The government's projection for Japanese economic growth is 0.6 percent for fiscal 1999 and 1 percent for fiscal 2000. Both are based on unrealistic assumptions about the present and future state of the economy. The projection appears to have been verified by the negative GDP growth recorded in the last two quarters.
The pessimistic view is based solely on the sluggishness of personal consumption reported in the Household Income and Expenditure Survey. However, the survey is notorious for inadequate reporting of high-income families who are the sole beneficiaries of the 4 trillion yen cut in the personal income-tax that was introduced last April.
While the consumption of middle-income and low-income families, whose income is falling and who have not benefited from the tax cut, has been declining, high-income families, who have not only benefited from tax cuts but also from the rise in stock prices, have been rapidly increasing consumption -- enough to compensate for the decline in the consumption of other families.