Japan: manufacturers optimistic internally but fear external issues
Pierre Leblanc and Lee Jay Walker
Modern Tokyo Times
If you want to study about the uniqueness of Japanese capitalism and how companies respond to enormous adverse conditions, then the Tankan survey by the Bank of Japan will make you fully aware. After all, the devastation caused by March 11 and the ongoing crisis at the Fukushima Daiichi nuclear plant would have caused most nations to bow down to mass uncertainty. However, welcome to corporate Japan where the response may seem slow but once the juggernaut starts, then it eats into the crisis and returns to normal.
Let us also remember that unemployment in America remains within the 9% range to just below 10% despite enormous debt borrowing and having no internal devastating consequences to face. Also, remember, that the dollar is very weak and should be helping exporters but in Japan the opposite is happening because the yen is too strong and causing many problems.
However, unemployment in Japan is falling despite all these negatives to below 4.5% and it is Japan and not America which is trying to help the European Union and crisis hit Greece. This applies to buying more Eurobonds and making it fully aware that Japan will step in and help Greece providing a sound economic policy is put on the table.
Also, Japan, which maintains a relatively “quietist policy” is racked by huge debt issues itself but the reserves of Japan remain to be enormous. Therefore, Japan’s unique brand of corporate capitalism can maintain low unemployment and keep on ticking despite the so-called missing decades when small growth to stagnation hindered the economy.
Would unemployment be below 5% in America, France, Germany, Italy, the United Kingdom, or in any other major developed nation, if small growth to stagnation had been part and parcel of the last twenty years?
The recent survey by the Bank of Japan which announced the results of the Tankan findings stipulate confidence. Therefore, manufacturers are expecting the rebound to continue internally but the main worry is external issues which could endanger current optimism.
Supply chains and Japanese mechanisms have once more responded quickly to the events of March 11. In all likelihood, companies will have developed a better infrastructure because now they know how to respond to adverse conditions.
Takuji Okubo who works for Societe Generale stated positively to the BBC that “Manufacturers are planning a sizeable output expansion in the next few months, so we expect conditions to improve even further.”
It is reported that capital expenditure will be down from expected forecasts but much of this is based on external issues. This applies to high unemployment and increasing debt issues in America, a slumbering European Union, the high value of the Yen, the Greek crisis, and other external related issues.
Hideo Kumano, Daiichi Life Research Institute, commented that “If you look carefully, you can see the heavy burden of a higher yen, and their profits are under pressure.”
All in all, it is clear that Japan is faced with enormous problems and currently it is the external factor which is causing alarm bells. Therefore, despite all the devastation of March 11 corporate Japan unblocked all the cogs and manufacturing is at similar levels before this date.
Japan may never see the Golden Years of the 1960s and early 1970s when economic growth was staggeringly high. However, the foundations of Japan were cemented in this period and despite countless tribulations Japan keeps on ticking.