Date: 10 May 2011
The event will be held in Tokyo, Japan, with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
United Nations Statistical Institute for Asia and the Pacific
Economic Affairs Officer
Macroeconomic Policy and Development Division
United Nations Economic and Social Commission for Asia and the Pacific
Country briefing note <download pdf file>
Economic recovery in 2010
The Japanese economy, which contracted by 6.3% in 2009, bounced back after second quarter of 2009. Economic recovery decelerated in the second half of the year in 2010; nevertheless, GDP still grew by 3.9% in 2010.
Economic growth continued to be heavily dependent on net export growth, while domestic demand also contributed, albeit weakly.
Domestic demand is led by the growth of private consumption, especially of durable goods, reflecting the subsidies for “green” durables as part of the fiscal stimulus.
Growth of nominal wage income turned positive in 2010 after recording a more than 7% decline during 2009, thus contributing to the improvement in consumer confidence.
Recovery of residential investment has stalled, however, hovering around the 2007 level when residential investment plunged due to regulatory changes. Corporate investment has continued to recover, reflecting an improvement in corporate profits and business sentiment.
Export bounced back despite the continued appreciation of the Japanese yen vis-à-vis the dollar. Export growth faltered in the third quarter of 2010, however, as the demand from Asia experienced a sharp slowdown.
In contrast to other countries in the region, deflation has once again become a major concern for the economy in Japan . Consumer prices continued to decline, by 0.7% in 2010, although at slower pace than in 2009.
The deflationary pressure reflects combination of factors: the output gap stemming from the slower economic growth; structural factors, such as market deregulation and competitive pressure from China , which is making it more difficult for producers to increase prices; sluggish wage growth and the appreciation of the Japanese currency, which have brought down imported prices in yen terms.
Government debt further increased from 217.5% of GDP in 2009, to 225.0% in 2010. Nonetheless, the Government of Japan launched a fresh fiscal stimulus package in late 2010 in view of deflationary pressures and deteriorating labour market conditions.
The additional spending coupled with sluggish recovery and reduced tax receipts led the Government budget deficit to increase to 7.5% of GDP in 2010.
Contrary to other countries in the region, the Bank of Japan further eased monetary policy in October. The policy target rate was lowered from 0.1% to a range between 0.0% and 0.1% due to the re-emergence of deflation. The policy likely to continue until prices had stabilized in the medium- to long-term
Despite weak economic prospects, the Japanese yen strengthened rapidly in 2010, leading the Bank of Japan to intervene in the foreign exchange market in September for the first time in six years, but with limited impact.
Damage from the earthquake and consequent tsunami on unprecedented scale was aggravated by the risk and uncertainty over radioactive contamination and disruption of electricity supply.
Preliminary estimates by the Government in March suggest the economic damage could reach $309 billion. Adverse economic impact caused by the extensive damage inflicted upon the coastal infrastructure in north-eastern Japan will continue to be felt for many years to come, although reconstruction may increase economic growth to some extent.
Government budget deficit would further worse as significant scale of public expenditure for reconstruction of infrastructure would be required.
The Bank of Japan has already injected massive funds into the money market to maintain liquidity.
Japan faces the grim prospect of slower economic growth, partly due to the damage caused to the economy by the devastating earthquake and tsunami. Economic growth is expected to slow to 1.5%.