four consecutive quarters and has achieved the yearly actual growth rate of 1.7 percent, heading into the black in 2 years.

“The markets are reviving slowly but surely,” said Dakenaka Heijo, minister of economy and finance, adding, “If this trend continues, Japan will soon depart from deflation.”

The factors are good export results and more investments into infrastructure. The two wings that lifted the growth rate were more infrastructure-building in electronics and better export results in Asian markets including China. Companies are warming up to further extend their investments with a 5.1 percent increase in infrastructure investment compared to last quarter.

Sony Inc. invested 185 billion yen to increase production of semiconductors for digital electronics and elements of digital cameras. Sharp Inc. also invested 60 billion yen to complete construction of Digital TV factories. These investments were enabled by sales increases in digital electronics.

The export showings were decent in almost all sectors including electronic parts, communicative devices, automobiles, and steel with a 4.2 percent increase compared to the last quarter. In particular, Japan has surely profited from “the China effect” with exports to China increasing 32.8 percent compared to that of last year.

However, the problem here is whether or not the internal economy will revive. Unlike the corporate sector, families are not sensing the growth. Many say that private consumption increased by 0.8 percent thanks to the digital electronics boom, but the extreme gap between the rich and the poor has been worsened by a lack of consumer spending. The sales of department stores and supermarkets experienced decreases overall except in October, when it experienced a slight increase, a similar level to that of last year.

Many companies are trying to freeze salary levels or even lower them, and this plays as a factor in the slow revival of the economy. The wages of the employed have decreased by 0.2 percent compared to the last quarter of last year. They did not profit from the growth. Nihon Keijai Shimbun reported, “It is certain that the Japanese economy has regained momentum, but escaping from deflation will not be easy without substantial help from the internal economy.”

parkwj@donga.com