The latest economic numbers for the second quarter of 2016 were published Monday, and they do not paint a bright picture of the Japanese economy. Data shows the economy in Japan barely grew, expanding only 0.2%, lower than the already diminished target rate of 0.7%. The stalling growth was somewhat expected, considering April earthquakes and the impact of Brexit, but was still worrisome considering the large drop from 2% growth in the first quarter.
Japanese officials have long looked for ways to boost economic growth, and recently announced a fiscal stimulus package. Many investors thought the package was not strong enough, leading to concerns about the Bank of Japan’s ability to stimulate growth on its own. The low growth numbers have led some to question the effectiveness and future of “Abenomics”, the economic policies of Prime Minister Shinzo Abe.
The stated goals of “Abenomics” are ending deflation and stimulating economic growth, neither of which has happened since the Prime Minister took office. Most analysts point to the demographics in Japan as the main reason for low growth and failed attempts to end deflation. The Japanese labor force is shrinking as the country ages, making it harder for the country to increase its productivity. Some believe the low growth numbers are simply the new norm for Japan, and that with a shrinking population, low growth should be expected.
The stalling growth numbers will increase the pressure on the Bank of Japan to announce more stimulus measures at their meeting next month. The question for the Japanese is whether the current demographic situation will even allow for large economic growth, and whether the economic measures by the government are having any true impact on the economy.