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Consumer spending in Japan: Next year’s economic bugbear?

December 26, 2006
By Ken Worsley


The foreign press has been all over Sluggish Consumption Slows Japan Economy, an AP piece published yesterday (link is to the Washington Post version). The AP article seems to play down the possibility of a January interest rate hike, calling Bank of Japan governor Toshihiko Fukui ‘cautious’ on the issue, based on his comments to the Japan Business Federation (Keidanren):

We can keep an accommodative monetary environment led by very low interest rates for some time. We will tighten monetary policy if economic activity and prices develop in line with our projections.

With domestic consumer spending accounting for about half of Japan’s GDP, if it doesn’t rise, there’s no way the economy can keep doing so. However, Keidanren chairman Fujio Mitarai, who is also the chairman of Canon, said that he thinks corporate profits will soon be reflected in higher wages:

As the economy becomes more robust and corporate performances improve, those effects should cross over to the household sector.

He had better hope so.

Filed Under Consumer Spending, Economics 

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