[Details] This year's Japanese economy is focused on wage increases What do experts think?

Many people are of the opinion that the Japanese economy will continue to recover this year, partly due to the recovery of inbound-related demand that has fallen due to the new corona.

However, with prices continuing to rise and concerns about a slowdown in overseas economies growing, it will be a year in which companies will be asked whether wage increases can boost the economy and consumption.

Regarding the outlook for the economic growth rate for the new fiscal year and 2023, the government expects that the real economic growth rate excluding price fluctuations will be +1.5%, and that GDP = gross domestic product will be the highest ever.

The growth rate compiled by the Japan Center for Economic Research, a public interest incorporated association, is an average of 1.07%, based on the forecasts of 36 private economists.

The number of foreign tourists, which had been cut off due to the corona crisis, has increased, demand related to inbound tourists has recovered, and there is a growing view among companies that the momentum for wage increases is increasing against the backdrop of rising prices and labor shortages.

On the other hand, it has been pointed out that overseas economies such as the United States are likely to fall into recession due to record inflation and rapid interest rate hikes as brakes, and the view that the impact on the Japanese economy is inevitable.

In order to avoid a situation where the economy is sluggish again without being able to achieve a strong recovery in the midst of high prices, it will be a year when the trend of corporate wage increases will spread in this year's spring labor offensive, and whether it will be possible to boost the economy and consumption. Become.

Regarding the outlook for the Japanese economy this year, Jun Takeda, chief economist at Itochu Research Institute, which specializes in macroeconomics, points out that the extent to which companies can maintain a positive attitude is the key to realizing growth.

Q. This year's Japanese economy.

Can we expect sustainable growth?

A.In addition to the government's economic growth rate forecast, private sector forecasts are all projecting positive growth.

Personal consumption, which accounts for more than half of GDP, has yet to recover to its pre-coronavirus level and remains at a low level, so there is considerable room for growth.

If the forward-looking attitude of companies is maintained and wage increases and investment expansion proceed as expected, growth this year is fully possible.

Q. What are the positive factors for the Japanese economy?

A.There are four major positive factors.

[De-coronavirus]

Japan has been slow to recover from the new coronavirus, but from around the fall of 2022, it will enter a phase of coexistence with COVID-19, and there is still a lot of room for normalization of economic activities.

So-called revenge consumption is expected to continue in the future.

[Corporate willingness to invest in facilities]

Various surveys show that companies are highly motivated to make capital investment, and given the continuing labor shortage, companies are likely to try to increase capital investment to improve production efficiency for future growth.

The indicator that shows the sense of excess or deficiency of facilities is negative, meaning that the situation continues to indicate a shortage of facilities.

[Recovery of inbound demand]

The number of foreign tourists who came to Japan in January last year was about 20,000 per month, but in October it was about 500,000, and in November it exceeded 900,000.

This trend will continue this year, and the recovery of inbound demand will begin in earnest.

Inbound tourism peaked in 2019 at just over 5 trillion yen, or 1% of GDP.

[Rise in prices]

Prices continue to rise, but the level is kept down compared to Europe and the United States.

The depreciation of the yen has calmed down for a while, and the soaring prices of food, energy, and resources overseas have peaked out.

Q. Conversely, what are the risk factors that put downward pressure on the economy?

A. The most serious concern is the deterioration of overseas economies.

Europe and the United States are suffering from inflation, and they continue to take the stance of suppressing inflation by raising interest rates even if they are prepared for a recession.

Both the US central bank, the Fed, and the European central bank, the ECB, have indicated that they will continue to raise interest rates, so this will act as a strong brake on the economy.

Q. What are you paying attention to in this year's overseas economy?

A. The Chinese economy has been in turmoil recently.

China has effectively abolished its zero-coronavirus policy, but it was lifted when it was not fully prepared, and infections are spreading rapidly.

As a result, people are refraining from going out, and factories are suspending production activities, so it should be seen that the economic stagnation will continue.

We have no idea when this epidemic will end.

Therefore, it is better to assume that the Chinese economy will continue to suffer a painful deterioration for the time being.

Q. How will the deterioration of overseas economies affect Japan?

A. In addition to Europe and the United States, the Chinese economy will deteriorate, which will cause considerable damage to Japanese exports.

Japan's exports have been declining since last autumn, and it is highly likely that the slump will continue for some time to come.

It would be nice if it was just a decline in exports, but if corporate sentiment deteriorates or if the expected rise in wages is restrained, consumer sentiment also deteriorates, which is expected to lead the economy this year. This will have a negative impact on domestic demand.

The biggest concern is that it will lead to a deterioration in corporate capital investment and personal consumption.

Q. How can we overcome this situation?

A. While it is not unlikely that wages will not be raised as expected, a considerable number of companies are currently facing shortages of employment and facilities. It is a situation that has no choice but to expand.

Rather than the Japanese economy being swayed by overseas economies, we must overcome it by working positively with the spirit of rebuilding our own economy, centering on Japanese companies.

I would like to expect the potential to hit back with domestic demand this year.

Q. What other points should you pay attention to in this year's economy?

A. The most important thing to watch out for is the direction of the Bank of Japan's monetary policy.

In December of last year, the Bank of Japan decided to revise its monetary policy, and the market is beginning to see a rise in interest rates approaching.

By April, the governor of the Bank of Japan will be replaced, and depending on the situation, the framework of monetary policy may change.

If that happens, the possibility of interest rate rises will increase further, and it will be a year in which we must prepare for it.

(Interviewer: Daisuke Nogami, Economic Department)