Business / Economy

Japan’s current economic expansion confirmed as second-longest since WWII

Kyodo

Japan’s current economic expansion has become its second-longest in the postwar era, a government panel concluded Thursday, surpassing the 57-month boom between 1965 and 1970.

The panel, which determines the length of periods of economic strength retrospectively, endorsed the view among government officials and economists that the expansion phase from December 2012 under Prime Minister Shinzo Abe entered its 58th month in September last year.

The assessment bolsters the likelihood of the current growth phase in January 2019 becoming the longest in the postwar period, amid criticism that consumers have yet to fully feel its benefits as wage growth remains modest.

The longest economic expansion in postwar Japan was the 73 months between 2002 and 2008, when the trade-reliant economy enjoyed strong demand for Japanese products before the global financial crisis.

The Izanagi boom came after the 1964 Tokyo Olympics as Japan’s consumers flocked to buy color televisions, cars and air conditioners.

The nation’s annual growth rate exceeded 10 percent on average in that period, but the economy has been growing at a much slower pace of around 1 percent recently when measured using real gross domestic product.

Although the nation’s economy has been on a modest growth track, uncertainty also remains over the tariff war between the United States and China.

Abe returned to power in December 2012, just as the current expansion phase began, pledging to prioritize economic growth with his “Abenomics” policy mix that includes bold monetary easing by the Bank of Japan that helped weaken the yen.

After Japan raised its consumption tax from 5 percent to 8 percent in April 2014, private consumption took a hit. But the Cabinet Office panel rejected the view that the economy experienced a recession.

Japan’s economy has benefited from growth in exports during the latest expansion phase and companies, especially exporters, have seen their earnings improve as the yen has depreciated against the U.S. dollar and other currencies.

Robust demand for infrastructure has also supported the world’s third-largest economy as Japan has stepped up preparations for the 2020 Tokyo Olympics and Paralympics.

Private consumption, however, has lacked strength as wage growth has been tepid, making it difficult for the BOJ to achieve its 2 percent inflation target.

As Japan braces for another sales tax hike in October 2019, from the current 8 percent to 10 percent, the government is drawing up steps to mitigate its negative impact.