World Economy

Japan PM Sets GDP Target of $4.9t

Japan PM Sets GDP Target of $4.9tJapan PM Sets GDP Target of $4.9t

Japan’s Prime Minister Shinzo Abe, fresh from a bruising battle over unpopular military legislation, has unveiled an updated plan for reviving the world’s third-largest economy, setting a GDP target of 600 trillion yen ($4.9 trillion).

Abe took office in late 2012 promising to end deflation and rev up growth through strong public spending, lavish monetary easing and sweeping reforms to help make the economy more productive and competitive. So far, those “three arrows” of his Abenomics plan have fallen short of their targets, although share prices and corporate profits have soared, Yahoo reported.

“Tomorrow will definitely be better than today!” Abe declared in a news conference on national television. “From today Abenomics is entering a new stage. Japan will become a society in which all can participate actively.”

Abe was recently re-elected unopposed as head of the ruling Liberal Democratic party. He has promised to refocus on the economy after enacting security legislation enabling Japan’s military to take part in combat even when the country is not under direct attack. The move prompted a series of street protests and weakened his popularity.

“He has to deliver the message that he is so committed to achieving the economic agenda; that is, to make people’s lives better,” said analyst Masamichi Adachi of JP Morgan in Tokyo.

Abe said he was determined to ensure that 50 years from now the Japanese population, which is 126 million and falling, has stabilized at 100 million.

 0.9% Growth

Japan’s economy, estimated at $4.6 trillion in 2014, contracted at a 1.2% annual rate in the April-June quarter. Economists have warned that China’s slowdown and market turmoil might weaken an expected recovery in the coming months.

At Japan’s recent pace of growth, achieving Abe’s goal would be a stretch. Real GDP growth averaged 1.7% over the past five fiscal years. That’s less than half the 3% pace needed to attain a GDP of 600 trillion yen by 2021.

The Japan Center for Economic Research, an independent thinktank, is forecasting growth at 0.9% this year and 1.5% in 2016. A sales tax increase planned for April 2017, to 10% from 8% now, is expected to dent growth for that year.

Meanwhile, Japan’s core consumer price index, which includes all items but not fresh food prices, declined 0.1% in August from a year ago.

It is the first time in more than two years that core consumer prices in Japan have fallen, in spite of  Abe’s best efforts to stimulate the economy.

Angus Nicholson, market analyst at trading platform IG Group, said the “mixed” inflation data showed inflationary pressures are “beginning to rise”.

He added: “Whilst this is a positive, it is unlikely to stay the hand of the BOJ [Bank of Japan] and is more an indication that QQE is starting to work.

“With an increased program and a steadily improving global outlook, they could still achieve 2% inflation at some point in 2016.”