By Masahi Amano / Yomiuri Shimbun Economic Editor The economy is a “living thing” — it sometimes moves dynamically, and sometimes delicately.
The Tokyo Stock Exchange got off to a good start in 2017, as the Nikkei Stock Average recorded a rise of nearly 500 points on the first day of trading on Jan. 4. There were some profit-taking moves the following day, but in contrast to the beginning of 2016, which was rattled by a series of sharp dives in stock prices, a positive atmosphere is prevalent in the market now.
Ahead of the U.S. presidential election last year, most analysts believed that a Donald Trump victory would be a cause of market turbulence. Since trading began, however, a trend of strong stock prices, accompanied by a weaker yen, has continued as people pinned hopes on the U.S. president-elect, who proposed tax cuts and deregulation programs.
As the New Year kicked off, I realized anew the difficulty of predicting the future of the “living thing.”
Against a backdrop of expectations for business expansion in the United States, a bright outlook for Japan’s 2017 economy is drawing attention.
According to a Yomiuri Shimbun survey conducted among 30 major companies, 70 percent of company heads said they expect the economy to recover moderately for about the next six months.
Bank of Japan Gov. Haruhiko Kuroda also said, “The headwind is turning into a tailwind.”
However, it is dangerous to make the United States Japan’s sole economic engine. This should be the year to achieve self-sustained growth driven by domestic demand. Relentless policy efforts are needed to achieve this goal.
It is now clear that the nation has no options left in its monetary policy after going as far as the introduction of the negative interest rate policy. The baton should be successfully passed over from the monetary-easing policy to fiscal policy and growth strategy.
The priority in money allotment should be shifted to growth fields such as education, medical care and artificial intelligence (AI). It is also important to make more efforts to boost companies’ investments and raise their productivity through regulatory reforms and tax system reforms.
It is indispensable to carry out social security reform and reinforce measures against the nation’s low birthrate to ease the public’s anxiety about the future, which makes people hold back in spending and refrain from making investments.
When I asked seven market players about key words for the New Year, two of them mentioned the term VUCA, which is an acronym that symbolizes an unpredictable situation — volatility, uncertainty, complexity and ambiguity.
Certainly, we should never let our guard down against the risks in the global economy. For the United States, there are concerns that the U.S. economy might stall through factors such as an excessively strong dollar, a rise in interest rates and protectionist trade policies.
European nations also face a mountain of problems, such as the spread of populism and uncertainty in bank operations. Emerging nations are worried about a possible sharp decline in currencies and inflation, as excessive outflow of funds has taken place following the interest rate hike in the United States.
Former U.S. Federal Reserve Board Chairman Alan Greenspan, who was dubbed a “maestro,” once likened the difficulty of economic analysis to a tailor measuring a person for a suit, saying that the “person we are measuring is running while we try to measure him.”
The maestro himself was criticized for his past judgments on economic policies after he stepped down from the post when the financial crisis triggered by the collapse of Lehman Brothers took place afterward.
To measure the clothing of someone who is running, it is necessary to run faster than the runner. When a wave of change arrives, you must quickly notice the crest of a wave.