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Business Insight


Business Insight

Japanese GDP Up While Oil Continues to Fall

Japanese government officials are reporting positive growth figures for the first time in three quarters. NHK WORLD's Ai Uchida looks at the effects.

The economy is growing, but the key question is by how much. Many were expecting growth of more than three and a half percent for the last quarter of the year, during the months of October through December.

But Cabinet Office officials are saying the economy only grew by 2.2%, which is a lot less than analyst expectations. Still, it is the first growth reported in nine months.

The officials say the fourth quarter GDP grew in real terms by 0.6%, compared with the previous quarter, translating to annualized growth of 2.2%.

They say consumer spending rose 0.3%. Capital spending by companies picked up, growing by 0.1%.

They say strong demand from abroad pushed up Japan's GDP by 0.2%. The weaker yen helped to lift the country's exports to the United States and Asia.

Still, they are concerned by housing investment, which was down 1.2%. The consumption tax was raised last April, and that seems to be weighing on the housing sector.

The GDP figures are raising hopes that the economy is bouncing back. Another bright spot is the low price of crude oil. NHK WORLD's Daisuke Azuma finds that while some industries are suffering from the impact of cheaper oil, most companies and consumers are enjoying its benefits.

Cars carrying skiers converge on a resort in western Japan. Its parking lot has been filling up every weekend. People here haven't seen crowds like this in years. "We were able to make this trip because of cheaper gasoline prices," one visitor says. Another says the savings will allow for more trips: "last year we could come here five times. But this year we may be able to come about ten times."

The restaurant at the resort is also seeing a boom in business. Low gasoline prices have given people more spending money. "I'm spending more money here this year than I did last year," a diner says before ordering a second beer.

The number of visitors this winter has already increased by 15% compared to last season. The manager says he wouldn't be surprised by a 25% increase overall. That would bring visitor numbers to the highest level in a decade.

"I think cheap crude oil prices have given visitors more choices in what they can spend their money on," says resort manager Yoshiyuki Kanayama. "Business is getting better for those of us in the tourism and service industries."

People in the transportation industry are also welcoming the drop in fuel prices. One of them is Hiroaki Matsuoka, who runs a trucking company that employs about 900 drivers and other staff. Soaring crude-oil prices during the past few years had forced him to take drastic measures to cut costs. The company started using lightweight auto parts and tires with a longer lifespan.

Executives started keeping a closer eye on their drivers' performance. All of them use a card to record fuel costs, travel times and distances. Managers analyze the data so they can raise the efficiency of their operations. "We took every possible measure to cut fuel costs," Matsuoka says. "But business was still difficult."

Their efforts finally paid off when crude-oil prices began dropping in the middle of last year. The company's fuel costs have dropped by about 20% over the past six months... and the business is back to making a profit.

Now Matsuoka plans on sharing the benefits with his employees. "We weren't able to raise base pay for our drivers for the past five years," he says. "But now we want to revise our wage system so we can pay them more."

Some economists say more and more people will start to feel the economic impact of low oil prices. "The current price of crude oil will result in a boost to Japan's GDP of about a half percent," forecasts Hidenobu Tokuda, Senior Economist with the Mizuho Research Institute. "Wages in real terms have been declining. But they'll start to rise in fiscal 2015. That means personal consumption will also rise."

The benefits from the low oil prices are rippling through Japan's economy, but no one knows for sure how long the prices will remain low. Policymakers and businesses will need to make the most of the positive effects, if the economy is to shift to a self-sustaining recovery track.

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