May 27, 2013

Abenomics’ Challenge: The Japanese Attitude

By Bruce Stokes, Director of Pew Global Economic Attitudes, Pew Research Center

Special to Nikkei Weekly

Some of the recent economic news out of Japan could hardly be more encouraging. The economy grew at an annual rate of 3.5% in the first quarter of 2013. The big improvement is needed after a general stagnation that has plagued Japan’s economy for much of the past two decades.

The legacy of those years of little or no growth poses a challenge for Abenomics. The Japanese people remain quite glum about the economy and their personal finances, far more so than people in many other societies, according to a new global survey by the Pew Research Center. The Japanese are extremely pessimistic about both their personal financial prospects and those of the next generation.

Yet positive signs have emerged. Public assessment of the economy is up 20 percentage points from 2012. Japanese are relatively optimistic about their economy’s prospects over the next 12 months compared with sentiment in Europe and the U.S. Concern about income inequality, a major problem in many parts of the world, is relatively low in Japan. And, despite Japan’s prolonged slump, the Japanese people report the lowest deprivation rates among the 39 countries surveyed by the Pew Research Center.

Nevertheless, just 27% of the Japanese thought their national economy was doing well in March, when the Pew survey was taken. Japanese sentiment tracks what was found in other advanced economies (a median of 24% say things are good). It trails, by a wide margin, results found in emerging markets (a median of 53%).

Among Asian nations, the Japanese mood is better than that in South Korea (where only 20% say the economy is good). But the Japanese are far gloomier than the Chinese (88% think their economy is doing well), Malaysia (85%) and even Indonesia (37%).

The Japanese feel slightly more positive about their personal finances:38% say they are good. But this is fairly negative compared with attitudes in other countries. Among publics in advanced economies, only the Greeks (15%) think their personal situation is worse. None of the publics in 11 emerging markets surveyed and only three in developing economies consider themselves worse off than the Japanese.

Few Japanese have much hope for their future personal economic well-being. Just one in eight think their finances will improve over the next year. Moreover, roughly three-in-four think that Japanese children will be worse off than their parents. Only the French are more pessimistic about the next generation.

The Pew Research survey did find some positive attitudes among the Japanese. Four in ten Japanese think their national economy will improve over the next 12 months, an optimism that the first quarter gross domestic product figures seem to bear out.

A finding of 40% may not seem that optimistic of a figure,but it is a better result than in Australia (31%), Germany (27%) and the U.K. (22%).

And despite growth that has annually averaged only 0.15% over the last four years, the Japanese do not report suffering the kind of deprivation and inequality that has afflicted many of the advanced economies in the wake of the Great Recession.

Just 34% of Japanese think the gap between the rich and the poor is a very big problem in Japan, making the Japanese public among the least worried about inequality among those surveyed. The median for such concern in advanced economies is 53%. Moreover, only 58% of the Japanese think the income gap has gotten bigger over the last five years, whereas the median who complain about such inequality in advanced economies is 80%.

As a result, while 61% of the Japanese say that the current economic system favors the wealthy, that is less than the 74% who object to such unfairness in other advanced economies.

The Japanese have also been spared much of the economic deprivation that Americans and other Asians have experienced in recent years.

Just 2% of Japanese complain that they could not afford to buy food for their families at some point over the last year and only 3% say they went without clothing or health care.

Over the same period, 24% of Americans report they could not put food on the table at some point, 27% went without clothing and 31% had to forego medical care. Similarly, 26% of South Koreans say they could not buy food or pay for health services for their families in the last 12 months and 35% went without needed clothing.

The government of Prime Minister Shinzo Abe faces many practical economic challenges in the months ahead. But it also faces an attitudinal challenge: the pessimism born of years of economic stagnation. The Japanese public expects the national economy to get better even though they have little faith in a better year ahead for their own finances or for the next generation. Bridging this gap between personal expectations – which may affect consumer spending decisions – and national expectations may ultimately help determine the success of Abenomics.