The Japanese economy: Sustained recovery and growth not yet assured

摘要

This paper reviews Japan's recent economic performance through the summer of 2004. It notes the strong cyclical recovery and its slowdown. I note several problems about the economic data, particularly about the GDP deflation's bias which results in an overestimate of real GDP growth by about 1 percent point. I consider inadequate aggregate demand; persisting deflation and monetary policy; unemployment and underemployment, adversely affecting the young particularly; ongoing financial system reform; government economic policy; longer run growth and economic transformation; and changes in corporate governance. The key issue is whether the generally positive economic ending has finally put Japan onto the path of self-sustained growth. I am cautiously skeptical; it depends whether growth in 2005 is close to 3 percent or to 1 percent.