Japan's economy is a source of good news these days. After a long slowdown in growth, the economy is starting to rebound, economists say. This is a welcome development for the United States and the rest of the world which have been pushing Japan to promote economic growth.
Even better, this growth is being fueled by spending at home rather than by sending more exports abroad. Japanese are building homes and highways and buying expensive clothes and furniture.
Japan's massive trade surplus is also slowly starting to shrink, though not yet with the US.
Traditionally Japan has depended on export-led growth. This has led to the accumulation of a huge trade surplus, currently $101 billion, that has fueled anti-Japanese feelings. While exports are still growing, imports are growing even faster. If this trend continues, a Foreign Ministry official predicts, the surplus could drop by almost 20 percent in the next year.
Two years ago Prime Minister Yasuhiro Nakasone's administration pledged to restructure the economy by increasing domestic demand. In theory this should lead to more balanced trade as Japan imports more and exports less. While economists remain cautious, there are signs that this approach is working.
The yen's rise in value since 1985 has been the major cause of the economic slowdown. Traditional industries like steel and shipbuilding, have slumped as exchange rates made their exports more expensive.
Recent economic surveys by several banks show that major industries are now expanding their investments in new plant and equipment. This is particularly true in industries which depend heavily on domestic demand - food, chemicals, textiles, paper, and construction.
While export-dependent industries continue to face difficulties, there is an ``emergence of cautious optimism in Japan,'' says Shijuro Ogata, deputy governor of the Japan Development Bank. The senior government banker attributes this change to three basic factors:
More stable exchange rates.
More government spending.
Increased consumer spending.
On the basis of these factors, both private and government economic forecasts are being revised upward from earlier this year by about 1 percent - to predictions of more than 3 percent growth in GNP this year.
Some experts warn it is too early to conclude that the economic upturn will be sustained. The growth could fade, a senior government official warns, if government spending does not continue to expand and if fluctuations in exchange rates resume. Officials also urge caution about how quickly this will have an impact on Japan's trade surplus. ``There is movement in the right direction,'' says Mr. Ogata but the problem is its speed.