Friday, June 12, 1998
There is no way to sugarcoat the news that Japan's economy shrank an annualized 5.3 percent in the first three months of this year on top of a 1.5 percent annualized drop in the October-December period. Traditionally, quarterly declines in GDP are so rare that the government has opted out of the convention widespread elsewhere of informally defining recessions as two consecutive periods of negative economic growth. Instead, Tokyo uses a less straightforward process that typically has resulted in many more periods being labeled recessionary than would be the case in the United States, where the two-quarter rule holds sway. It has not yet said whether it believes Japan is in a recession, although few analysts doubt that it will do so eventually.
The latest figures cast doubt on government efforts to get the economy going. A tax cut announced in late December was implemented in January-March period, with little visible positive impact. Nearly half the announced stimulus package announced in April, but not yet implemented, merely represents a continuation of that program. To that extent the stimulus package cannot be expected to play a role in reigniting economic growth.
JEI Report No. 23B, dated June 19, 1998, will contain a detailed table of the GDP figures for the most recent four quarters as well as an interpretation of their meaning.
"JEI's Spin on the News" are the opinions of one of more members of JEI's staff and do not necessarily represent the views of the organization.