(The original article in Japanese was posted on August 20, 2021)

 

On August 16, the Cabinet Office announced that Japan’s gross domestic product for the April-June period of 2021 turned positive on a year-to-year basis for the first time in two quarters. The GDP growth rate was a real 0.3% led by a 1.7% increase of capital investment by the private sector. Aggressive investments toward fulfillment of decarbonization and digitalization contributed to the positive growth.

On the other hand, there is still a lack of momentum in consumer spending. It is true that household consumption expenditure also rose 0.8% year-on-year. However, "growth" is felt rather unrealistic in view of the fact that the growth figure is achieved based on the comparison to the period during which the first state of emergency was enforced and "self-restraint" worked effectively to some extent. In the meantime, consumers’ non-durable expenditure declined by 0.3% year-on-year.

The economic sluggishness is attributable to the exhausted social atmosphere due to the prolonged "self-restraint” without promise of clear effects and the ending date. Compensation for employees for the April-June period of 2021 showed a decrease of 1.4% from the previous January-March period (according to the System of National Accounts, Cabinet Office). Wages and bonuses in June paid by companies with 5 or more employees decreased by 0.1% and 2.3% respectively from the same month of the year before. In particular, a significant decline was seen in the industries such as education, life services, food/beverage, transportation, construction, medical care, and welfare. (Monthly Labor Survey, Ministry of Health, Labor and Welfare). The number of unemployed in the April-June period reached 2.33 million on average, 109% of the size of the same period of the year before, of which 740,000 were unemployed for over one year, 135% of the size on a year-to-year basis. Long-term unemployment has acceleratingly been increasing. (Labor Force Survey, Ministry of Internal Affairs and Communications)

While nationwide new coronavirus cases and severely ill cases hit a “record high” day after day, the target areas under the state of emergency and the quasi-state of emergency were expanded, and at the same time, the extension of the emergency period was confirmed. The impact on personal consumption is inevitable. However, the amount of loss is hardly estimated. First of all, “self-restraint” and “cooperation” will effectively work only when political measures deserve confidence of the people. But now, the government has lost public confidence as a result of never-ending political confusion and double standard policies. Unless effectiveness and feasibility of policies are tangible, it is not possible to set parameters of a provisional calculation. A reaction to self-restraint fatigue is not negligible. In fact, the economic loss caused by a state of emergency is getting smaller every time an emergency statement is declared. On the other hand, facing the crisis of explosive infection spread (overshoot), companies as well as individuals are likely to strengthen their self-defense measures. Possibly, private consumption will shrink more significantly than the time under the first state of emergency.

Home recuperation patients in Tokyo topped 20,000. It is a substantial healthcare collapse, which has brought some tragic fatal cases during self-isolation at home. Experts warn that the situation is "uncontrollable” and “as serious as a disaster." Meanwhile, the Paralympics starts on August 24. Throughout the period of the games, more than 500 health-care professionals are assigned per day, and 3,800 rooms as well as 18,000 beds are prepared for athletes and authorized members of the games.

Earlier on May 11, Takarajimasha, Inc. placed a corporate advertisement in Japan’s major newspapers; the Asahi Shimbun, the Yomiuri Shimbun and the Nikkei, with an old photo of a typical Japanese wartime image of female students holding a bamboo spear, highlighting the following phrases: "Each one of good citizen who follows the regulatory requests faithfully is almost beaten down by anxiety about uncertainty in future and will helplessly be worn-out.” “We are on the verge of losing our life due to political mismanagements.” Unfortunately, I should say that is becoming a reality. Paralympians are not to be blamed but definitely, it is a matter of political failure.

 

This Week’s Focus, August 20

Takashi Mizukoshi, the President