München. LMU. 1. Franz Waldenberger. Japan Center and. Munich School of
Management. Ludwig-Maximilians-University Munich
The Japanese economy ?
Franz Waldenberger Japan Center and Munich School of Management Ludwig-Maximilians-University Munich
LMU
Ludwig Maximilians Universität München
[email protected]
1
Outline 1. GDP – economic recovery 2. GDP per head – two “lost decades” 3. Employment – more flexibility 4. Deflation – no end in sight 5. Rich country – poor government 6. Old, but “genki” population 7. Increasing income disparities 8. Japan – not as international as you think 9. Conclusion LMU
Ludwig Maximilians Universität München
Franz Waldenberger „The Japanese Economy“
2
1. GDP – economic recovery Real GDP growth 1998 to 2011
OECD economic outlook, Nov. 2009
LMU
Ludwig Maximilians Universität München
Franz Waldenberger „The Japanese Economy“
3
2. GDP per head – two “lost decades” Relative position in GDP per head 1950 to 2008
1950
Ludwig Maximilians Universität München
1991
2002
2008
Japan
20
69
83
75
73
Germany
41
72
74
74
77
100
100
100
100
100
US
LMU
1973
Franz Waldenberger „The Japanese Economy“
4
3. Employment – more flexibility
LMU
Ludwig Maximilians Universität München
•
Unemployment jumped up from 4% in 2008 to 5.6% in 2010, but it is still low in international comparison. However, the share of longterm unemployment is high (33.3), despite low and short unemployment benefits.
•
Irregular forms of employment (part-time, temporary, etc.) make up for more 1/3 of total employment.
•
Employment protection regulation is less strict than in continental Europe and has been further loosened.
•
Minimum wages are relatively low.
•
Labour costs proved to be flexible during economic downturns.
•
The burden of taxes and social contributions on wage income is moderate. Franz Waldenberger „The Japanese Economy“
5
4. Deflation – no end in sight
LMU
Ludwig Maximilians Universität München
•
Consumer prices started to decline again in 2009.
•
Nominal interest rates remain very low – less than 2.0 on government bonds! Relieving fiscal debt services.
•
The banking sector is suffering from low profitability (especially regional banks), mainly due to low interest margins.
•
A solution would require higher nominal interest rates and fewer banks!
Franz Waldenberger „The Japanese Economy“
6
5. Rich country – poor government
LMU
Ludwig Maximilians Universität München
•
Japan continues to have the largest amount of net foreign assets world wide (2,500 billion USD in 2008).
•
On the other hand, the Japanese government is burdened with high debt (gross debt about 200% of GDP, net debt 100% of GDP).
•
However, interest payments are very low (1.1% of GDP), and
•
almost all government debt is held by Japanese investors.
•
The tax burden is still relatively low. There is room for consolidation, however, Japanese politicians do not seem to be serious about fiscal consolidation.
Franz Waldenberger „The Japanese Economy“
7
6. Old, but “genki” population
LMU
Ludwig Maximilians Universität München
•
Rapid ageing: In 2050, 40% of the population will be 65 and older.
•
As a result of ageing, household savings dropped from 10% in the late 1990’s to below 3% in recent years.
•
To secure the viability of the pension system, the retirement age is being lifted, benefits are being reduced, contributions are being raised. In addition, the government is pouring more tax money into the system.
•
The impact on employment is limited due to the high employment rate of elderly in Japan even beyond the age of 65.
•
To compensate the reduction in employment due to ageing, productivity will have to grow by 0.3% annually to maintain the level of GDP per head. Franz Waldenberger „The Japanese Economy“
8
7. Increasing income disparities
LMU
Ludwig Maximilians Universität München
•
Household income in Japan is slightly less equally distributed than in other OECD countries. Little change over the last 10 years when measured by the Giny coefficient.
•
The poverty rate (share of households with income less than half the median income) is relatively high (15%) and has markedly risen over the last decade.
•
The poverty gap (difference between average income of “poor” to median income) is rather small.
•
There is little redistribution of income by the government.
Franz Waldenberger „The Japanese Economy“
9
8. Japan - not as international as you think
LMU
Ludwig Maximilians Universität München
•
China has become Japan’s most important trading partner in recent years surpassing the US.
•
Export and import shares are comparatively low (recently around 15% of GDP).
•
The same holds true for inward and outward FDI stocks (4% and 14% of GDP respectively).
•
Japan’s low degree of internationalisation remains a puzzle. It cannot be explained in terms of tariff or non-tariff barriers or product market regulation.
Franz Waldenberger „The Japanese Economy“
10
9. Conclusion
LMU
Ludwig Maximilians Universität München
•
Japan continues to fall behind in GDP per head.
•
It needs to redirect private savings from the public to the private sector through consolidation of fiscal deficits.
•
More investments are needed in education and training.
•
The economy needs to further internationalize in terms of trade and FDI.
•
Demographic change requires mid-term adjustments, but longer life and reduced population density should result in net welfare gains.
Franz Waldenberger „The Japanese Economy“
11
