The latest batch of economic reports has given the public reason to take heart. The Finance Ministry’s quarterly business survey, released last week, found busi- ness-fixed investment rose 3.3 percent in the January-March term, the first year-on-year rise in nine quarters.
Thanks to the upturn in capital spending, the nation ended fiscal 1999 with a 0.5 percent real increase in gross domestic product, the first in three years.
The survey also found that the combined total of pretax profits of all industries surged 38.7 percent over the previous year on top of a 41.8 percent gain the previous quarter.
Still, for good reasons, few people are finding themselves financially better off. First, with prices refusing to rise, economic growth remains unperceivable.
Before allowing for changes in purchasing power, the economy actually shrank 0.7 percent in fiscal 1999 for its second consecutive year of decline. Although the cost of goods has decreased, people have little cause to celebrate as wage increases remain nowhere in sight.
Second, the structural reform going on in Japan is distorting the economic outlook.
Since the recently enacted changes to the corporate accounting system no longer allow companies to delay writeoffs of their problematic liabilities, they have dug into earnings gains to cut debts.
As a result, many firms chalked up extraordinary losses for the year that ended March 31, despite sizable increases in pretax profits.
It is unlikely that corporations will pass along this growth in earnings in the form of increased bonuses and wages this year.
Third, the pump-priming measures taken in recent years could soon backfire.
Although there is little dispute that the government’s efforts to spend its way out of the recession have proved effective, worries remain over the repercussions that may arise from such massive spending.
In the early 1990s, the U.S. faced the problem of economic growth without a correspondent increase in jobs.
In Japan, too, people may continue feeling for some time a gap between positive economic figures and incongruent prospects for income.