Annual Report on

The Japanese Economy and Public Finance


- Japanese Economy Heading for New Growth Era

with Conditions for Growth Restored -

Cabinet Office

Government of Japan

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Annual Report on the Japanese Economy and Public Finance 2006


Chapter 1 Japanese Economy Heading for New Growth Era and its Challenges

   Section 1 Background for the Continued Economic Recovery and Future Challenges
   1. Recent economic trend
   2. Characteristics of Current Economic Recovery Phase Seen from Aspects of Business Cycle
   3. Points to Keep in Mind Regarding Future Economic Trends

   Section 2 Prospects for Overcoming Deflation and Related Challenges
   1. Recent Price Trends and Future Outlook
   2. Trends of Financial Policy

   Section 3 Financial Market Recovery
   1. Variation factors and future prospects of long-term interest rates
   2. Evaluation of potential impact of a rise in interest rates on real economy
   3. Stock Market Continuing Recovery Reflecting Economic Recovery
   4. Bank Lending Begins Increasing
   5. Trends of Land Prices and Real Estate-Related Markets

   Section 4 Trends in Fiscal Policy

   Section 5 Summary

Chapter 2 Changes in Business Behavior and Companies' Evaluation of Structural Reforms

   Section 1 Business Behavior Being Normalized after Post-bubble Adjustments
   1. Business Sector Recovering on Elimination of Three Excesses
   2. Elimination of Bubbles' Negative Legacy and Business Behavior Changes
   3. Companies Still Curbing Personnel Costs and Lowering Labor Share
   4. Restructuring's Effects on Business Behavior

   Section 2 Changing Characteristics of Japanese Companies
   1. Japanese Industrial Performance Worldwide
   2. Japanese Companies' Characteristics for International Comparison and Their Changes
   3. Changes in Japanese-style Management and Corporate Performances

   Section 3 Structural Reforms and Business Environment for Companies
   1. Institutional Reforms Surrounding Companies
   2. Institutional Reforms Regarding Corporate Activities and Their Ratings

   Section 4 Present Conditions and Problems at Japanese Banks
   1. Present Conditions of Japanese Banks
   2. Future Problems Facing Banks

   Section 5 Summary

Chapter 3 Changes in Environment in the Household Sector and Challenges toward the Strengthening of Human Potential

   Section 1 Changes in employment styles and their impact
   1. Diversification in employment styles
   2. Severe employment situation for young generations
   3. Employment in various regions

   Section 2 Challenges towards the strengthening of human potentials in terms of acquiring vocational skills
   1. Strengthening of human potentials from the perspective of acquiring vocational skills
   2. School education
   3. Vocational education and training provided by firms in Japan
   4. Significance and problems of vocational education and training seen respectively from individuals and firms
   5. Future prospects of the strengthening of human potential

   Section 3 Economic Disparity in terms of the Household Sector
   1. Trends in the economic disparity based on economic statistical data
   2. Trend of social stratification
   3. Citizens' awareness of disparity
   4. Standpoint in considering the disparity

   Section 4 Changes in environment of the household sector and policy responses
   1. Response to the diversification in employment styles
   2. Response to the severe employment situation among young people

   Section 5 Summary


Appended Figures and Tables

Appended Notes


Long-term Economic Statistics

Column 1 The Council on Economic and Fiscal Policy (CEFP)
Column 2 Income surplus exceeds trade surplus
Column 3 Structural Unemployment
Column 4 It is after the war that inflation has taken root internationally
Column 5 Relations between Employment Systems and R&D Operations
Column 6 Relationship between Employment Tenure and Productivity
Column 7 Situation regarding Germany's acceptance of foreign workers

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