Global IssuesJAPAN: Economic Woes Hover Over Yearend Revelry
Japanese employees are marking the countdown to the new year with the usual parties that they traditionally indulge in to 'forget the past and start afresh’. But how they celebrate — and how much they spend on these ‘bonen-kai’ celebrations — are a harbinger of the state of the economy.
During the heady bubble years of the late eighties, companies and their employees were so flushed with funds that yearend parties included foreign trips. Many of these were heavily subsidised by corporate budgets.
This year’s ‘bonen-kai’ trend, in the context of the country’s long economic recession and rising unemployment, is as revealing, say analysts.
'Surveys on bonen-kai this year indicate that people are spending more than they did during the last three years despite the gloomy outlook,' said Masato Yoshikawa, senior analyst at Hakuhodo Lifestyle Research Institute, a think tank. 'Still, rather than viewing the trend as a sign of better times, I think people are resigned to their financial difficulties, which makes me predict that Japan will be even more rudderless and less confident next year.'
A December survey by the Kirin Institute of Food and Lifestyle shows that on average, the Japanese spent around 50 dollars each on their ‘bonenkai’ parties, up by 10 dollars compared to the last three years. Most attended two parties in December, one that involved their company colleagues and the other with personal friends.
For many Japanese, their top reason for attending the ‘bonen-kai’, which is voluntary, was to have a 'great time' talking and laughing with friends, followed by stress relief. Asked what venues they selected for these parties, their key priority was 'reasonable prices'.
Among women, there was a high preference for using conference halls in the office or meeting in their apartments and relying on cheaper catering services. Indeed, orders for expensive items such as sushi and roast beef were often restricted to only one serving per person.
'As with the recent past, the huge focus is on partying cheap. People are mindful of their purses because they worry about the future,' explained 47-year-old Akiko Ozaki, who works in the travel industry. Together with her colleagues, Ozaki, whose company reported dwindling sales in 2010, had a yearend binge by spending less than 50 dollars each.
'My daughter enters private high school next April. So in 2011, and to cope with the new expenses, my husband and I have decided to cut back on all the extras,' she said.
Financial consultant and former banker Shigeru Yamada said, 'Japan’s hopes for economic recovery is pinned on implementing some drastic steps. But given the dire political and the government fiscal deficit at twice the Gross Domestic Product, the future is bleak.'
The Nikkei, Japan’s leading financial daily, predicted slower GDP growth in 2011 of 0.6 percent, compared with 1.5 percent in 2010.
Economists are concerned about poor consumer spending in Japan, which is causing deflation and leading to a negative growth spiral. This will see more capital investment abroad by companies that need overseas markets to stay afloat, Yamada said. Domestic demand comprises almost 40 percent of the national economy.
With exports rising 9.1 percent in November, economists such as Seiji Shirashi at Hong Kong Shanghai Banking Corp Securities see more expansion in this area. Still, the overall opinion is that buoyant exports to China especially 'do not necessarily translate to higher capital investment in Japan by companies that are aware of the difficulties in surviving locally,' pointed out Yamada.
Concerns about a moribund economy, along with the rapidly ageing population, are reflected in Japan’s next budget. While the 2011 budget of 1.1 trillion dollars includes measures to raise revenues, it also includes 28.7 trillion yen — or more than half of general expenditures — for social costs such as the state’s growing medical and welfare expenses.
The 2011 budget passed in late December — the Japanese fiscal year runs from April to March — will also lead to more fiscal borrowing. Japan’s government debt is expected to reach a high 204 percent of GDP in 2011.
Other difficult signals include unemployment among youth, as figures show that 30 percent of new university graduates are unemployed. The national unemployment average is 5.9 percent.
Economists have long called for drastic structural reforms, such as opening Japan’s protected agricultural market to exports and expanding immigration, to allow foreigners to reside and work in the country.
'New policies are badly needed. Still, Japanese bureaucrats continue to drag their feet and with the government hampered with internal political bickering, I cannot see Japan pulling its socks to change at least for the first six months of 2011,' said Yamada.
Prime Minister Naoto Kan has promised to focus on creating jobs and has identified environment protection technology, the sector of nursing care for the elderly, and tourism as potential sectors to create 5 million new jobs. The growth target is set at 3 percent annually through 2020.
But analysts find this approach too optimistic, pointing out that Japan’s growth is also heavily reliant on how the larger Asian economy fares.
Meanwhile, anxious Ozaki and her colleagues looking forward to the Year of the Rabbit, the lunar new year that begins in February, because it is supposed to herald prosperity. Laughed Ozaki: 'That is our main hope for next year.'
© Inter Press Service (2010) — All Rights ReservedOriginal source: Inter Press Service