Annual Report on the Japanese

Economy and Public Finance


- No Gains without Reforms II -
November 2002
Cabinet Office

Government of Japan

 [Toc]  [Prev]  [Next]  [Annual List]
Chapter 1

   Overview of the Capacity for Economic Recovery

Section 2 Behavior of the Corporate, Banking, and Household Sectors under Deflation

   The economy deteriorated in 2001, accompanied by downward pressures caused by deflation. The corporate sector, in response to the deterioration of the economy, carried out adjustments in various fields. Although corporate earnings decreased sharply, the fact that corporations promoted inventory adjustments prepared the conditions for the bottoming out of the business cycle. On the other hand, the balance sheet adjustment, capital stock adjustment, and wage/employment adjustment that were implemented by corporations pushed the economy downward. Although balance sheet and other adjustments are necessary to strengthen medium- and long-term growth foundations, their prospects for the future are difficult to foresee, as the deflation has made the adjustment difficult.
   The banking sector was forced to further accelerate the disposal of non-performing loans in response to the deterioration of the business performance and balance sheets of corporate borrowers and descended into the red. Banks' outstanding balance of non-performing loans still remains at a high level and their financial intermediary functions have declined, putting a downward pressure on the real economy.
   The household sector saw a decrease in employee compensation due to the severe employment/wage adjustment by the corporate sector and is feeling increasingly uneasy about future employment and wages. Therefore, consumption and housing construction have remained sluggish.
   In this section, we will examine in detail the activities of corporations, banks, and households.

1. Adjustments in the Corporate Sector

(1) Dramatic decrease in corporate earnings
   Corporate earnings, which are fundamental to corporate activities, decreased dramatically in FY2001. According to the Ministry of Finance' s "Financial Statements Statistics of Corporations by Industry, Quarterly," the ordinary profits of all industries dropped 19.6% from the preceding year. By type of industry, the ordinary profits of the manufacturing industry fell 42.5% and those of the non-manufacturing industry fell 1.3%(24). The sharp drop was mainly down to the manufacturing industry.

Sharp drop in ordinary profits of the manufacturing industry
   Let' s take a look at factors that reduced the ordinary profits of the manufacturing industry.
   The upper section of Figure 1-2-1 is an analysis of factor-by-factor contribution to year-on-year changes of ordinary profits by such factors as unit sales, sales price, terms of trade (proportion of sales price and purchase price), personal expense, and other fixed cost.
   The figure shows that the terms of trade factor and the personal expense factor made positive contributions in FY 2001. The terms of trade factor made a positive contribution because the margin of decline of input prices was wider than the margin of decline of output prices. The margin of decline of output prices was narrow due to the yen' s depreciation and the margin of decline of input prices was wider due to a decline in crude oil prices. The personal expense factor made a positive contribution to profits, as corporations carried out employment/wage adjustments. Nevertheless, the ordinary profits of the manufacturing industry decreased sharply, because the unit sales factor had a large negative contribution. A study of industry-by-industry sales decline during the period under review shows that a decline in sales of electric machinery and general machinery, mainly by large enterprises, made a big negative contribution. The sharp decline in demand for IT-related goods following the burst of the IT bubble in the United States had a major impact on the earnings of the manufacturing industry.
   The manufacturing industry (i) was able to absorb the impact of the decline in sales prices, thanks to a decline in crude oil prices and yen' s depreciation, but (ii) its ordinary profits decreased dramatically because unit sales, especially for IT-related goods, declined sharply.
Figure 1-2-1 Factor-by-Factor Contribution to Year-on-Year Changes of Ordinary Profits
Non-manufacturing industry' s sales also decrease
   The decrease in the ordinary profits of the non-manufacturing industry was smaller than that of the manufacturing industry. During the period under review, the non-manufacturing industry saw its sales decrease and the ratio of sales administrative expenses to sales rise. The personal expense factor also contributed negatively. However, since the year-to-year decline of non-manufacturing industry' s sales in FY2001 was 1.9%(25), smaller than that of the manufacturing industry, the decline of its ordinary profits was small.
   Accordingly, the question is what impact prices had on ordinary profits. In order to investigate this point, let' s make a factor-by-factor analysis of the ordinary profits of the retail industry (including food service)(26). The lower section of Figure 1-2-1 shows that, in the case of the retail industry, the unit sales factor made a positive contribution in FY2001(27). On the other hand, the terms of trade factor contributed negatively. Since the retail industry, unlike the manufacturing industry, cannot directly enjoy the benefits of a decline in crude oil prices and the yen' s depreciation, it is directly affected by a decline in sales prices. An analysis of the contributions of the sales price factor and unit sales factor to sales of the non-manufacturing industry, including the retail industry, also shows that the negative contribution of the price factor is large on the whole (See Figure 1-2-2).
   It can be said that the ordinary profits of the non-manufacturing industry in FY2001, though less affected by the decline of sales, mainly of IT-related goods, experienced a relatively larger impact from the price declines.
Figure 1-2-2 Factor-by-Factor Contribution to Year-on-Year Sales Changes
Net income worse than ordinary profits
   Although ordinary profits dropped sharply in FY2001, those of listed companies (on a same-number-of-company basis) stayed at almost the same level or slightly higher than they were at the time of the two previous business cycle bottoms (28). However, net income ran into the red due to the decrease in ordinary profits and a huge amount of extraordinary losses and it was a harsh result compared to the previous two recession periods (See Figure 1-2-3).
Figure 1-2-3 Changes of Corporate Profit
   Extraordinary losses have been on an increasing trend since the second half of the 1990s and rose sharply in FY2000. This is because corporations moved to cover shortfalls in retirement grant following the introduction of the retirement grant accounting system in the business year starting in and after April 2000(29).
   The extraordinary losses in FY2001 were not as large as in FY2000. However, if retirement grant-related losses are excluded, the extraordinary losses in FY2001 were larger than in FY2000. This is because of the following reasons.
   First, restructuring expenses increased. At corporations that used early retirement schemes to reduce their staff sizes, special additional retirement grant increased. Furthermore, at corporations that sold or abolished inefficient plants and equipment, losses were incurred on sales or the write-off of fixed assets.
   Second, steep declines in stock prices generated a huge amount of losses on stock sales and depreciation. Incidentally, as market-value accounting has come to cover miscellaneous securities, such as cross-held stocks, starting in the business year that ended in March 2002(30), even if losses on stock sales and depreciation are not generated, a decline in stock prices has come to have negative impacts on balance sheets directly.
   Third, some corporations booked appraisal losses on fixed assets to restore health to their balance sheets ahead of the introduction of an impairment accounting system (possibly in FY2005). There were also movements to revaluate land used for business operations and record their unrealized losses and profits on balance sheets by utilizing the land asset revaluation law. The law expired in the business years ended in March 2002.
   Due to the sharp decrease in ordinary profits and the huge amounts of extraordinary losses, the net income of listed companies ran into the red, the worst performance since the beginning of 1990. The poor business performance, which was accompanied by massive corporate restructuring, restrained business investment and had negative impacts on employment and wages. However, it should not be forgotten that progress in restructuring will contribute to the enhancement of corporations' future earnings power.
(2) Speedy production adjustment
   When the U.S. economy began to slow down, Japanese exports decreased and industrial shipments fell sharply. Shipments continued to decrease quarter-to-quarter over 3% from the January-March quarter of 2001 to the October-December quarter of the same year and year-to-year 9.7% in FY2001. As a result, inventories were accumulated from then on the second half of FY2000 and the economy entered a phase of inventory adjustment. Industrial production began to decrease after hitting a peak in August 2000 and kept decreasing throughout 2001.
   A study of decreasing phase of production shows that the latest production adjustment was fast and steep. In FY2001, production decreased 10.2% from the preceding fiscal year, the steepest decline since the compilation of production statistics began in 1953. In November 2001, when production hit bottom, it was at the lowest level since November 1987 (90.1). As a result, despite a cut in production capacity, the indices of operating ratio fell to 87.2 in November, the lowest level since the compilation of production statistics began.
   Production adjustment was conducted mainly in the IT-related sectors. The declines in production in other sectors were relatively small(31). A study of production decrease by type of industry shows the decrease was remarkable in IT-related sector, which was hit hard by the decline in global demand for IT because of the slowdown of the U.S. economy (See Figure 1-2-4). Though production in the manufacturing industries not related to IT continued its downward trend, the margin of decrease was smaller than in the IT-related manufacturing industries(32).
Figure 1-2-4 Trend In Production Activities
   As a result of the large production adjustment, mainly in the IT-related sectors, inventory adjustment also progressed rapidly. Inventories entered a decreasing phase after hitting a peak in May 2001. At the end of FY2001, inventories were 7.9% less than a year earlier. An inventory cycle (See Figure 1-2-5) reveals that crossed the 45-degree line downward and entered an inventory build-up phase in the January-March quarter of 2001 passed through an inventory adjustment phase without building up inventories as much as in the previous cycle, came close to the 45-degree line in the January-March quarter of 2002, and stood at a level far above this line in the April-June quarter of the same year(33). As far as the inventory cycle is concerned, it can be said that the inventory adjustment phase came to an end. The advance in inventory adjustment can also be confirmed from the BOJ' s Tankan diffusion index (D.I.) for the perception of excess inventory (See Figure 1-2-6). It shows that the perception of excess inventory has decreased quite rapidly since the beginning of 2002.
Figure 1-2-5 Inventory Cycle
Figure 1-2-6 D.I. for Perception of Excess Inventory
Column 1-1
   Movement of industrial production that affected movements of local economies 
   Cabinet Office' s "Regional Economic Trends" shows that business confidence, which was on a downward trend all over the country in 2001, turned gradually upward in the beginning of 2002 and that the pick-up began to spread in the summer of the same year. The main factor behind the upward revision of the nation' s assessment of business confidence was a pick-up in production at national as well as local levels.
   A study of region-by-region production trends shows the following characteristics: (i) The rates of production decrease in the latest declining phase (October-December 2000-October-December 2001) were greater than in the previous declining phase (July-September 1997-October-December 1998) and region-by-region deviation became large. (ii) On the whole, the regions that saw production decrease by greater margins than in other regions in the latest declining phase have been seeing production picking up by greater margins than in other regions up to now. Concretely speaking, the rates of decrease ranged from minus 6.1% to minus 13.0% in the previous phase but they ranged from minus 6.6% to minus 22.4% in the latest phase, and in the regions that had seen sharp decreases in production, such as the Tohoku, Hokuriku, and Kyushu regions, the growth rates of production in the pick-up phase were greater than the national average.
(Region-by-region production trend)
   Upper figures are peak-to-bottom decrease rates and lower figures are bottom-to-peak rates <Previous: Comparison with peaks; This time: April-June figures>
   These characteristics may have something to do with the fact that, in the latest phase, the decline in national production and the pickup thereafter were steep, especially influenced by IT-related electric machinery. In other words, in Tohoku and Kyushu where electric machinery weigh heavily and in Hokuriku where the rate of change in production of electric machinery is large, the rate of change in production as a whole has become large. In the case of Okinawa where machinery, including electric machinery, weighs less heavily, the rate of decrease in production was small but the rate of increase thereafter was large by the contribution from metal products.
   The production pick-up has begun to have spillover effects on regional economies. For example, the job offers-to-seekers ratio has been gradually rising in some regions. From here on, it is expected that a movement toward a production recovery by each region of the country will lead to the recovery of the entire economy(Note).
   Note: For detailed regional economic trends, see "Regional Economic Trends" and "Regional Economic Report," Cabinet Office. 

(3) Balance sheet adjustment
   The corporate sector has been saddled with the problem of excessive debts since the burst of the economic bubble. In particular, three industries--real estate, construction, and wholesale/retail--purchased land with funds raised through debt financing during the bubble years. After the burst of the economic bubble, however, land and other asset prices plunged and the asset value kept declining. On the other hand, the net asset value on balance sheets deteriorated, since the value on the liability side is basically fixed at its nominal value. Moreover, since general prices have been declining, the real debt burden has increased. The corporate sector needs adjustment to improve balance sheets.
   Figure 1-2-7 shows changes in corporate debts by industry, considering the ratio of the amount of debts to the added value that indicates repayment capability. It shows that the margin of increase in manufacturing industry' s debt ratio is small in the first place and that its current level is not particularly high. On the other hand, the debt ratio of the three non-manufacturing industries--real estate, construction, and wholesale/retail--kept rising during the period from the bubble years to the second half of the 1990s and, though on a downward trend recently, it still stands at a considerably high level. The debt ratio of the non-manufacturing industry excluding the three industries is slightly higher than it was before the bubble years but lower than that of the three industries.
   The capital ratio of the three industries, obtained after evaluating fixed assets at current prices, has dropped sharply amid the ongoing decline of asset prices (See Figure 1-2-8). The balance-sheet adjustment pressures on the three industries still remain strong. The figure also shows that the improvement of balance sheets remains slow in the small and medium-sized non-manufacturing industry.
   The problem of corporations' excessive debts and balance-sheet adjustment pressures will continue to put downward pressures on the economy for some time to come.
Figure 1-2-7 Changes in Corporate Debts
Figure 1-2-8 Changes of Capital Ratio (assets evaluated at current prices)
(4) Capital stock adjustment
   Faced with deteriorating economic conditions, corporations also began adjustment of business investment. In FY2001, business investment posted a sharp decrease. We will now examine factors behind capital stock adjustment in the manufacturing and non-manufacturing industries.
Sharp decrease in business investment by manufacturers
   First, let' s take a look at the manufacturing industry. When studying the business investment trends of the manufacturing industry, it is important to take into account (i) the size of idle capacity and (ii) the level of the expected growth rate of industry demand, in addition to the earnings trend. They all worked to drastically decrease business investment by the manufacturing industry in FY2001.
(i) Size of idle capacity
   When a corporation has idle capacity, the corporation' s business investment intention is believed to decrease as it gives priority to activating the idle capacity. Therefore, a study was made on the trend of operating ratio to see the size of idle capacity. It reveals that operating ratio declined in line with production adjustment amid decreasing sales and increasing inventories (See Figure 1-2-9). In particular, operating ratio of the electric machinery industry posted a sharp decline, reflecting a drastic production adjustment of IT-related goods. As production began to pick up in the beginning of 2002, the rate rose slightly but still remains at a low level.
   According to the BOJ' s Tankan survey, the perception of excess capacity, which had been consistently declining from the April-June quarter of 1999 until the end of 2000, deteriorated in the March 2001 Tankan, especially in the manufacturing industry. Here again, the rise in electric machinery industry' s perception of excess capacity is conspicuous (See Figure 1-2-10). Though the feeling of excess capacity has been weakening since the beginning of 2002, the number of businesses feeling excess capacity far outnumbers those feeling otherwise.
Figure 1-2-9 Change of Operating Ratio
Figure 1-2-10 Changes of Excess Capacity
(ii) Level of expected growth rate of industry demand
   As to the corporations' expected growth rate of demand, it has been on a declining trend since the collapse of the bubble economy and recently its downtrend has gained momentum. According to the Cabinet Office' s "Questionnaire Concerning Corporate Activities (January 2002 survey)," the real growth rate of industry demand (manufacturing, over the next five years) forecast by corporations belonging to the manufacturing industry, which stood at around 4% in 1990s, began to decline in the first half of the 1990s and fell to 1.4% in 1999. It rose slightly to 1.7% in 2001 but dropped again to 1.1% in 2002. Most of the industries expected the rate to remain low or post negative growth.
   As results, corporations adjusted the growth of their capital stock in line with the expected growth rate of demand. This can be confirmed by a circular capital-stock diagram (See Figure 1-2-11, upper figure). The stock build-up period that started in the January-March quarter of 2001 ended after only one and a-half years (~April-June quarter of 2001) and entered a stock adjustment phase in the July-September quarter of 2001.
   In order to understand the reason for this rapid entry into the stock adjustment phase, in relation to expected growth rates, let' s take a look at the curve that shows the relationship between the growth rate of business investment (vertical axis) and "business investment / capital stock" ratio (horizontal axis) (See Figure 1-2-11, lower figure). We can draw a hyperbolic curve corresponding to the level of the expected growth rate on the graph(34). The closer the curve is to the left side, the more it corresponds to a low expected growth rate. It shows that capital stock entered an adjustment phase in a short period of time as the corporations' expected growth rate had remained low at around 0% since the second half of the 1990s and did not record a sharp rise from 2000 to 2001. On the other hand, since the growth rate of stock stayed at a low level during the same period, it can be said that the current adjustment pressure may not be so strong. Barring a further decline in the expected growth rate, the adjustment will come to an end in a short period of time. However, if the expected growth stayed at a low level, the strength of recovery of business investment would become even weaker than in the previous recovery period.
Figure 1-2-11 The Stock Adjustment of Business Investment (Manufacturing)
   Incidentally, the index of production capacity (See Figure 1-2-12) of the electric machinery industry rose from 1999 to 2000 reflecting an increase in business investment, but then declined slightly. The index of production capacity of the transport equipment industry declined sharply, reflecting the intensified integration of production sites. As a result, the production capacity of the manufacturing industry has declined sharply. This suggests that the abolition of equipment is being implemented on a broad scale and would quicken stock adjustment.
Figure 1-2-12 Changes in Production Capacity
Non-manufacturers' business investment remains stagnant
   Next, let' s take a look at business investment by non-manufacturing industries. Non-manufacturers' business investment also remains stagnant due to deteriorating earnings, as was described earlier. However, in 2001, the margin of decrease in non-manufacturers' business investment was smaller than that made by the manufacturing industry, which saw a considerable decrease in IT-related investment.
   In the non-manufacturing industry, the kind of capital stock circulation seen in the manufacturing industry is not clearly observable. The BOJ' s Tankan diffusion index (D.I.) for the perception of excess capacity also shows that changes in the proportion of corporations feeling they have excess capacity in the non-manufacturing industry are smaller than in the manufacturing industry(35) (See Figure 1-2-10). This is because the impact of factors other than the cyclical factor is large. For example, business investment in FY2001 decreased for the following reasons: (i) Reflecting weak private consumption, the personal service industry and retail industry slashed investment; (ii) In the electric power industry, business investment decreased due to the liberalization of wholesaling and retailing of electric power; (iii) In the telecom industry, business investment increased in the field of mobile communications but decreased in the field of fixed telephone due to a fall in telephone charges and an increase in demand for mobile phones in the wake of regulatory reforms; (iv) In the retail industry, business investment decreased in reaction to a sharp rise seen shortly before and after the abolition of the Large-Scale Retail Stores Law.
   The slow progress in balance sheet adjustment in the three industries (real estate, construction, wholesale/retail) is seen as a factor restraining an increase in business investment. This is because, under such circumstances, debt repayment is given priority over business investment and because fund raising, including borrowing from banks, would become difficult due to a decline in collateral value. This can be confirmed by estimating the business investment function by using the ratio of current prices of land assets to debts as the explanatory variable (See Attached Note 1-5). It shows that business investment especially by small and medium-sized enterprises and large non-manufacturers is restrained. The fact that the BOJ' s Tankan diffusion index (D.I.) for the lending attitude of financial institutions toward small and medium-sized enterprises and non-manufacturers has become severe reflects a decline in collateral value and the deterioration of balance sheets.
(5) Intensifying employment/wage adjustment
   During the latest recession phase of the business cycle, corporations carried out severe adjustments of wages and staff sizes in order to curb labor costs. The characteristics of the adjustments are as follows: (i) Wage cuts were made mainly in bonuses and overtime allowances; (ii) Manufacturers and large enterprises carried out sizable reduction of their work force and, reflecting this, the number of the unemployed, mainly non-voluntary job leavers, increased; (iii) Increased employment of part-time workers restrained wages and enhanced the flexibility of employment.
Wages decreasing
   First, let' s take a look at wage adjustment. Per-capita wages in FY2001 decreased by about the same margin as in FY1998, when a major adjustment was made. Total cash earnings (total of per-employee income before tax, including bonuses and overtime allowances; nominal) posted a year-to-year growth of 0.5% in FY2000, after registering negative growth for two consecutive years--minus 1.7% in FY1998 and minus 0.8% in FY1999--but again decreased to post a negative growth of 1.6% in FY2001(36). In real terms as well, the total cash earnings adjusted for effects of changing prices posted a gain of 1.2% in FY2000 but registered a negative growth of 0.3% in FY2001.
   Wages are restrained in the following methods: (i) Cutback on special cash earnings (bonus, etc.); (ii) Restraint on non-scheduled cash earnings (such as overtime allowances); (iii) Restraint on scheduled cash earnings; and (iv) Utilization of part-timers and day workers. In FY2001, the cut in bonuses was the biggest contributor to fluctuations in total cash earnings (See Figure 1-2-13). This shows that, for corporations, slashing bonus payments in accordance with earnings performance is the most important means of adjusting wages. Reduction of overtime allowances also contributed to wage adjustment. This reflects the fact that they can be automatically adjusted in line with decreases in production. In addition, scheduled cash earnings, which had fluctuated little in the past, also decreased. This seems to suggest that a change in employment style, as well as restraints on wage hikes, is having impacts on wage levels.
Figure 1-2-13 Trend of Total Cash Earnings
   With respect to employment style, there has been a sharp increase in the employment of part-time workers in recent years. Although the number of regular workers has been decreasing at an accelerated pace amid a fall in the total number of employed workers, the number of part-timers and day workers has been increasing. This is advantageous to corporations, as it enhances the flexibility of employment and curbs personnel expenses. A study of factors behind wage fluctuations (See Appended Note 1-6) shows that the effect of pulling average wages down by decreasing the number of full-time workers and increasing part-time workers is almost the same as the effect of cutting average wages by changing the wages of both full-time workers and part-timers.
   By type of industry, average wages decreased in such industries as construction, manufacturing, wholesale/retail, and services (See Appended Note 1-6). The margin of decrease is sharper in those industries because, in the service industry, which has recently seen increases in its number of employees, the ratio of part-time workers is rising, and because manufacturing and wholesale/retail industries have been reducing their staff, especially full-time workers. By size, large enterprises, whose wages are relatively high, are believed to have contributed negatively. Extensive employment adjustment made by big enterprises, such as major IT manufacturers, is also believed to have pushed average wages down(37)(38).
   Thus far, we have confirmed that the average wage per employee has been on the decrease. Wage is an important indicator for analyzing employment compensation. However, in order to see it from the aspect of cost for corporations, it is necessary to study it in relation to labor productivity. This is because, even if the per-employee wage decreases, if the decline of real output per employee (labor productivity) is bigger, it would raise the unit labor cost. The figures obtained by dividing nominal compensation of employee by real gross domestic product, figures that show the trend of unit labor cost of industries as a whole, has been on a downward trend (See Figure 1-2-14). However, the figures that show the trend of unit labor cost of only the manufacturing industry kept rising during 2001. Since production decreases in a recession phase of the business cycle, unit labor costs tend to rise. Still, the sharp rise of the unit labor cost of the manufacturing industry in the latest recession phase stands out. The fact that the unit labor cost of the manufacturing industry rose against the background of declining labor productivity caused by a sharp decrease in production seems to have added momentum to the move to slash employment.
   Next, let' s take a look at employment adjustment.
Figure 1-2-14 Changes in Unit Labor Cost (ULC)
Number of employees decreasing
   The number of employees began to decrease in the beginning of 2001 on a seasonally adjusted quarter-to-quarter basis and dropped sharply in the July-September and October-December quarters. By type of industry, the number of employees in the service industry continued its healthy growth but the number decreased sharply in the manufacturing and construction industries. By size, the margin of decrease of employment in big enterprises was large. The manufacturing and construction industries also had major negative contributions to new job offers (See Figure 1-2-15). This shows that the manufacturing and construction industries, which saw a sharp decline in demand, implemented particularly extensive restructuring programs focused on personnel cuts(39). In the case of the manufacturing industry, the rise of the unit labor cost seems to have had a major impact.
   With production starting to pick up in the beginning of 2002 and employment adjustment, mainly in manufacturers and large enterprises, making relatively rapid progress, the BOJ' s Tankan shows that manufacturers' sense of excess employment, especially for large enterprises, began to improve at a rate faster than usual (See Figure 1-2-16).
Figure 1-2-15 Changes of the Number of New Job Offers
Figure 1-2-16 Changes in Employment Conditions (Diffusion Index of "Excessive Employment" minus "Insufficient Employment")
Unemployment rate above 5%
   The unemployment rate rose sharply in line with the advances in employment adjustment (See Figure 1-2-17). The unemployment, which had been moving at above 4.5% since 1998, rose above 5% in July 2001 and kept rising to hit a record high of 5.5% in December 2001. In 2002, the rate is remaining at a high level of over 5%.
Figure 1-2-17 Trend of Unemployment Rate
   The rise of unemployment has much to do with the fact that corporations stepped up restructuring efforts focused on personnel cuts. In the first half of 2001, there were more voluntary job leavers than involuntary job leavers, but from the second half of 2001, the number of involuntary job leavers began to increase sharply and in November 2001 the number of involuntary job leavers exceeded that of voluntary job leavers. During the period when voluntary job leavers accounted for most of the jobless workers, these workers were mostly young people. But the increase in the number of involuntary job leavers also increased the number of middle-aged and elderly persons out of work.
   A study of the movement of unemployment rates (See Figure 1-2-17)(40) shows that not only cyclical unemployment rates but also structural unemployment rates are increasing.
   Cyclical unemployment was on a declining trend in 2000 against the background of economic recovery, after hitting a peak of 1.2% in the April-June quarter of 1999, but caused by recession, again began to rise from 0.9% in the January-March quarter of 2001 to 1.3% in the October-December quarter of the same year.
   On the other hand, the structural unemployment rate rose further in the second half of the 1990s and kept rising, reaching 4.1% in the January-March quarter of 2001. The structural unemployment rate rises in line with an increase in the number of jobless workers who remain unemployed even when the economy picks up. This is because mismatches in terms of job type and skills between job seekers and employers are expanding(41). This kind of phenomenon can be clearly observed in the service industry and highly technical fields.
   The rise of the unemployment rate came to a halt in the beginning of 2002, reflecting the progress in employment adjustment as described earlier. However, with about 80% of the unemployment being structural and as it will take time for the employment mismatches to shrink and for the structural unemployment rate to decrease, the unemployment rate is likely to remain high for some time to come.

2. Movement in the Banking Sector

(1) Banks' non-performing loans, profit, and business strength
   Japan' s banking sector has been beset with serious non-performing loan problems since the collapse of the bubble economy and is therefore unable to fully perform its bank' s intermediary function. Among the characteristics of the problem of non-performing loans in Japan are(42): (i) With cases of loans becoming fresh non-performing loans continuing, the balance of non-performing loans continues to increase. (ii) Disposal of non-performing loans is eroding banks' profitability; (iii) The non-performing loans are concentrated in specific industries: real estate, construction, and wholesale and retail. These situations served as a drag on the real economy through disintermediation of bank-system lending and gave rise to deflation.
   On the other hand, the asset price deflation has been putting heavy pressure on bank management. (i) The deflation of asset prices, mainly of land prices, deteriorated the balance sheets of borrowers and the prolonged recession, etc. aggravated the business performance of borrowers, leading to increases in banks' non-performing loans and the degradation of loan assets(43). (ii) The asset price deflation (especially, stock price deflation for major banks) has been reducing the asset value of the banks themselves. A study of private financial institutions' balance sheet (current-price base) based on the National Accounts shows that banks' debt-to-asset ratio is rising due to losses resulting from loan assets becoming non-performing and to declines in land and stock prices (See Figure 1-2-18).
   From 2001 to 2002, banks began to make moves for management integration and other industry reorganization(44) and showed positive stance toward the disposal of non-performing loans. However, in view of the fact that business performance of corporate borrowers has deteriorated and that the collateral value kept decreasing due to falls in land prices, the problem of non-performing loans continues to keep bank management in a difficult situation.
Figure 1-2-18 Impact of Asset Price Fluctuations on Financial Institutions
Outstanding balance of non-performing loans and costs for disposal of non-performing loans increasing
   Although Japanese banks have been disposing a huge amount of non-performing loans (risk management loans) every year, they have also incurred a huge amount of fresh non-performing loans. Therefore, the outstanding balance of non-performing loans has been on an increasing trend since the collapse of the bubble economy. In the year ended March 2002, it rose to an all-time high of 42.0 trillion yen (See Figure 1-2-19). Classified assets based on the Financial Reconstruction Law(45) rose to 43.2 trillion yen. The proportion of non-performing loans (risk-management loans/total loans) rose to 8.9%. The increase in the outstanding balance of non-performing loans means that fresh non-performing loans increased faster than the amount of final disposal of non-performing loans(46).
Figure 1-2-19 Changes of Non-Performing Loans
   The reasons for the increase in non-performing loans in the business year ended in March 2002 are, in addition to the deterioration of business performance of borrowers due to a deepening recession, etc., that timely asset evaluations reflecting market signals made progress ahead of the implementation of special inspections (autumn 2001-spring 2002) and that monitor-requiring loans increased due to stricter classification criteria for restructured loans. The special inspection, implemented by the government, was designed to prompt major banks to take measures to strengthen the financial system, ensuring an appropriate classification of borrowers as well as sufficient level of write-offs and provisions, mainly focusing on large borrowers whose stock prices, ratings, etc. showed marked changes significantly. As a result, many borrowers were classified as in danger of bankruptcy. Specifically, the inspections covered 149 borrowers with accumulated loan value of 12.9 trillion yen. The classifications of 71 of them were downgraded with accumulated loan value of 7.5 trillion yen, and 34 of them with accumulated loan value of 3.7 trillion yen were classified as in danger of bankruptcy.
   With loan assets becoming non-performing, banks incurred a huge amount of expenses for the disposal of non-performing loans in the year ended in March 2002. According to all banks' business results for the year, expenses for the disposal of non-performing loans came to more than 9.7 trillion yen, including write-offs and provisions that were increased following the special inspections. The amount is far larger than banks' net business profits (excluding expenses for disposal of non-performing loans(47)) of 5.9 trillion yen(48).
Profits deteriorated and business strength decreased due to falls of stock prices
   Banks' profits have been deteriorating due to falls of stock prices as well as the burden of expenses for disposal of non-performing loans described above. In the business year to March 2002, banks suffered an accumulated net loss of 4.9 trillion yen(49) due to expenses for disposal of non-performing loans and huge amounts of loss as on sale of stocks and stock write-offs caused by stock price declines.
   As a result of the business deterioration and decreases in unrealized capital gains on stockholdings due to stock price decline and sale of stocks carrying such gains, banks' business strength has decreased. Major banks' business strength (total of capital and unrealized capital gains), which had been on a declining trend since the collapse of bubble economy, improved in the year ended in March 1999 thanks to the infusion of public funds, but then declined again (See Figure 1-2-20). Although major banks' capital-asset ratio stood at 10.8% on average in the year ended in March 2002, it includes public funds and deferred tax assets.
Figure 1-2-20 Trends of Capital Adequacy Ratio (major banks)
Decline in bank' s financial intermediary functions(50)
   Banks have been active in lending to low-risk borrowers but remain cautious about lending to other borrowers due partly to the fact that they are busy disposing of non-performing loans.
   According to the BOJ' s Tankan, banks' lending attitude toward small enterprises remain severe. This in part reflects the deterioration of corporations' balance sheets and banks' move to set interest rates in accordance with risk. It also reflects a decline in financial institutions' intermediary function, as disposal of huge amounts of non-performing loans has eroded banks' profitability. The lending competition to low-risk borrowers can also be said to reflect not only sluggish fund demand on the part of corporations but also a decline in banks' risk-taking capacity. Also, with funds supplied by financial institutions having piled up in fields of low productivity(51), they are unable to fully perform their role of raising the growth rate of the economy as a whole through fund supply to fields of high productivity and growth potential. With expenses for disposal of non-performing loans continuing to increase at a pace faster than initially projected due mainly to the emergence of a huge amount of fresh non-performing loans (See Figure 1-2-21), the market view of banks inevitably becomes severe(52) and it cannot be said that banks have won customers' trust. Banks' capital adequacy ratios stand above the BIS standard. However, since the portion of the tax-effect accounting is conditioned to securing profits in the near future, there is concern that further deterioration of profits may reduce the ratios.
Figure 1-2-21 Plans for Disposal Losses of Non-performing Loans and Actual Results
   In order to get out of this situation, it is important for banks and other financial institutions to regain and enhance profitability as early as possible by promoting measures for corporate rehabilitation, distinguishing good businesses from those that should be liquidated, and promptly disposing of non-performing loans(53). If the recent series of business failures and compilation of corporate rehabilitation plans help corporations and banks to contain further expansion of losses and enhance their future profitability, they will contribute to reducing excess liabilities and non-performing loans and to enhancing the productivity of the economy as a whole. To that end, it is essential to utilize the frameworks for disposal of non-performing loans that the government has been promoting, including sales of loans to the Resolution and Collection Corporation (RCC)(54). Banks are expected to carry out fundamental disposal of non-performing loans at an early stage and to focus on loans to areas with high growth potential by such means as creating actual demand for funds by promising enterprises and setting an interest margin corresponding to borrowers' credit risk.
   In Column 1-2 below, we will introduce Korea' s quick disposal of non-performing loans and its V-shaped economic recovery as one of the recent successful examples in foreign countries.
Column 1-2
   Disposal of non-performing loans in Korea 
   Following the Asian currency crisis, Korea experienced a serious recession, with the value of the won depreciating by 50%, the unemployment rate rising from 2.6% to 6.8%, and the economy posting growth of minus 6.7% in 1998. In order to deal with the crisis, the country implemented various structural reform measures.
   In the financial sector, the following measures were implemented: (i) reorganization of financial institutions; (ii) concentrated purchases of non-performing loans and quick disposal of them on the market by the Korea Asset Management Corporation (KAMCO); and (iii) infusion of public funds. The specific contents of the measures are as follows (1).
(i) Reorganization of financial institutions 
   The number of financial institutions decreased during the period from the end of 1997 to the end of June 2001 (33 -> 22) (2). Of the seventeen general banks that were in place as of March 2001, five banks were held by foreign capital as the largest shareholder and four banks by the government/deposit insurance corporations.
(ii) Disposal of non-performing loans 
   The Korea Asset Management Corporation (KAMCO) actively bought and sold non-performing loans (as of December 2001). It purchased about 39 trillion won worth of non-performing loans on a purchase price basis and about 101 trillion won on a book value basis. It disposed of non-performing loans worth about 24.2 trillion won on a purchase price basis and about 58.5 trillion won on a book value basis, and gained about 2.7 trillion won on sales of non-performing loans. About 80% of them were disposed of by auction or through issuance of ABSs on the market.
(iii) Infusion of public funds 
   A total of 155.3 trillion won of public funds were infused. Of them, 60.2 trillion won were used for capital injection to financial institutions and 38.7 trillion won for purchase of non-performing loans.
   As a result of the progress in the structural reform of the financial sector, the banking sector' s loan growth is on a rising trend (about 3.6% growth on an annual basis at the end of September 2001) and its non-performing loans ratio is on a decreasing trend (about 5%).
   In addition to these measures, structural reforms were also promoted centering on corporations/conglomerates, the labor market, and the public sector. In the corporate sector, the number of new businesses increased drastically thanks to the rationalization of business conglomerates and successful measures to support venture businesses (3). The country was also helped by macro-economic factors, such as fiscal surpluses, the high savings rate, and increased earnings in the export sector, which had been plagued with excess capacity, thanks to the improvement of external business conditions. As a result, Korea has achieved a rapid economic recovery, with its real economic growth rate rising to 10.9% and 8.8% in 1999 and 2000, respectively, and the unemployment rate falling to 6.3% and 4.1% in, respectively.
Figure (1) Non-Performing loans in Korea
Figure (2) Korean economic indicators
(1) Since Korea' s GDP is about 517 trillion won and Japan' s GDP is about 501 trillion yen, won-quoted GDP ratios can be replaced by yen-quoted GDP ratios for comparison purpose without changing the figures. Exchange rate: about 10 won = 1 yen.
(2) Due to mergers, the number decreased to 20 in December 2001.
(3) Japan Small and Medium Enterprise Corporation (2001) 

3. Household Sector

   The fact that employment/wage adjustment is in progress in the corporate sector means that the household sector is in a severe condition. In such circumstances, households have reduced consumption and become cautious about housing construction. Let' s take a look now at how households responded to the situation.
(1) Consumption remains sluggish
   Personal consumption is an important demand item, accounting for nearly 60% of gross domestic expenditure. Its movements have enormous implications on the movements of the economy as a whole.
   Representative statistics for understanding the movements of private consumption are the Family Income and Expenditure Survey, which is demand-side statistics, and retail sales in the Current Survey of Commerce, which is supply-side(55). According to the Family Income and Expenditure Survey, real consumption expenditure decreased slightly in the July-September quarter of 2001 after posting a sharp decrease from the January-March quarter to the April-June quarter of the same year (See Figure 1-2-22). Retail sales value also decreased during the same period. It can be said that private consumption, after decreasing in the April-June quarter of 2001, saw weak movements until the July-September quarter of 2001.
Figure 1-2-22 Trends of Private Consumption
   However, while real consumption expenditure in the Family Income and Expenditure Survey picked up in and after the October-December quarter of 2001, retail sales kept decreasing. This makes it difficult to judge the basic tone of private consumption. Since the Family Income and Expenditure Survey for this period is likely to have shown stronger figures, however, it can be said that private consumption moved sideways for the most part (See Column 1-3).
   The following can be pointed out as factors behind the sluggish movement of private consumption during 2001: (i) decreased disposal income of households; (ii) increased payment burden, such as housing loans; (iii) deteriorated consumer confidence; and (iv) decreased equity holdings due to the fall in stock prices. Firmness was partially observed in 2002 as consumer confidence improved slightly. Let' s take a look at these factors one by one.
Column 1-3
   Disparity between Family Income and Expenditure Survey and Current Survey of Commerce 
   While the Family Income and Expenditure Survey (real living expenditure) has been registering a pickup since the October-December quarter of 2001, the Current Survey of Commerce (retail sales) kept decreasing and began to show signs of bottoming out from the January-March quarter of 2002. The disparity between the two exists even in a comparison between the synthetic consumption index, which is adjusted for the increase in the number of households--not reflected in the Family Income and Expenditure Survey--and retail sales value (real), which is adjusted for the consumer price index (goods). The following factors may have some connection with the disparity.
   First, the difference between income trends in the Family Income and Expenditure Survey and wage trends in the Monthly Labour Survey. The income growth in the Family Income and Expenditure Survey shows that both the regular income of the household heads and income of spouses were lower than the wage trends in the Monthly Labour Survey until around the summer of 2001 but were higher in and after the autumn of the same year. Therefore, it can be said that the survey results in the Family Income and Expenditure Survey showed higher figures, as they reflected the consumption trends of households whose incomes grew relatively faster in and after autumn of 2001 than in the period until the summer of the same year.

   Change in Household Income

   Second, the Current Survey of Commerce does not cover sales for services (eating out, travel, etc.) that are covered in the Family Income and Expenditure Survey. Therefore, if sales for services were relatively higher than sales of consumer goods, it could explain the reason for the deviation from the Family Income and Expenditure Survey. However, service expenditures in the Family Income and Expenditure Survey do not show high figures during the period.
   Third, corporate demand and individual demand may not have been differentiated in the Current Survey of Commerce. Since the corporate sector, which is striving to enhance its business strength by reviewing profit structures, is curbing expenditure as part of thorough cost-reduction efforts, even if consumption expenditures in the household sector pick up, it may not be reflected in the trend of retail sales.

   Note: Estimation method for the Synthetic Consumption Index: After excluding "remittances," "repair expenses" and widely fluctuating high-prices items, such as "automobile purchases," from the "Family Income and Expenditure Survey" of the Ministry of Public Management, Home Affairs, Posts and Telecommunications, the remaining figure is multiplied by the number of households and then the amount of automobile, rents, and medical expenses--calculated separately by using supply-side statistics--is added. For details, see the Discussion Paper

Factors behind sluggish consumption
   First, let' s take a look at household disposal income. As we have described earlier, if corporations promote employment /wage adjustment, it will decrease compensation of employees. Nominal compensation of employees in the National Accounts decreased 1.5% in FY2001. Real compensation of employees increased only 0.6% in FY2001. Although the disposal income of households is increasingly affected by taxes, property income, pensions, etc.(56), its basic trend is determined by compensation of employees (See Figure 1-2-23)(57) .
   Housing loans are also increasing the payment burden of households. According to Family Income and Expenditure Survey, the number of households paying housing loans accounts for nearly one-third of all worker households and the ratio of loan payment to the disposal income of such households has risen to nearly 20%(58)(See Figure 1-2-24).
Figure 1-2-23 Factor Analysis of Real Disposable Income of Households
Figure 1-2-24 Households Paying Housing Loans
   As for the movements of consumer confidence, many households determine the level of current consumption by taking into account not only their current income but also their income in the future. Therefore, even if there is no change in current income, a change in the outlook for future income would affect their current consumption. In 2001, concerns about the future appear to have suppressed consumption. Let' s take a look at the consumer confidence index in the "Consumer Confidence Survey" by the Cabinet Office. The consumer confidence index shows whether or not consumers expect their income to increase and whether or not they expect employment conditions to get better over the next six months
(See Figure 1-2-25). According to the survey, during the recession phase in and after the middle of 1997, the outlook for employment conditions deteriorated sharply, increasing households' concerns about the future, and then the outlook for income growth worsened, putting downward pressure on household income. Later, the outlook for employment conditions and for income growth improved from the middle of 1998 to the autumn of 2000, but again deteriorated sharply in 2001. It can be said that the deterioration of consumer confidence was one of the factors behind sluggish consumption.
Figure 1-2-25 Consumer Confidence
   According to the Bank of Japan' s "Questionnaire on Consciousness of Life (March 2002; half-year survey)," some 40% of responding households said their consumption "decreased" from a year earlier and the number of households citing "anxiety about future employment and income" was large, suggesting that increased anxiety about future employment and income is curbing current consumption. Moreover, many people reduced their consumption due to anxiety about a cut in social insurance benefits, such as pensions, and hikes in taxes and social security contributions in the future.
   However, consumer confidence began to improve in the beginning of 2002. The consumer confidence index also shows signs of improving against the background of the bottoming out of the economy.
   Let' s take a look at the DI for judgment of current conditions (households) in the "Economy Watchers Survey" of the Cabinet Office, which is an assessment of current economic conditions as compared with those three months before made by people engaged in the supply side of the economy. The DI, after hitting a peak of 53.3 in March 2000, continued to decline until it hit a low of 29.0 in October 2001 and then picked up slightly but stayed below 40 until February 2002. Although the DI still remains below 50, it posted a sharp recovery in around the spring of 2002.
   Lastly, let' s take a look at the impact of the fall in stock prices on households' financial assets from the Bank of Japan' s "Flow of Funds" statistics. The net financial assets of households increased by 92.5 trillion yen (933 trillion yen -> 1,025 trillion yen) in 1999 and 42.4 trillion yen of this was due to a rise in the appraisal value of stocks. However, the net financial assets as a whole remained almost unchanged in 2000 and 2001, as falls in stock prices reduced the appraisal value of stocks by 14.2 trillion yen and 10.1 trillion yen, respectively.
   Considering all the above factors, it can be said that the decrease in household disposal income and the anxiety about future employment and income were the basic factors behind sluggish consumption(59). Although private consumption remained sluggish in the beginning of 2002 due to the continued severe employment/wage situations, firmness was partially observed, reflecting a slight improvement in consumer confidence.
Some underpinning factors for private consumption
   Although consumption as a whole remains sluggish, some underpinning factors are evident for consumer spending.
   First, the number of households is increasing. In FY2001, the number of households (Basic Resident Register basis) increased 1.3% over a year earlier. The increase in the number of households is believed to be providing underpinnings for housing-related consumption as well as for housing starts (especially starts of houses for rent; see housing construction section).
   Second, private consumption by the elderly is showing solid movement. The propensity to consume of the aged people (60 years or older) in no-occupation households is on an upward trend (See Figure 1-2-26). Since the weight of aged households in total number of households has increased, their impact on consumption as a whole is believed to have increased. The following are thought to be contributing to the solid consumption by the elderly: (i) The elderly are less burdened with loan payments and have less anxiety about their future; (ii) Amid declining consumer prices, their real disposal income is underpinned as their nominal pension benefits are maintained(60)(61).
Figure 1-2-26 Changes in the Propensity to Consume and the Number of Aged and No-Occupations' Households
   Third, a part of service consumption is believed to be moving steadily. National Accounts shows that service consumption remained on an increasing trend until FY2000. There are no statistics available that show the recent movement of consumption as a whole. A study of changes in the number of employees in the service industries, however, shows that the number in those industries serving households (service industries minus those serving corporations, such as software and temporary help businesses) increased further in FY2001(62)(See Figure 1-2-27). The number of employees increased in 2001 from the preceding year in specialized service industries (including medical service), industries serving individuals, the amusement industry, and other service industries (including social welfare). In 2002, for which further breakdown of the figures is possible, medical service and social welfare contributed considerably to the increase in the total number of workers. The increased workers in medical service and social welfare can also be attributed to the steady spread of nursing-care insurance and deregulation(63).
Figure 1-2-27 Changes in the Number of Employment in the Service Industry Serving Households
   Moreover, fundamental expenditure began to show firm movement in the beginning of 2002. According to the Family Income and Expenditure Survey, while discretionary spending has been posting a year-to-year decline, fundamental expenditure, mainly on foods, has been increasing over its year-earlier levels.
   Such firmness in specific fields has been providing some underpinnings amid the overall sluggish movement of private consumption.
(2) Housing construction has remained at the same level
   Amid severe employment/wage conditions, households were also cautious about housing construction. New housing starts (annualized basis), after hitting a high of 1.6 million units in 1996, dropped sharply to 1.39 million units in 1997 and 1.2 million units in 1998 and remained at slightly above 1.2 million units in 1999 and 2000. After falling to 1.17 million units in the January-March quarter of 2001, new housing starts moved sideways within a range of 1.15 million to 1.2 million units (See Figure 1-2-28). By use, both owned houses (total of owned houses and houses for sale) and houses for rent (total of houses for rent and company housing) dropped sharply from the levels in 1996. Since 2001, starts of houses for rent have been picking up, but starts of owned houses have been on the decrease. Although houses for sales have remained almost unchanged, owned houses have been decreasing.
   Potential demand for housing construction is believed to be strong. Nevertheless, households remain cautious about housing construction because of increased concerns about future employment.
Figure 1-2-28 Trends of Housing Starts
Stock adjustment makes progress
   First, let' s take a look at potential demand for housing construction. Housing construction is believed to be greatly influenced by necessary housing stock and is thought to move in line with the number of households in the medium and long run. As to the number of households, although the growth of population has been declining, reflecting the decrease in the birthrate, the number of households has remained steady due to the decrease in the per-household number of family members (See Figure 1-2-29). The population census shows that the number of households headed by second baby boomers and the elderly increased during the period of 1995 to 2000. In particular, the number of single-person households increased sharply. Since this trend is expected to continue for some time to come, the number of households will remain steady for the time being.
   However, it is not the case that the number of households always moves in tandem with housing stock. In fact, a study of the vacancy rate ((housing stock--number of households) / housing stock) shows that when the rate rose faster than its upward trend, it was followed by a suppression of housing starts (stock adjustment) (See Figure 1-2-30). Although there was a buildup of housing stock in FY1996 due to last-minute housing starts ahead of a consumption tax hike, a stock adjustment is progressing reflecting a decrease in housing starts thereafter(64).
Figure 1-2-29 Trends of the Increase in the Number of Households and Housing Stock
Figure 1-2-30 Vacancy Rate and Stock Adjustment
Housing acquisition capability is high, but starts remain depressed due to uncertainties about the future
   Since housing stock adjustment is making progress, there should potentially be a recovery in housing starts(65). Whether or not this becomes evident depends on (i) current housing acquisition capability and (ii) the outlook for income and housing prices.
   The housing acquisition capability index is the ratio of financial resources available based on current savings, income and interest rates to house price. Until around 1997, starts of owned houses and the owned house acquisition capability index showed a parallel movement by and large (See Figure 1-2-31). Since 1998, however, starts of owned houses have remained sluggish despite the fact that the acquisition capability index has remained at a high level. Households decide whether to purchase houses or not by taking into account not only their current acquisition capability but also their future repayment capability. It can be said that the sluggish movement of the starts of owned houses is because households have become uncertain about their repayment capability due to the deterioration of the outlook for future employment and wage conditions, as can be seen from the rise in the unemployment rate of householders (See Figure 1-2-31)(66).
   As we have seen in the above, households became prudent not only in consumption but also in housing construction, in order to cope with the severe employment/wage conditions. This was natural behavior on the part of the households, but it also meant that housing starts did not work to ease the severe economic conditions.
Figure 1-2-31 Housing Acquisition Capability Index, Unemployment Rate and Starts of Owned Houses and Houses for Sale
   We have analyzed the trends of the corporate, banking and household sectors under deflation. The analyses revealed that the economy has been unable to realize a strong and sustainable growth, as it has been caught up in a vicious cycle of deflation and a stagnant real economy pressured downward by such structural problems as excess liabilities and non-performing loans. In other words, the analyses revealed that the general price deflation is putting downward pressures on corporate earnings and wages, as well as increasing real debt burdens, that the sharp rise in asset prices during the bubble economy and the deflation thereafter created problems of excess liabilities and non-performing loans, causing a decline in banks' intermediary function, that the problems, combined with corporations' and households' pessimistic view of the future, restrained spending behavior, and that this in turn caused further declines in general prices and asset prices.
   In order to break away from the vicious cycle, it is basically necessary to overcome the situation in which corporations and consumers are unable to foresee bright prospects. This can be done by activating the economy. We will examine this in detail in Chapter 3.

 [Toc]  [Prev]  [Next]  [Annual List]