It is the job of politicians in Japan and elsewhere to talk up the economy. They are obliged to insist that things are looking brighter on the scantiest of evidence both to offer reassurance and to save themselves from irate electorates.
If things go wrong and the global recession turns into a global depression, then they know only too well what their fate may be. Unless improvement is on the cards, lots of them could find be lining up in the very same Hello Work unemployment queues that their constituents are now in.
This spring, the momentum appears to be with the optimists and the pols -- to no one's surprise -- have been milking the hints of recovery with a rare energy.
Americans are being told by President Barack Obama that "we have begun to pick ourselves up and dust ourselves off and we've begun the work of remaking America." Likewise, stock markets around the world, taking their cue from Wall Street, have been putting in decent performances with some bank shares doing extraordinarily well after huge sell-offs over the winter.
If you believe what the markets are saying, then all those pep talks about being on the road to recovery will chime in nicely. Guff about green shoots and spring being the season of growth may work wonders with those who want to believe that the worst is over and we are once again set for growth in the months ahead.
Yet, consumer surveys and talk show chats do not a recovery make. With Chrysler going bankrupt, doubts about whether the Chinese economy can really be performing so admirably when energy consumption is reported to have dipped and the massive unemployment rates in countries such as Spain, it may pay to be skeptical. And if this wasn't enough, political leaders and their officials may soon be wrestling with a swine flu pandemic that would bring massive human suffering and economic disruptions.
Loads of wariness is surely in order in the wake of the Bank of Japan's recently released economic outlook survey. The BOJ, by its own admission, is owning up to having got its forecasts hopelessly wrong. Its new predictions are miles apart from previous ones where the estimates for economic performance where relatively benign.
Now it is a totally different story. The authors of the latest outlook report frankly that "economic conditions in Japan have deteriorated significantly." They warn pretty bluntly that there a host of downside financial and stimulative risks that leave the nation facing considerable pain in the months and years ahead.
Japan's future is likely to be conditioned by factors that neither its central bank nor its LDP-led coalition cabinet can easily correct. External forces, such as the fact that housing markets have yet to touch bottom in many of its major trading partners and the uncertainties over "toxic waste" within the financial sector overseas will have to be resolved before banks will confidently lend to each other and their clients. Only then will consumers perhaps stop saving and start thinking at least of going on a shopping spree once more.
Tokyo also faces an additional headache over the extraordinary strength of the yen. This is having a large impact on its hopes of exporting itself away from trouble and appears unlikely to be easily correctable short of central bank intervention and a gradual devaluation. The fact that the yen has strengthened from around to 200 yen to the pound to somewhere in the 130-140 range underlines Japan's problems. The yen is fast becoming a currency that everyone wants to hold with the inevitable result that potential importers abroad are going elsewhere when an alternative supplier can be found.
The result is bad news for the nation, its government and hard-pressed families. Japanese tourists may never have had it so good when they reach Hawaii, but Tokyo is now experiencing its first trade deficit in over a generation and growth is certain to be negative in this financial year at around 3%.
With deflation now a certainty and consumers increasingly frightened for their jobs, it is going to take more than a few spring shoots and noises from government leaders to propel Japan back to what used to be termed normality.
At the moment, all the Bank of Japan can aim for is to "exert its utmost efforts" to return Japan's economy to "a sustainable growth path with price stability." Admirable objectives, no doubt, but it won't happen tomorrow or next month or even next year at this rate. Be prepared for a hard slog ahead.© Japan Today