Japan Breaking out of Economic Slump ; Eight Years of Deflation Are Expected to End in 2006, Boosting Consumer Spending

By Bennett Richardson Correspondent of The Christian Science Monitor | The Christian Science Monitor, December 22, 2005 | Go to article overview

Japan Breaking out of Economic Slump ; Eight Years of Deflation Are Expected to End in 2006, Boosting Consumer Spending


Bennett Richardson Correspondent of The Christian Science Monitor, The Christian Science Monitor


Christmas came a few days early in Japan when the government announced Monday that the economy was likely to emerge in 2006 from eight years of price deflation.

The stock market obligingly powered to a new five-year high, briefly topping 16,000 points on Wednesday, underscoring that many feel the nation's long economic slump is ending.

Declining consumer prices in Japan have wreaked havoc on the world's second-largest economy by encouraging shoppers to delay purchases of everything from refrigerators to houses. With consumption accounting for about 55 percent of GDP, the disincentive to spend has caused a decade-long vicious cycle of falling corporate profits, departure of producer capacity overseas, downward pressure on incomes, and scores of bankruptcies.

But the foundations of a consumer-spending turnaround were laid when wage deflation came to an end some time last year, partly as a result of improvements in the job market, says economic analyst Naoko Yano at Mitsubishi Research Institute. "As stronger corporate profits begin to filter more fully into pay packets, both higher incomes and better sentiment toward the economy is likely to help further boost individual consumption," she says.

To be sure, the chiefs at the Ministry of Finance expect the transition from deflation to inflation to be fragile at first. The report released Monday predicts consumer prices will rise a mere a 0.5 percent next year. But economists see positive signs, at least until the end of the decade, as asset-rich baby-boomers retire and divest their savings into the economy at large, and their children move into higher-paid jobs and buy property.

A surge in property investment is already under way in major urban areas. While land prices nationwide plunged 67 percent over the past 14 years, property values in central Tokyo rose 0.5 percent this year for the first time since 1991. Areas of Osaka and Nagoya also posted gains.

Foreign investors have been quick to jump on this trend, snapping up idle golf facilities, suburban malls, and tony apartment complexes.

Real estate investment trusts have become popular with individual and corporate investors, helping fuel redevelopment of many business districts. Areas like those near Tokyo Station are almost unrecognizable from even five years ago as skyscrapers replace drab office space dating from Japan's postwar building boom. Research firm IDSS Co. expects office rents in central Tokyo to rise in 2007 for the first time in 15 years.

Foreigners have also been a key factor in rising stock prices. Despite new highs this week, many analysts expect the pace of gains to slow, as overseas markets have been left in the dust by the blistering pace. The Nikkei has gained more than 30 percent from the beginning of 2005 compared with around 2 percent for the Dow Jones Industrial Average, 15 percent for the FTSE index in Britain, and 20 percent for the DAX in Germany.

Still, there are few concerns over the economy itself. Unrecoverable loans have been written off, and corporations that had been burdened for years with massive repayments on bad investments now have increasing leeway to plow some profits back into infrastructure and research. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Japan Breaking out of Economic Slump ; Eight Years of Deflation Are Expected to End in 2006, Boosting Consumer Spending
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.