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80% of major Japanese firms expect domestic economy to grow in 2018

Kyodo

Over 80 percent of major companies expect the economy to grow toward the end of this year, but most do not see the expansion lasting beyond the 2020 Tokyo Olympics, according to a recent Kyodo News survey.

Around 82 percent of the 113 companies surveyed in July, including Toyota Motor Corp. and Sony Corp., said they think the economy will expand at least moderately in 2018, citing increases in corporate investment and rises in personal spending despite uncertainties stoked by U.S. protectionism.

The upbeat outlook comes with the Japanese economy in its second-longest expansion cycle in the postwar period.

Asked about the outlook for the economy after the 2020 Olympics, 50 percent of the companies expect it to level off and 22 percent predict a slowdown. Only 18 percent expect an expansion.

The survey also measured wariness over U.S. President Donald Trump’s “America First” trade policy, such as higher tariffs on steel and aluminum imports as well as U.S.-China trade disputes and possible hikes in tariffs on U.S. imports of cars and auto parts.

Some 21 percent of the companies said their earnings would be affected, while 34 percent said they have concerns despite the absence of any tangible impact so far. Fifteen percent said they see little or no impact.

Prime Minister Shinzo Abe’s Abenomics policy, centered on bold monetary easing by the Bank of Japan and fiscal spending, received a positive assessment from 55 percent of the companies, while 4 percent said they are against it. The policy mix was introduced in 2012 in a bid to beat chronic deflation and achieve sustainable growth.

Asked which government policies the companies are pinning their hopes on, 45 percent chose regulatory reforms and 42 percent picked promotion of free trade agreements. Japan and the European Union signed a free trade agreement in July, while the Trans-Pacific Partnership deal grouping Japan and 10 other Pacific Rim countries is expected to take effect early next year.

Asked what concerns them about government policies, 41 percent picked fiscal rehabilitation and 35 percent chose social security reforms. The Abe administration is trying to restore fiscal health so the government can better cope with the aging of the population and consequent increases in pension and medical costs. To increase tax revenue, the government plans to hike consumption tax to 10 percent in October 2019, up from 8 percent now. Some 53 percent of the surveyed companies are in favor of the planned hike and only 1 percent are against.

But 27 percent said they are neither for nor against the consumption tax increase, with some saying the government should consider carefully when to raise the tax. Some 19 percent did not answer. Fifty-three percent said they are experiencing a shortage of labor, while 44 percent said they are not.

Asked about ways to address the labor crunch, and permitted to give more than one answer, 61 percent said they have high hopes for the use of artificial intelligence and introduction of other technology, 58 percent cited female empowerment and 15 percent backed the hiring of more foreign workers.