Kristian Rouz — The Japanese government is touting recent positive developments in the national economy, highlighting the ongoing gradual recovery from the lingering aftereffects of the last global economic crisis, as well as decades of stagflation. This comes amid rising consumer confidence and spending, business investment, as well as gains in national exports.
Japan's Cabinet Office said its outlook on the economy remains stable despite the concerns US protectionist measures could hinder Japanese foreign trade. The government stressed that the economy is becoming increasingly sustainable amid strong domestic consumption, which has helped reduce Japan's reliance on export revenues.
Additionally, the government hinted that Japan could negotiate favorable trade conditions with the US in the upcoming weeks, which would offset the projected negative impacts that the new US tariffs on industrial metals are expected to have on the Japanese economy.
Some US experts across the Pacific share a similar sentiment.
"I would expect Japan to get exempted without any particular conditions being established, because it is such an important ally," Matthew Goodman of the Washington-based Center for Strategic and International Studies said.
Additionally, Japan's exports in industrial metals are highly-diversified, with only 5 percent of its steel and iron exports going to the US. In this light, last year's scandal at Kobe Steel — which supplied subpar-quality metals to US manufacturers, including in the aerospace industry — had a far more devastating effect on Japanese exports than President Trump's tariffs could inflict.
Last month alone, Japan's exports rose 1.8 percent year-on-year, according to government data. The island nation's trade balance was a surplus of $32 mln that same month, which was, however, far below the previous expectations of $837.5 mln, as imports rose 16.5 percent due to the rise in oil and commodity prices.
"In principle, overseas economies are doing well, so I don't see exports losing steam," Yuichi Kodama of Meiji Yasuda Life Insurance said. "Domestic demand is also quite solid, and capital expenditure especially should be growing as firms invest in assets to reduce labour hours."
Japanese exports to the US alone rose 4.3 percent in February.
In its March economic report, the Japanese government observed an expansion in domestic capital investment, with such industries as robotics and advanced electronics — including semiconductors — increasing re-investment in order to meet the rising demand.
Additionally, rising business spending and inventories, coupled with robust gains in consumer demand, led the Japanese Cabinet to revise upward GDP growth for the past quarter.
This might suggest that stagflation is finally over, despite the Bank of Japan (BoJ) still struggling to push consumer prices and broader inflation closer to its 2-percent target.
The recent economic improvements are largely attributed to Prime Minister Shinzo Abe's policies of labour reforms, corporate tax breaks, and deregulation — known as ‘Abenomics'.
This, however, has been coupled with the BoJ's $3-trln policy accommodation package, enacted in the aftermath of the 2009 crisis, while Japan's government debt-to-GDP ratio stands at 253 percent compared to 191.8 percent back in 2008.
This means further reforms and adjustment, as well as sound trade deals with foreign partners acting in good faith, are necessary if Japan wants to free up more tools at its disposal to be prepared for the next global economic meltdown.