Does the longest postwar boom cycle mean much?

The government's assessment that the current cycle of economic expansion is now on par with the longest in postwar history may be no cause for celebration for many of Japan's consumers. While the economy is on an extended but moderate growth trend, wage raises remain anemic despite the extremely tight labor market and consumer spending weak even as big companies earn record profits. The key challenge going forward continues to be how to enable consumers at large to feel the economy's growth as their own through more robust and broad-based wage increases.

The judgment that the economy continues to be in a moderate recovery, in the government's monthly report for December, extends the ongoing cycle of expansion, which began in December 2012, to 73 months — equal to the longest postwar expansion cycle from 2002 to 2008. The government also officially confirmed earlier that the current expansion cycle surpassed the second-longest postwar expansion period — the so-called Izanagi boom from 1965 to 1970 — as of September 2017. But while the economy enjoyed double-digit annual growth during the Izanagi boom, which took place toward the end of the nation's rapid post-World War II growth, the average annual growth during the current boom cycle so far comes to a mere 1.2 percent — even lower than the 1.6 percent during the 2002-2008 boom, in which, like in the ongoing boom, many consumers were said to find it hard to share the sense of a strong expansion.

Finance Minister Taro Aso remarked that it is a problem "of sensitivity" on the part of the people who feel that their wages are not rising enough. But in fact, workers' real, inflation-adjusted wages in October fell 0.1 percent from a year earlier for the third monthly decline in a row, as prices rose faster than their pay. Real wages declined by 0.2 percent in 2017. Even on a nominal basis, wage growth in October rose by a mere 0.4 percent. The sluggish wage growth is behind the slow recovery in private consumption, which accounts for 60 percent of Japan's GDP and, even as the Bank of Japan's massive monetary stimulus program has gone on for over five years now, the central bank's 2 percent annual inflation target remains nowhere near in sight.