The Journal The Authority on Global Business in Japan

Cabinet Office
Greater efforts needed to boost domestic demand

On November 15, the Cabinet Office announced that the adjusted gross domestic product (GDP) for the July–September 2017 quarter showed an annual growth of 1.4 percent. This marked an unusually long period of 28 quarters (seven years) of consecutive growth.
But individual consumption declined from the previous quarter by 0.5 percent, failing to match the 0.7 percent growth achieved from April to June. This essen­tially reverts the growth model to one based on external demand led by exports, thus far-reaching measures are urgently needed to shore up consumer demand at home.

“We want to analyze the factors causing negative domestic demand,” said Toshimitsu Motegi, the minister in charge of economic revitalization, at the press conference held following the release of the GDP data.

Consumption in service-related sectors, such as travel and dining, were negatively affected by typhoons, prolonged rain, and other meteorological factors during the July–September period. Consumers also remained hesitant to open their wallets, and this was reflected in a variety of retail stats.

The global economy—bolstered in part by exports from Japan and overseas operations by Japanese firms—continues to enjoy favorable conditions. The US unemployment rate dropped to 4.1 percent in October and held steady in November and December, its lowest level in 17 years. The European Union has also been enjoying record-low unemployment figures, buoyed by Japan’s exports of auto­mobiles, construction equipment, and related components.

But some are concerned that protec­tionist trade policies embraced by US President Donald Trump might lead to global economic chaos. In such an environment, shifts abroad could deal a severe blow to Japan’s growth if it is dependent on foreign demand. Robust domestic demand not influenced by overseas economies is necessary to prevent this.

Prime Minister Shinzo Abe has en­cour­aged the industrial sector to follow through with a 3-percent increase in wages to re­inforce individual consump­tion. But for companies to implement continuous wage increases, improve­ments are needed to strengthen their productivity and profitability.

Another concern is the increasingly heavy burden placed on young workers to keep the social welfare system afloat. This requires these workers to pay a higher portion of their income into the system, making it important for the government to alleviate concerns about the viability of pensions.

Ministry of Land, Infrastructure, Transport and Tourism
Interest-free loans to be extended for pilot training

At the end of November, the Ministry of Land, Infrastructure, Transport and Tourism announced it had created a scholarship system for aspiring student pilots at private universities and other training facilities, which will take effect in 2018.
In the face of high tuition costs, the government—with its long-term target of boosting inbound tourism—must expand overseas air routes. To do this, it must work together with the private sector to ensure there are enough pilots.

Tuition for pilot training can run from ¥15 to 20 million, and many potential students are said to opt out because of the costs.

The new “Future Pilot” scholarship program is to be overseen by a founda­tion called the Aircraft Operator Nurturing Group. Funds of up to ¥500,000 will be made available to some 25 candidates, distributed in one to three installments beginning in their sophomore year. Students will have up to 10 years to repay the loans after graduation. Japan Airlines Co., Ltd. and ANA Holdings Inc. will take part, underwriting one-half of the funds.

However, of the approximately 6,400 pilots employed by 17 domestic airlines, 54 percent are presently aged 45 or older. As these individuals begin to retire, a shortfall is anticipated. With the increase in air routes, some 380 new pilots will be required by the time of the Tokyo 2020 Olympic and Paralympic Games—a figure that is expected to soar to 430 by 2030.

Keizaikai magazine