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On the political stand, Prime Minister Junichiro Koizumi is set to step down in September and Mr Shinzp is most likely to succeed him LDP (Liberal Democratic Party); political support is yet on the brink.
In 2006 the real output will rise in between 2.8% - 3.0% and 2.1% in 2007. The latest behaviour of exports in mid-2006 has had a modest downward reflected by the impact of weaker exports growth of goods and services; core assumption on domestic demand is set to expand just by 2%. (Economist Intelligence Unit).
Inflation prices will continue to increase year by year as a demonstration of higher activity; however, according to CPI index national prices increase could have been largely influenced by the oil market price increase.
Exchange rates are expected to appreciate to reach momentum in 2007 as US interest rate start to ease again and equity markets and fixed income investors will potentially include Japan in their portfolio.
By taking the idea of reinforcing policies between fiscal and monetary targets, Japan can extend integral actions. The government needs to cut taxes to lift domestic demand. This solution can be taken after some other structural reforms are made, as they were clarified in table 1. Structural changes have to target the core of the problems and it is clearly the financial mess in public funds management.
An important issue to keep in mind is pensions; Japan's population will age rapidly, in the next 30 to 40 years and it is necessary to start generating and promoting savings. In this regard, current accounts positive results will help achieve this target.
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Bibliography
Aryeetey Ernest et al (2003).Asia and Africa in the Global Economy, United Nations University Press, Tokyo, Japan.
Bank of Japan web site, available: www.boj.or.jp/en/
Euromonitor, Global market information database for the British Library, available at: http;//www.gmid.euromonitor.com
Fulford B., Business, Forbes, May 26th 2003
Jopson B., Economy: Recovery may be fragile, FT World report, October 14th 2003
Maital S., Barron's : Editorial, July 28th 2003
Miwa Y, (2004), Estate Competence and Economic Growth in Japan, Routledge Curzon Studies in the Growth Economies of Asia Published in London, UK
Moffett S, Fuyuno I., Economic Monitor, Eastern Economic Review, August 2003
OECD organization database, available at http://stats.oecd.
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