Japan’s economy shrinks more than expected in 3rd quarter
Let’s talk a little bit more about Japan’s economy. Vicky Price is an international economist. Um, great to have you on Global Business Europe again, Vicki. Now, is this all about US tariffs squeezing an export reliant economy? I think it was, but what we’re seeing is that there has been some normalization if you like. So, there has been an agreement now. Tariffs have have been reduced and there is a little bit more confidence ahead. So what we likely see as you rightly say is that the fourth quarter of the year will be a little bit better. It was a bit of a surprise that there was quite such a drop in the third quarter especially since Japan had been doing okay until then. Uh and what it of course it does is it confuses a little bit policy makers because uh yes as again as you suggested there is a meeting on the 19th of December um to see whether interest rates will be going up. Interest rates of course are very low in Japan right now. They’re only at 0.5%. So they are just half a percent really and they may be going up to 75%. Well that’s very very low and that’s way below where inflation is which is around 3%. So the question is you know does the the bank of Japan do something a bit more urgent on this? Uh is it going to be worried about what will happen to growth in in the future if indeed Japan sort of recovers? Um and so that there is a bit of a schizophrenic attitude if I may say because at the same time uh the the government itself is putting a lot more money into the economy through a stimulus measure cutting subsidy no uh sorry not cutting subsidies but actually reintroducing subsidies for energy for energy uh which of course will bring uh sort of hopefully inflation down. So how can you on the one hand be thinking about in increasing interest rates when at the same time you’re trying to stimulate the economy? You you talk about that confusion. So what do you think needs to happen? Um or do you think Japan’s economic outlook is going to maybe remain uncertain in in the short to to medium term? Well, something needs to probably be done about inflation because after years and decades of uh Japan being in a deflation environment and suddenly we see inflation there. Um and uh and of course it means for individuals uh who are not getting at present wages rising at the same rate as inflation. they will perhaps in the future, but it means that there is an issue about demand in the economy and also investment in the economy and I think that’s the real problem. So if you raise rates even further even though they’re very very low then that perhaps you know will act as a disincentive but in reality they’re still very negative in real terms. So you can be increasing interest rates for a while without worrying too much. So there isn’t that much of an inconsistency. It looks like it’s from the outside, but when you look at what’s going on in Japan itself, you’ve got a situation where yes, perhaps uh mood is improving a little bit, a bit more help from from government, a bit more exports. We’ve seen exports recover, even car exports going up, semiconductors going up. So, so there is certainly some underlying uh strength in the economy coming back. So the forecasts for this year are for growth perhaps of just over 1% for next year originally mainly because of the trade concerns slightly less.9%. It could be better could be better certainly Vicky Price a pleasure talking to you again. Thank you very much.
CGTN Europe discussed this with International Economist Vicky Pryce