Japan economy: end of negative rates?
Japan’s Finance Minister has said that the economy is no longer stuck in deflation Paving the way for an end to eight years of negative interest rates when the Central Bank meets on Tuesday the world’s third largest economy seen falling prices for over 25 years but a surge in salaries could be bringing an end to that Trend Japan’s annual labor negotiations with unions known as shunto or the spring wage offensive has seen major firms agreeing to a pay increase of over 5% for workers that’s the highest rate in over three decades it’s led to speculation that the bank of Japan could raise wider interest rates from their current level of minus 0.1% when policy makers meet next week if they do it means Japan will officially be out of its 8-year period of negative interest rates ending a long spell of discount borrowing for investors both in Japan and abroad earlier I spoke to seiro takesa Professor of management and information at the University of sh woker and I asked him if a change in Japan’s economic Outlook is underway at last well I think it’s a bit too early because capital expenditure is very strong continuously but that’s on back of um lack of Personnel in other words rationalization kind of investment not really forward moving you know Investments and uh private consumption Still Remains to be very conservative considering the uh conservative nature of the Japanese uh Spenders or consumers uh so it’s too early to say that you know we’re regaining you know the strength but the plateau of regaining the strength is definitely going to be here because it’s the first rise in almost 20 years that you know these employees are getting a decent pay rise the company’s concerned that Toshibas Toyota Panasonic these kind of large traditional Japanese companies they knew that this pay rise was important that it would it might become a signal to other parts of the national economy why did they award this pay rise do you think and do you think other parts of the Japanese private sector will follow because after all this is only 16% of the wor Force well the fact of the matter is is that we had inflation which is a word we haven’t heard in two decades and for that reason Corporation had to raise you know the the pay uh also due to the fact that these companies were making very high levels of profit on back of uh price rise and also weaken the Yen so obviously uh even the government were you know inducing were trying to convince these companies you know to raise the pay which hadn’t taken place for two decades so yes it will be a kickoff start and the trend of the Japanese corporation is such that the larger companies would show an example andit small Lo ons to follow so I know you said it was too early to tell exactly what the effects on the economy might be but could we project that we might be looking at a some sort of a recovery led by the private sector I think again um my guess is that uh the Japanese consumer mind is a lot more conservative than many people think uh they need Assurance of job security that’s definitely the first thing but the propensity to spend you know just because cash income comes in by the Japanese isn’t you know like that of the United States or the Americans so um I’m I think it would be too early to say that the private consumption will be the leading you know uh Power of Revival of the Japanese economy I think it would first have to play with capital expenditure what about the International Community then tourism against a stronger Yen perhaps export relationships changing International Investment in the Japanese economy can we see changes expected in these down the line well you know if the Yen strengthens obviously that would be putting off you know many of um inbound tourism uh I think the important thing is you know again uh for the corporations to start investing on a forward moving multiplying type of investment which calls for further Innovation type of you know uh investment rather than backward backpedaling type of investment which is rationalization which unfortunately is the main force of capital exure right now so if we see those kind of changes mindset changing by the you know uh the management then I think we will see a good turnaround uh to take place in the Japanese economy as a whole
Professor of Management and Information at the University of Shizuoka Dr. Seijiro Takeshita speaks to CGTN Europe about the outlook for Japan’s economy.
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