Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Japan panel calls for shift away from stimulus-driven economy

Published 04/02/2024, 05:46 AM
Updated 04/02/2024, 05:52 AM
© Reuters. People have lunch at a seafood restaurant at Tsukiji Outer Market in Tokyo, Japan, February 15, 2024.  REUTERS/Issei Kato/File Photo

By Leika Kihara

TOKYO (Reuters) - Japan must shift its policy focus away from crisis-mode stimulus towards achieving private sector-driven economic growth, a government panel said on Tuesday in the wake of the central bank's decision to end eight years of negative interest rates.

In a proposal to the government's top economic council, the panel urged policy changes in the face of rising domestic prices and interest rates, as well as wage growth at a 30-year high as companies face job shortages.

"Japan's economic and fiscal policies must shift away from the crisis-mode approach that worked when prices barely moved, to one that responds to rising prices and strengthening growth," the panel said in the report, which was submitted to the council's meeting on Tuesday.

"We need to achieve a domestic demand-driven growth and a sustainable fiscal structure," the report said, urging Japan to wean itself off decades of heavy fiscal and monetary support that had underpinned the fragile economy.

The recommendations by the panel and private members lay the groundwork for setting the government's long-term economic policies and their priorities.

Private-sector members of the government council also called for continued cooperation between the government and the Bank of Japan to ensure wages keep rising next year and beyond.

"With the BOJ having ended negative rates, monetary policy has entered a new stage," the private-sector members said in their joint proposal. "We're seeing an opportunity open up to achieve economic growth driven by private demand."

The council's meeting also debated the impact of Japan's rapidly ageing population on long-term economic growth.

Under a baseline scenario that assumes the economy will keep growing around the current pace, Japan will see its per-capita gross domestic product (GDP) rise just 6.2% in 2060, the Cabinet Office's estimates showed.

While that will be up from 4.1% in 2020, it will be well below 9.6% for the United States, 8.1% for Germany, 7.6% for Britain and 7.1% for France in 2060, the estimates showed.

© Reuters. People have lunch at a seafood restaurant at Tsukiji Outer Market in Tokyo, Japan, February 15, 2024.  REUTERS/Issei Kato/File Photo

Japan has one of the world's fastest-ageing populations that is intensifying labour shortages and leading to a shrinking domestic market. The ratio of those aged 65 or higher is expected to rise to 37.9% in 2060 from 28.6% in 2020, the estimates showed.

Japan's economy grew 1.0% in 2022, lower than Germany's 1.8% and 1.9% in the United States for the same year.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.