Economy in lull amid export slowdown / Spending on services remains steady; winter clothing, car sales see increase

Tomoki Matsubara / Yomiuri Shimbun Staff Writer

Real gross domestic product figures for the October-December quarter released Monday showed the nation's economy is in a lull or a state of temporary stagnation.

The Cabinet Office announced in a preliminary report that the GDP declined by 2.3 percent on an annualized basis, the first drop in two quarters.

It is hard to speculate how the European economy and the yen--which could greatly affect the economy--will impact matters. Companies remained wary with regard to the economic situation.

"It's very important to create domestic demand in the fields of environment, energy and medical and nursing care services," Motohisa Furukawa, state minister for economic and fiscal policy, said at a press conference Monday.

While stressing it is important to make the switch from external demand-led growth, Furukawa showed signs of impatience, saying, "We've been saying that since the '80s."

One major reason for the negative growth is a sharp slowdown in exports.

Although exports account for only 16 percent of real GDP, the figures once again showed exports have a major effect on the economy when domestic demand is sluggish.

Meanwhile, consumer spending, which accounts for about 60 percent of GDP, remained steady.

Television sales declined in the October-December quarter after a sharp increase in the previous quarter due to a last-minute rise in demand before TV broadcasting was switched to digital from analog.

But car sales increased enough to cover the waning demand for televisions, so spending on durable goods declined by a relatively low 1.9 percent.

Meanwhile, spending on services such as restaurants remained steady with an increase of 0.6 percent.

Recent low temperatures also sustained consumer spending for winter clothing. "Winter clothing sold well," an official of Isetan Mitsukoshi Holdings Ltd. said.

According to the Cabinet Office's Economy Watchers Survey in December, a retail shop owner in the Hokuriku region said the number of year-end parties increased there. In the survey, the government questioned people working in industries highly sensitive to local economic conditions.

Some observers said that could indicate a reversion from the widespread hesitation to spend money after the Great East Japan Earthquake. However, it is hard to predict the future of the nation's economy.

Furukawa said,"The economy will continue to recover at a modest pace."

Many economists said the economy will move into positive territory for the January-March quarter but the growth rate will show only a minor increase.

It is also hard to gauge how the economies in Europe, the United States and emerging nations will move. Industrial circles also have strong fears about the global economy.

"We can't see how the European financial crisis will be resolved," an official of Nissan Motor Co. said.

A Sharp Corp. official said, "It is inevitable the yen's appreciation will continue for a long time." Meanwhile, a Honda Motor Co. official said, "We don't feel the strength of U.S. economy."

Nominal GDP--which reflects price fluctuations and is considered to be a close indicator of the real sentiments of those in charge of household finances--dropped to 468 trillion yen in 2011, about the same as the 1991 level of 469 trillion yen.

The figures show the economy has not grown in 20 years, although it is quite difficult to draw a conclusion by simply comparing the figures.

As the deflationary recession has continued, the rate of economic growth has hardly increased.

"Even if real GDP grows, companies and households can't feel 'optimistic' about the economy, and the sense of stagnation has strengthened," said Takeshi Minami, chief economist at Norinchukin Research Institute Co.