Oecd Economic Surveys : Japan 1980-1981.

87 Pages·5.916 MB·English

by  OECD

OECD
ECONOMIC SURVEYS
JAPAN
JULY 1981
BASIC STATISTICS OF JAPAN
THE LAND
Area (I 000so,, km) 377.6 Majorcities,October 1980estimate
Cultivatedagricultural land (10000inhabitants):
(lOOOsq.km, 1976) 55 Tokyo(Kuareaonly) 834
Forest(I 000sq.km, 1975) 245 Osaka 265
Denselyinhabiteddistricts' Yokohama 277
(lOOOsq.km, 1975) 8.3 Nagoya 209
Kyoto 147
Kobe 137
Sapporo 140
THE PEOPLE
Population, December 1980 Labourforceinpercentoftotal
estimate(1 000) 117 220 population, Dec. 1980 47.8
No.ofpersonsperso.km in 1980 314 Percentagedistributionofemployed
Pourcentageofpopulation persons, Dec. 1980:
livingindenselyinhabiteddistrict Agriculture,forestryandfishery 9.4
in 1975' 57.0 Manufacturingandconstruction 35.9
Nclannualraleofpopulation Other 54.7
increase(per 1 000inhabitants,
1975-198(5 1.0
PRODUCTION
Grossnational product in 1980 Growthofreal fixed investment,
(billionyen) 235 734 1975-1980average(annual rate,
GrowihorrealGNP, 1975-1980 percent 4.7
average(annual rate,percent) 5.1 Netdomesticproductofagriculture,
Grossfixedinvestment in 1979 forestryandfishery,at market
(percentofGNP) 31.7 prices,in 1979 (billionyen) 8 123
Growihofproduction!in
manufacturing(perman hour)
1975-1980,annual rate,percent% 6.2
THEGOVERNMENT
Publicconsumption in 1980 CompositionofParliament, May 1981
(inpercentofGNP) 10.0 (percent):
Currentpublicrevenuein 1979 Houseof Houseof
(inpercentofGNP) 26.6 Repre- Coun-
Governmentemployeesin percent sentatives cillors
oftotalemployment, Dec. 1980 3.5
Outstandinglong-termnational bonds Liberal Democratic
inpercentofcurrentexpenditure Pari)' 56 54
(FY 1980) 165.6 Socialist Parly 21 19
Komeilo(Clean
Government Party) 7 10
DemocraticSocialist
Parly 6 5
Communist Party 6 5
New LiberalClub 2 1
Other 2 6
Lastelection: June 1980 June 1980
Nextelection: 1984 July 1983
FOREIGNTRADEAND PAYMENTS
(1980, million US dollars)
Commodityexports, (fob) 121 649 Percentagedistribution:
Commodityimports, (fob) 124575 Exports Imports
Servicesand transfers -12906
Currentbalance -10832 OECDcountries 46.1 33.7
Long-termcapital 2394 ofwhich:NorthAmerica 26.4 26.8
Basicbalance -8 352 South EastAsia 23.8 22.2
Exportsofgoodsandservices Other 30.1 44.1
inpercenlofGNP 15.1 Crudematerial
Importsofgoodsandservices andfuels
inpercentofGNP 16.1 (SITC2,3,4) 1.5 66.7
Semi-manufactured goods
(5et6) 29.2 11.9
Machineryand transport
equipment (7) 54.8 6.2
Other(0, 1,8,9) 14.5 15.2
THECURRENCY
Monetaryunit: Yen CurrencyunitsperUSS
averageofdailyfigures:
Year 1980 226.6964
May 1981 220.7799
I Areaswhosepopulationdensityexceeds4000personspersq.km.
Nine An internationalcomparisonofcertain basicstatisticsisgiven inanannex table.
OECD ECONOMIC SURVEYS
JAPAN
JULY 1981
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and Development
(OECD) was set up under a Convention signed in Paris on 14th
December 1960, which provides that the OECD shall promote policies
designed:
to achieve the highestsustainableeconomicgrowth andemploy¬
ment and a rising standard ofliving inMember countries, while
maintainingfinancialstability,andthustocontributetothedeve¬
lopment of the world economy;
tocontributetosoundeconomicexpansioninMemberaswellas
non-membercountries in the process ofeconomic development;
to contribute to the expansion ofworld trade on a multilateral,
non-discriminatory basis in accordance with international
obligations.
The Members ofOECD are Australia, Austria, Belgium, Canada,
Denmark, Finland, France, the Federal Republic ofGermany, Greece,
Iceland, Ireland, Italy,Japan, Luxembourg, the Netherlands, NewZea¬
land,Norway,Portugal,Spain,Sweden,Switzerland,Turkey,theUnited
Kingdom and the United States.
TheSocialistFederalRepublicofYugoslaviaisassociated in certain
work oftheOECD,particularlythatoftheEconomicandDevelopment
Review Committee.
The annual review of Japan
by the OECD Economic and Development Review Committee
took place on 23rd June 1981.
©OECD, 1981
Queriesconcerningpermissionsortranslationrightsshouldbeaddressed
to:
Director ofInformation, OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16. France. .
CONTENTS
Introduction 5
I Recent trends and policies 6
Domestic developments 6
Balance of payments 19
Economic policies 29
II Selected factors of the successful adjustment process 37
Relative economic performance since the mid-1970s 37
Role of aggregate demand policy 40
Supply adjustment 44
Flexibility of wages and labour inputs 53
III Short-term prospects and conclusions 61
The outlook for 1981 and 1982 61
Policy conclusions 65
Statistical annex 70
TABLES
Text
1 Demand and output 8
2 Employment trends 14
3 Price developments 16
4 Wages, productivity and unit labour costs 17
5 Corporate profits 18
6 Balance of payments 20
7 Changes in the current balance 23
8 Regional current balances 24
9 Monetary policy variables 30
10 Central Government general account budget 34
11 Central Government bonds outstanding by ownership 35
12 Comparative economic performance 37
13 Fiscal policy indicators 42
14 Policy-related investments 43
15 International comparison of changes in net lending 44
16 Productivity changes and contributing factors 49
17 Automobile industry labour requirements 52
18 Comparison of large and small enterprises, 1979 56
OECDEconomicSurveys
19 Comparative wage developments 57
20 Medium-term trends in wage components 57
21 Most relevant factors in wage determination 58
22 Labour input elasticities in selected OECD coutries 61
23 Short-term outlook 62
DIAGRAMS
1 Contributions to GNP growth 7
2 Saving ratio and consumer confidence 9
3 Behaviour of stockbuilding 10
4 Industrial production and capacity utilisation 11
5 Labour market trends 13
6 Recent price developments 19
7 Relative competitive position 22
8 Exchange rate movements 26
9 Current account, interest rate differential and exchange rate 28
10 Trends in monetary aggregates 31
11 Interest rate developments 32
12 Macro-economic performance of selected OECD countries 39
13 Medium-term trends in money supply and its components 41
14 Structural changes in manufacturing industry 45
15 Capacity utilisation and contributing factors
in structurally-depressed industries: a case of spun yarns 47
16 Main Investment motivations 50
17 Wage differentials, manufacturing sector 55
18 Production and labour inputs in manufacturing 59
19 Methods of adjusting labour inputs 60
Statistical annex
A Gross national product and expenditure 70
B Gross national product and expenditure 71
C Net domestic product at factor cost by industry of origin 72
D Income and expenditure of households and private non-profit institutions 73
E Appropriation account for General Government 74
F Appropriation account for public enterprises 75
G Local government budget (plan) 76
H Foreign trade by commodities 77
I Foreign trade by area 78
I Exports to US and to Western Europe 79
K Long-term capital movements 80
INTRODUCTION
In spite of some deceleration, in 1980 Japanese economic growth remained
among the highest in Member countries with net exports exerting the major
contribution. Consumer price inflation accelerated significantly, influenced by
the sharp increase in oil and other import prices, but was again distinctly
lower than the average for the OECD area. Developments in the course of the
year reflected more clearly the economy's better adjustment to the second oil shock
than had been the case in 1973-1974. With stagnating domestic demand, activity
weakened further in the second half of 1980 and labour market conditions deterio¬
rated slightly. The current external deficit, which had widened steadily since the
second quarter of 1979, declined rapidly as from the second quarter of 1980,
reflecting a fall in import volume, continued buoyancy of exports and a gradual
improvement in the terms of trade, which, coupled with net capital inflows, led to a
sharp appreciation of the yen until early 1981. The strengthening of the
exchange rate contributed to a reduction of inflation, particularly marked at the
wholesale price level but also progressively reflected in the movement of consumer
prices.
The successful control of inflation in the wake of the second oil shock owed
much to the tight policy stance maintained up to last summer and to the moderate
behaviour of wages. However, in view of stagnating domestic demand and
stabilized wholesale prices, a certain re-orientation of policy has been effected
since last August, aimed at supporting activity. Monetary policy has been
relaxed, with a significant decline in interest rates, a reduction in bank's com¬
pulsory reserve requirements and an increase in the ceilings on bank lending.
Within the framework of an overall restrictive stance of fiscal policy the execution
of public works has also been stepped up. On the basis of present trends and
policies, economic growth is expected to remain moderate over the next twelve
months or so, but with a gradual acceleration in the course of 1982. But develop¬
ments could be significantly affected by the future course of policies and move¬
ments in the exchange rate.
Part I of the present Survey reviews recent domestic developments, trends
in the balance of payments, as well as economic policies. Selected factors behind
Japan's successful adjustment process since the advent of the first oil shock
of 1973-1974 are analysed in Part II, with special emphasis placed on the role
of aggregate demand policy, supply adjustments and the flexibility of wages and
labour inputs. Part III presents an assessment of prospects for 1981 and 1982
and offers some concluding remarks on policy issues.
OECDEconomicSurveys
I RECENT TRENDS AND POLICIES
Domestic developments
Main features
Real domestic demand growth slowed down markedly in 1980, negatively
influenced by the terms-of-trade deterioration and the tight policy pursued up
to the summer. As the real income loss stemming from higher import prices was
mainly borne by households, expenditure by this sector weakened. Real GNP
growth was, however, supported by resilient business fixed investment and a strong
expansion of net exports1. Nevertheless, real GNP growth decelerated somewhat
in the second half of the year with industrial production falling and labour
market conditions deteriorating slightly. After their earlier sharp rise, wholesale
prices remained virtually flat since May 1980 thanks to the appreciation of the
yen. The lagged effect of stable wholesale prices and a moderate wage increase
brought about a marked deceleration in consumer price increases in the second
half of last year. However, for the year as a whole the rise reached 8 per cent
compared with 3.6 per cent in 1979.
Demand and ouput
Real private consumption decelerated sharply from 6.2 per cent in 1979 to
1.3 per cent in 1980, mainly due to the acceleration in consumer prices and a
moderate rise in household disposable income largely attributable to a modest
spring wage settlement and a sizeable increase in the tax burden. The unusually
cold summer also affected private consumption by reducing farmers' income and
depressing sales of seasonal goods, e.g. air-conditioners, refrigerators, beverages
and clothes. Moreover, there was a decline in replacement demand for certain
consumer durables. In contrast to developments after the first oil shock, the
household saving ratio fell slightly despite the acceleration in consumer prices.
This may have been related to a lower rate of inflation than in 1974 and more
favourable labour market conditions. In the wake of the continued deceleration
in consumer prices some signs of a recovery of private demand have appeared
in the early months of 1981.
Following a decline in 1979, the volume of private residential investment
dropped further in 1980. Housing starts posted a 12-year low of 1.27 million,
compared with around 1.5 million in the 1976-1979 period. Publicly-financed
housebuilding declined by 10.4 per cent in 1980, while construction entirely
financed from private sources also fell for the fourth consecutive year (by 18.2
per cent). The sluggish trend of residential construction was attributable to a
steep rise in land and construction material prices, a meagre rise in real household
1 It should be noted that the base year for national accounts estimates at constant
prices has been changed from 1970 to 1975; the movements of GNP and its components
differ importantly between the old and the new series percentage changes from previous
period, s.a.a.r.:
1970 prices 1975 prices
1980 1980
1980 1980
I 11 I 11
Total domestic demand 1.4 0.7 0.6 0.6 0.0 -o.i
Plus change
in foreign balance (4.2) (4.9) (3.7) (3.6) (4.1) (3.5)
GNP 5.5 5.7 4.3 4.2 4.2 3.4
Japan
Diagram I ContributionstoGNPgrowth
REALGNP [PERCENTAGE CHANCEOVER PREVIOUS PERIOD ATANNUAL RATE)
CONTRIBUTION
FINAL DOMESTICDEMAM)
STOCKBUILDING #>. ._
EXPORTS
IMPORTS
c6 :
n »"
-1
-2 -2
-4|_ J -4
I II I II I
1377 1978 1979 I960
Source: EPA, AnnualReportonNationalAccounts.
disposable income and high mortgage rates2. It also reflected structural factors
such as the limited supply of residential sites and a slowdown in the rate of
household formation. In early 1981, housing starts improved somewhat as a
result of a decline in mortgage rates and a deceleration in construction costs.
2 Housing costs (including land prices) and household disposable income in million
yen:
FY 1976 FY 1977 FY 1978 FY 1979 FY 1980=
Average price of a single-unit
house' (A) 19.85 20.60 21.69 23.66 26.67
Disposable income
per household1 (B) 2.86 3.12 3.28 3.48 3.71
Ratio (A)/(B) 6.9 6.6 6.6 6.8 7.2
1 Data based on loans granted by the Housing Loan Corporation, Given the limited nature of the
sample, the average price shown in this table does not necessarily reflect that for all new houses.
2 Provisional estimates.
Source: Housing Loan Corporation.
Table 1 Demand and output
Percentage change from previous period at 1975 prices
1979 Annual average Annual rates, seasonallyadjusted
Percent 1973 1980 1977 1978 1979 il980 1980 1981
yen inshGarNeP 1967 1973 Qi Q2 Q3 Q4 Qi
Private consumption 127.3 58.0 8.3 3.2 3.8 4.7 6.2 1.3 4.1 -1.0 0.7 0.3 0.9
Public consumption 21.5 9.8 5.3 4.2 3.9 5.1 4.0 2.1 11.3 -2.9 1.1 4.4 9.0
Gross fixed investment 70.1 32.0 13.9 1.8 4.8 9.4 6.6 0.1 -13.2 5.9 0.6 9.7 2.2
Public 21.9 10.0 14.1 2.5 11.6 16.1 3.0 -4.3 -36.0 -12.1 21.8 37.0 6.9
Private residential 15.2 6.9 14.7 -0.7 1.7 6.6 -1.0 -9.1 -20.0 33.9 --32.8 -10.8 -0.6
Private non-residential 33.0 15.0 13.5 2.4 2.5 6.6 12.5 6.4 7.0 7.4 4.9 3.6 0.5
Stockholding1 2.1 1.0 (-0.0) (-0.1) (0.1) (-0.1) (0.6) (-0.3) (0.6) (-0.2) (-1.5) (-3.0) (2.1)
Domestic demand 221.1 100.8 9.5 2.7 4.2 6.1 6.7 0.6 -0.8 0.8 -0.9 0.6 4.4 r.
Foreign balance1 -1.7 -0.8 (-0.4) (1.2) (1.2) (-0.9) (-1.0) (3.6) (6.3) (0.7) (6.0) (1.3) (-0.0) to
Exports 27.9 12.7 15.1 11.3 11.4 0.2 6.6 19.3 26.3 16.5 6.1 11.1 16.3 t>3
Imports 29.6 13.5 13.8 3.2 4.1 6.5 14.7 -3.9 -14.4 15.1 -29.5 4.4 23.0 g
GNP 219.3 100.0 9.5 3.8 5.3 5.5 5.6 4.2 5.6 1.5 5.2 1.9 4.1 g
Co
Activity indices (1975 = 100)
Industrial production i
(mining and manufacturing) 11.6 2.8 4.1 6.2 8.3 7.0 16.3 0.8 -7.6 6.1 6.9 s
Tertiary sector 3.1 5.3 5.5 4.1 0.1 0.7 -2.3 -5.2 5.5
1 Changes aspercent ofGNP inthe precedingperiod.
Sources: EPA, Annual Reporton NationalAccounts;MITI, IndustrialStatisticsMonthly.