"New Year's View"Hopes and Fears for Abenomix, Makoto Utsumi, President and CEO of JCR

Jan. 06, 2014

The inauguration of the second Abe Administration was cheered by the people with wishes that it might release them from their twenty years of gloom and doom and let them hope for better economy and brighter future of the nation. This was the initial success of the Administration. Japan was indeed in turmoil politically and economically in the last twenty years, for which its international position lost grounds as well. Not just in the scenes of international politics, but we did not see many people come if a Japanese company presented its IR meetings abroad. Japan was forgotten as such. Abenomix has changed such perception upside down in Japan itself and in the rest of the world.
We should note, however, that we owe much of the current depreciated yen and appreciated stock prices on the moves of foreign investors, hedge funds in particular. We should not indulge ourselves in momentary joys, forgetting the country's dire reality behind the scene.
Forbes, a US business magazine, recently reported an article entitled "Now They Tell Us: The Story of Japan's 'Lost Decades' Was Just One Big Hoax". It is true as a matter of fact pointed out there that between 1991 and 2012 Japan's GDP, in real terms and measured against the unit labor input, maintained a growth rate comparable, by and large, to those of the highest among advanced economies, say the United States or Germany. This reminds us that our economy could not but grew only as much as its population, which unfortunately was shrinking.
To make things worse, we have this terrible fiscal issue in which the public debt to GDP is twice as much as Greece at its worst.
Next elections are expected to come in December 2016 for the House of Representatives and earlier July for the House of Councilors. Hence Mr. Abe has a good chance to do job as a long-term administration for the first time in recent history. I would like to encourage him to let people know about the country's somber situation and cherish such spirit as they feel ready to cope with it helping each other in the long years to come.
The Abe Administration earned a credit in its early days by successful creation of a kind of drama that made people wishful. There is a chance, however, in which such success induced the desire to incessantly pursue a next drama, and thereby populism prevails, so it keeps refurbishing people's rosy dreams. We have to be prepared, both the government and people together, to accept the reality that there exists a natural limit to which extent we could depend on the growth to get us out of this agony of public debt accumulation under the circumstance where our country has decreasing population and labor force. We have to be firmly determined that we will go through a thorny path of raising tax rates and cutting public services. Should the Administration be inclined to seek unrealistic economic growth, postponing fiscal reforms which include tax hike, the speculative money of foreign investors who once bought Abenomix would surely turn to sell Japan altogether and right away. I earnestly hope Mr. Abe minds it and carries out a realistic and responsible policy management.
The success in the bid for Olympic Games 2020 made the second scene of the drama for the Abe Administration. Quite a fortune it got. Let us hope this would not turn out to be our nightmare like Greek after their Athens Olympics. I strongly believe it is time for us, both the government and people, to get prepared against the toughest challenges before us.