While the mood over the global economy in the West hovers between cautious optimism and despair, the Japanese appear confident that 1983 will bring precisely what the doctor ordered for their economic ills: a long-awaited recovery in the United States.
In the view of analysts here, only a more economically robust United States, Japan's single largest market overseas, can absorb enough Japanese goods to reverse the country's steepest export decline in almost three decades and help revive its sluggish economy. And only improved U.S. business performance and lower unemployment, they say, can ease the protectionist pressure in the United States that has threatened to boil over into retaliatory trade measures against Japan.
The consensus emerging among private economists and officials here is that declining interest rates and inflation in the United States will help fuel a spurt in the economy there in the second half of the year.
Even a modest upturn in the United States, according to this formula, will allow Japan's economy to grow by between 3 and 4 percent in 1983. At the same time, however, Japan's comparatively bouyant, export-led business performance--and the booming trade and payments surpluses it will surely bring--will continue to cause headaches abroad for Prime Minister Yasuhiro Nakasone's government.
Nakasone, who came to office Nov. 26, has stressed the need to strengthen relations with Washington and remove the rancor in the vast economic relations between the two countries.
Tension has been amplified by the huge U.S. trade deficit with Japan, which is expected to hit a record $20 billion for 1982. Tokyo's own massive budget deficits, however, will mean the government will have only a paltry store of funds available to prime its economic pump. And stiff resistance among Japan's entrenched economic interest groups to demands by Washington that it move quickly to open its markets to more American goods promises few dramatic trade concessions on Tokyo's part.
According to Zenichi Ishikawa, a senior analysts at Daiwa Securities, exports will remain the key to Japanese growth. "Export recovery will only follow the recovery of the U.S. economy," he says, pointing out that Japan is now poised to take full advantage of any U.S.-induced rebound in global trade.
A sharp drop in the country's key exports in 1982 forced Tokyo to revise its official estimate of economic growth to 3.1 percent for the current fiscal year (ending March 31), compared to an earlier forecast of 5.2 percent. Private--and generally more accurate--Japanese forecasts peg growth for the period at between 2 and 3 percent.
Nevertheless, the current business downturn here has done little to affect the country's high rates of industrial productivity. Stable profits at big corporations have allowed them to press ahead with investments in new technologies designed to maintain their competitive edge.
Once-mountainous inventories of major export items--cars, machine tools and electronic gadgetry--have been pared substantially, and exports recently stopped their year-long slide. Consumer price inflation and unemployment here are now below 3 percent, although the jobless rate would probably run twice the official figure if measured by a Western yardstick.
Government officials here argue with considerably less conviction these days that an upsurge in domestic demand--goods and services purchased in Japan--will offset the country's heavy reliance on exports as a major prop to economic growth. At the same time, they say, mounting protectionist pressures have clouded the long-term outlook for overseas sales in key markets in the United States and Western Europe, where an estimated one-third of Japanese goods are now under export controls.
According to Takahiro Ogawa, a senior research associate at Nomura Securities, the country's exports will expand by roughly 4 percent in the new fiscal year, or about one-fourth the rate of 1980. This should be sufficient, he says, to keep the economy growing in the neighborhood of 3.3 percent, in real terms, in a year in which he expects Japan's overall trade surplus to expand to $23.5 billion. Tokyo has officially forecast 3.4 percent growth for the next fiscal year, a $20 billion trade surplus and a $9 billion surplus on current accounts.
Prime Minister Nakasone, meanwhile, has pledged to carry out the fiscal austerity drive of his predecessor, Zenko Suzuki, to prune Tokyo's escalating debts. And, while Nakasone has effectively postponed Suzuki's goal of balancing the national budget by 1984, the government was forced to adopt even tighter spending constraints in its 1983 budget as a result of a massive shortfall in revenues brought along by lower than expected growth.
Appropriations for practically all spending categories were cut from year-earlier levels in an overall $214 billion budget, which grew only 1.4 percent. Only outlays for defense, foreign aid, energy-related programs and social security were given increases.
National defense, the most outstanding exception, will be allowed to rise by 6.5 percent, largely at the behest of Reagan administration officials anxious for Japan to expand its own defense role to offset heavy U.S. military commitments.
Approval of the 1983 budget by the Nakasone Cabinet came shortly after the U.S. House of Representatives passed a bill last month that would effectively shut Japanese cars out of the American market unless they contain a specified proportion of U.S.-made parts. The move reflected growing irritation on Capitol Hill and among elements in the American public with the U.S. trade deficits with Japan.
Analysts here say the trade deficit could go higher this year, especially if the United States economy improves and sparks increased demand for Japanese imports.
Ironically, Japan's dollar-denominated exports expanded rapidly in 1982, despite an overall drop in both their yen value and in volume. This resulted from the rapid weakening of the yen against the dollar, something the Japanese widely attributed to continuing high interest rates in the United States.
Now that U.S. interest rates have started to fall, the yen has strengthened from its weakest point of approximately 275 yen to the dollar in late October to roughly 230 yen. But Japan's trade surpluses have continued apace, partly because the Japanese tend to cut back drastically on imports when times get tough.
Nakasone is expected to make marginally more funds available for government reflationary measures later in the year, although the magnitude of the move is not expected to be sufficient to reduce the economy's dependence on exports. Consumer spending, the largest single element in Japanese domestic demand, is forecast to remain weak throughout 1983, according to private economic surveys here.
A growing number of private economists argue that a tax increase will be inevitable to help fill government coffers over the long haul when the economy is predicted to grow more slowly, although leaders of Nakasone's ruling Liberal Democratic Party have shunned tax hikes in the past because of their vast unpopularity with Japanese voters.
Nakasone, it is widely believed, is contemplating the imposition of an indirect form of sales tax, along the lines of the value-added tax now in force in parts of Europe. But changes in the country's tax structure are expected to come only gradually and will not ease Tokyo's fiscal pinch soon.
Given current conditions, Koei Narusawa, senior adviser at the Bank of Tokyo, says that "it is entirely impossible to cut back on fiscal debt and at the same time spend more on a military buildup."
Some of the country's leading bankers and private economists have advocated expanded government spending on public works budgets to help stimulate domestic business activity and thereby reduce trade surpluses by boosting imports. They argue that Japan's high rate of individual savings--20 percent, compared to roughly 5 percent in the United States--means that, unlike the United States, Japan has plenty of funds available to finance a chronic government deficit and at the same time provide adequate reserves for borrowing by private industry.
Officials at Japan's tight-fisted Finance Ministry assert, however, that the size of the current deficit--larger, as a percentage of gross national product, than that of the United States or any country in Western Europe--proves the wisdom of Tokyo's austere budget policies. Meanwhile, opposition by the country's elite senior bureaucrats and powerful public workers' lobbying groups has helped delay efforts to cut out the fat in the public sector.
In a step toward easing trade friction, Nakasone's Cabinet is expected to announce another broad package of measures designed to open the market here to more foreign goods before Nakasone visits Washington later this month. The move would supplement two similar rounds of market-opening measures put in place last year, which included a review of the product standards, testing and customs procedures that American business executives frequently contend prevent them from selling goods in Japan at competitive prices.
Tokyo has also speeded up Japan's commitment to making across-the-board reductions in import duties under the Tokyo round of tariff agreements. Such trade steps, however, are likely to continue to fall far short of demands by the Reagan administration, which, for example, has been pressing Tokyo to end controls on the import of American beef and citrus fruits. Japan's Liberal Democrats have resisted because they rely heavily on the farm vote to stay in office.
"Protectionism is one of our gravest concerns in the coming year," says Narusawa, "and if we fail to take the chance to head off protectionism, the movement will only gain more momentum. The most urgent task for Nakasone is to make a really bold political decision on an 'open door' policy on trade."