Bangkok (UN Information Services) – Japan’s economic growth is forecast to slow in 2008, to 1.4 per cent from 2.1 per cent, amid “considerable uncertainties” over the impact of a United States economic slowdown on Japan’s exports, according to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
In its Economic and Social Survey of Asia and the Pacific, ESCAP said concerns over the outlook for United States credit markets had begun to erode business confidence by late 2007.
Private investment had also suffered “a major setback after new construction standard laws took effect in June 2007.” The construction sector faced a sharp downturn resulting in non-residential construction falling by 54 per cent and housing construction falling by 44 per cent in September 2007.
ESCAP said increasing production costs were having a particular effect on small-and medium-sized enterprises. Corporate inflation at two per cent was also higher than consumer price inflation, due to higher oil and commodity prices, as well as increases in hourly wages rates for part-time workers.
While Japan has increasingly opened its trading ties with Asia in recent decades – almost half of Japan’s exports are to Asia -- ESCAP says a slowdown in the United States would reduce US demand for Asian products. This in turn may lead to a reduction in Asia’s demand for Japanese exports, ESCAP said.
ESCAP noted that in Japan’s share of exports to China and Hong Kong, China had reached 20 per cent in 2006, “almost equal to the 22 per cent share of exports going to the United States.”
There has been a marked decline of the US market’s relative contribution to export growth, from a share of 30 per cent in 2000, “as other export partners’ demand grew and expanded market share,” to around 10 per cent growth.
On international trade, ESCAP says a successful settlement to the Doha round of trade talks would offer significant benefits to Japan with short-term gains amounting to US$1.5 billion and US$2.1 billion over the longer term. Under a comprehensive global trade settlement the short term benefits to Japan would amount to US$8.0 billion, rising to US$17.6 billion over the long term.
ESCAP also raised concerns over the outlook for Japan’s ageing population and retirement with the “major challenge of ensuring its social security system” functions successfully. “Socio-economic change has increasingly eroded the tradition family support system,” ESCAP said.
An increasing number of Japan’s elderly, some 45 per cent of elderly households, lie in the lowest income quartile. “In 2002, 20 per cent of elderly people had incomes below the poverty line,” ESCAP said.
At an aggregated level, the savings by the elderly are much higher than among younger generations although the distribution is uneven among the older groups. ESCAP says that one third of elderly households have savings of more than 20 million yen (US$163,300) but another quarter has less than 7.5 million yen (US$62,000), which is “less than twice the average annual earnings of regular workers.”
At the same time, “as much as 20 per cent of people older than 60 may have no savings,” although on average the elderly may live for two decades after retirement.
ESCAP noted that many of Japan’s elderly continue to work long after retirement, until age 69 on average, to supplement old-age pensions. “More than 70 per cent of men aged 65 to 69 are employed or willing to work, after they have retired from the main occupation,” it said in its Survey.
Low pension earners also have low levels of savings. ESCAP points to data showing that more than 30 per cent of the lowest public pension earners have no savings, “while over 40 per cent of high public pension earners have savings of more than 20 million yen.”
ESCAP said the main challenges lie in “developing a coherent and effective, and financially viable social insurance scheme.” It warns that the existing system has led to “pockets of people who are wholly or partly excluded.”
Further information on the Survey can be found at:
For more information, please contact:
Hak-Fan Lau, UN Information Services, ESCAP
Tel.: +66-2-288-1866, Mob.: +66-84700-1147
Ari Gaitanis, UN Information Services, ESCAP
Tel.: +66-2-288-1862, Fax: +66-2-288-1052