The Japanese economy is expected to lose some steam in 1986, as slack demand and the appreciation of the yen begin to take their toll on exports while the government sticks to fiscal austerity at home.
Official projections of inflation-adjusted growth of about 4 percent are being dismissed as wishful thinking by many private-sector economists. They suggest 3 percent or lower will be closer to the mark.
In 1985, growth came to about 4.3 percent, the decade's highest, fueled by strong foreign sales. But Normura Research Institute economist Kazuho Toyoda, echoing a view common among his colleagues, says: "The Japanese economy can't continue to depend on exports for the next year's growth."
Through most of the post-war era, it has done so and prospered. In 1984 and 1985, recovery in the United States sucked in waves of Japanese products, and China, Japan's second-largest foreign market, went on a buying spree in its modernization program.
Sales abroad were also helped along by a weak yen. But 1986 is beginning with the yen 20 percent stronger than it was for most of last year. Most Japanese companies are expecting it to stay strong and hurt their competitive position by making their products more costly to foreigners.
Even without the stronger yen, sales to the United States are expected to be down this year because of dampened growth there. In China, too, sales are expected to fall because of a political decision to cut down on imports.
Nomura is predicting that exports overall will fall by 0.2 percent in 1986 after rising by 17.5 percent in 1984 and 6.6 percent in 1985. It sees imports rising by about 1.4 percent during the coming 12 months.
Few economists expect that Japan's overall trade surplus, estimated at $55 billion in 1985, will show any substantial decrease in 1986. Exchange-rate shifts take a year or more to start affecting these figures, they say.
Most economists, meanwhile, do not see domestic demand picking up the export slack. Programs to stoke the home economy have been implemented under pressure from abroad (Washington feels it would dampen exports and draw in more imports, easing the two countries' trade imbalance). But they are not expected to have substantial effect.
That is because they consist largely of deregulation and other steps that are supposed to make the private sector more active. Prime Minister Yasuhiro Nakasone has made "fiscal reconstruction," or reduction of a gaping national budget deficit, a theme of his 3-year-old administration, and refuses to prime the pump with any significant government spending.
Thus, in many economists' eyes, the government is chasing contradictory goals -- speeding up the domestic economy while reining in government spending. Few people expect it to budge from austerity. "Domestic demand stimulation will be quite hard to achieve," says Masahiko Koido, chief economist of the Sumitomo Bank.
Personal consumption, meanwhile, will not rise by much, as the Japanese continue to be hard-working and frugal. And another potential driving force, private investment, is expected to be sluggish as factories cut back on expansion and modernization programs because of their expectations on exports.
Inflation will remain low, at about 2 percent, it is expected.
No one here is in a panic about the slowdown. It is seen as part predictable reaction to 1985's unusual showing, part a price to pay for correcting the trade surplus and restoring good relations abroad. In fact, some economists, like Sumitomo's Koido, see it as the start of a long-term transition away from an export-propelled economy to one that balances foreign and domestic sales equally.