Feb 10, 2020 (Nikkei) - On a chilly January afternoon in Yokohama, a 25-year-old IT company employee said what much of Japan is thinking: "I'm not expecting my salary and the economy to improve much."
The man has only been in his job for a year, following graduate school. But any excitement he might have felt about this new beginning is overshadowed by fears for the future. How, he wonders, will he cover the expenses that inevitably come with marriage, children and looking after aging parents?
Takahide Watanabe, a 58-year-old at a very different point in his career, struck a similarly somber note. "Companies don't give employees a big pay raise because they don't know what will happen next."
A gloom hangs over the country after years of Abenomics -- Prime Minister Shinzo Abe's program to get the Japanese economy humming again. To an extent, it worked, powering a streak of expansion that lasted more than seven years. But the economy is believed to have contracted in the October-December period -- the results are due next Monday -- as a result of one-off factors such as typhoon damage and the consumption tax increase on Oct. 1.
This raises fresh questions about the economy's resilience just as Japan's longest-serving leader confronts a new threat: the coronavirus originating in China.
The immediate focus is on consumers' response to the tax increase. Economists expected shoppers would pull back in the last quarter, as households tend to make big purchases before a hike. Still, the levy rose a relatively modest 2 percentage points, to 10% from 8%. Surely, many thought, this would not be enough to send the economy into a contraction.
Yet, despite generous government spending to offset the impact, a QUICK survey of 17 analysts suggests gross domestic product declined 3.9% from the previous quarter on an annualized basis.
Department stores have taken a beating. Sales have dropped for three straight months, including a 5% year-on-year fall in December, according to the Japan Department Stores Association.
