Japan Facing Challenge of Recovering Economy after Election

Tokyo, Nov. 1 (Jiji Press)--Japan faces the major challenge of recovering its economy from the COVID-19 fallout after Sunday's general election. The economy's outlook is clouded by widening inequality among companies and households and higher crude oil prices. In their campaigning for the House of Representatives election, both ruling and opposition parties promised to distribute cash and reduce taxes. But they have failed to present clear visions on how to achieve economic growth enough to provide sustainable funding sources for such measures. Last month, the Bank of Japan lowered its outlook for the country's economic growth in fiscal 2021 to 3.4 pct from 3.8 pct, citing supply constraints and pandemic-induced slowdown in consumption. It is apparently difficult to achieve the government's goal of bringing gross domestic product back to levels before the pandemic by the end of this year. Takahide Kiuchi, executive economist at Nomura Research Institute Ltd. <4307>, said that higher crude oil prices and the yen's drop "could undermine a recovery in domestic consumption and the economy." The number of pandemic-linked corporate bankruptcies hit monthly record highs in September and October, according to data from Tokyo Shoko Research Ltd, a credit research firm. The government's funding support has so far limited the number of business failures but the data showed the impact of excessive debts stemming from a prolonged economic slump is spreading. Government support is needed for the revival of companies hit by the pandemic. But the kind of pork-barrel spending promised by political parties will hurt the potential for companies and the Japanese economy. Unless anxiety over future social security is eliminated, a virtuous cycle of stronger consumption and growth cannot be achieved. The Abenomics economic policy, launched by former Prime Minister Shinzo Abe and inherited by his immediate predecessor, Yoshihide Suga, has achieved certain results, such as higher stock prices. But challenges remain, including making up for a delay in digitalization of administrative procedures and expanding household disposable income. END