Japan's economy, though beset by uncertainties, is recovering steadily. That is the message of the latest government report on the gross domestic product (GDP), which was published last week by the Cabinet Office. In the third quarter, July through September, the real GDP -- excluding effects of falling prices -- expanded 0.6 percent from the previous quarter for an annual increase of 2.2 percent.
Thus, adjusted for deflation, the economy continued to grow for seven consecutive quarters beginning in the first quarter of 2002. Financial Services Minister Heizo Takenaka, speaking at a press conference, struck a confident note, saying, "Our scenario for economic recovery is on track." He said the growth rate for all of fiscal 2003, ending next March, would reach 2.2 percent even if GDP remained flat in the remaining two quarters.
To keep the recovery going the government should take a growth-oriented approach to budget compilation and tax reform -- a process that begins in earnest next month. The need for fiscal discipline goes without saying, but tightening the belt at this time is a mistake. The important thing is to keep sending a positive message to the private sector, which holds the key to self-sustaining growth.