The Japanese economy entered the new year in good shape. Gross domestic product has grown for seven straight quarters through the July-September period and the current cycle of economic expansion, which began in December 2012, is believed to be the second-longest boom since World War II. The Nikkei 225 average on the Tokyo Stock Exchange opened the year sharply higher than the 2017 closing to hit a 26-year high. Economists are forecasting the 2018 will see continued modest growth. Barring a major shock originating overseas, there is a good chance the expansion will, by the end of the year, catch up with the 73-month-long boom of 2002 to 2008 and become the longest in the postwar period.
Such a rosy assessment of the economy may not be shared by many consumers. Despite robust corporate earnings and the booming stock market, consumer spending remains weak, thanks in large part to stagnant wage growth despite the tight labor market. This year should be one in which increased business profits will find their way into households in ways that contribute to self-sustained growth driven by domestic demand. The government needs to take policy steps to facilitate this, and businesses should share their record profits with employees through significant wage increases.
Labor market conditions have improved steadily under the five years of Abenomics. In November, the jobless rate hit a 24-year low of 2.7 percent, and the ratio of job offers to job seekers reached 1.56 — the highest in about 44 years. As the manpower shortage tightens, openings of regular full-time positions exceeded the number of people seeking such jobs for the first time last year.