On July 18, the Economic Planning Agency (EPA) published its annual economic white paper for 1997. Subtitled "the Japanese Economy Geared up for Reform," this year's white paper says the nation's economy is now ready for full-fledged structural reform. Last year's white paper said the economy was on a recovery course and moving at a mild pace. The EPA Director-general commented that this year's white paper is optimistic about the economy but that the economic trends are not all positive. Attention should continue to be directed to slight business fluctuations after release of the white paper.
Confirming that consumption and investment are firm, the paper points out that the weaker yen has since the latter half of 1996 helped the Japanese economy move down the path to a self-reliant recovery. Although the financial deflation through the April 1 hike in the consumption tax and the restraint on public works, temporarily slow the tempo at which the economy recovers, the white paper predicts that the recovery will be sustained. The after effects of the "bubble years" in the later half of the 1980s, including the massive bad loans made by financial institutions, are no longer a problem that will drag down the overall economy. Attention should now be focused on the structure of individual sectors, the white paper stresses. It thus expresses the view that ripples from the bubble years have substantially disappeared in macro-economic terms. While claiming that the current super-low interest rates has contributed to economic recovery, the paper notes that they have also brought about a deterioration of returns to corporate pension schemes stemming from lower rate of returns on assets.
Meanwhile, the white paper stresses the importance of reforming the economic structure. In particular, deregulation is cited as being essential for a return to long-term stable growth. While valuing international competitiveness and higher productivity in manufacturing, the paper is critical of the non-manufacturing sector. In particular, the ineffectiveness of financial institutions was noted as a factor which is likely to restrain economic development.
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