A team of private-sector economists and financial market participants agreed Tuesday that Japan will not be able to shake off deflation for a few more years, a government official said.
The members also endorsed the government’s recent view that the economy is deteriorating but were divided almost down the middle on how long it will continue to sink, the Cabinet Office official said.
Tuesday’s gathering involved one of the team’s six subgroups formed under the government’s Council on Economic and Fiscal Policy.
The team, which consists of about 80 economists and financial market participants, is slated to hold a plenary session Aug. 23 before submitting a report to the council later in the month.
Heizo Takenaka, state minister in charge of the council, told the meeting in an opening address that he wants the experts to give their views on the direction of the economy, which the council will take into account in its policy deliberations.
“We have to proceed in a balanced way with the strengthening of the supply side and the management of demand, as the economy becomes very severe,” Takenaka said.
During the discussions, optimists predicted the economy will bottom out between autumn and winter, due to the relative firmness of consumption and sectors unrelated to the recent steep downswing in information technology.
In contrast, pessimists pointed to the risks of this downswing spreading to other sectors and further weighing on the economy, which would not hit bottom until next year.
But both agreed the recovery that follows will likely be more moderate than before.
The team called on the government to consider measures on the presumption that deflation will continue for a while, since the supply shortage stemming from Japanese firms’ transferring their manufacturing bases to China is another cause of the phenomenon.
The team first met Monday to discuss IT-related market conditions. It will be followed by sessions involving experts on financial, foreign and labor markets before the planned report is compiled.
The team is led by two members of the council chaired by Prime Minister Junichiro Koizumi — Jiro Ushio, chairman of Ushio Inc., and Masaaki Honma, a professor at Osaka University.
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