Japan's Economy Begins To Recover After Crises
LINDA WERTHEIMER, host:
To find out how the overall is economy is doing three months after the devastating earthquake and tsunami in Japan, we called Kenneth Cukier. He's a correspondent based there for The Economist magazine, although we reached him in the United States.
Mr. Cukier, welcome.
Mr. KENNETH CUKIER (Journalist, The Economist Magazine): Hello.
WERTHEIMER: Now, let me ask you, first of all, the big-picture question: Some of the economic numbers that are just out the latest gross domestic product from Japan - what are they telling us?
Mr. CUKIER: Well, we're seeing the numbers revised upwards, and that's very good news, something that we didn't expect. Japan is very good culturally at kind of thinking very pessimistically at things and then being surprised later when things are not quite as bad. And we've seen that yet again with the hit to the economy.
The issue, really, is the supply chain issue. Are factories going to be able to produce the things that they need? What we found, though, is that although these factories were obliterated - or at least severely damaged, or at least couldn't get raw materials, just a very small, you know, piece of rubber with which a lot of other things are depended - that, in fact, these companies were able to bounce back more quickly than we expected.
So in the case of Toyota, we were really expecting them to go back to, say, half production at their factories, creating half as many cars this year as last year, which is still, of course, a huge drop-off. We were expecting that 50 percent figure to be around here in the middle of the summer. Toyota's new estimate is that they'll be at 90 percent during the summer. Now, that is something that, a month ago, if you spoke to the Toyota executives I did, they didn't realize that.
WERTHEIMER: One thing I've been very curious about is tourism. Some of the famous sites in Japan - especially, I'm thinking of Matsushima Bay, one of the most beautiful places in the whole country - was very heavily damaged. I mean, the epicenter of the earthquake was right off that bay. What about places like that? Any chance of them making a comeback? Are people going to see them?
Mr. CUKIER: The answer is yes. Over time, many of these places will bounce back, will be restored. The Japanese will be the first tourists to go there, then foreign tourists will go there. For the moment, the entire country is catching its breath. It's still in a period of self-restraint. That's actually hurt the economy, as well.
But what it's meant is that there has been less travel, less travel through that region, as you'd expect. There's a sort of new austerity - not just simply in that area, of course, there would be but elsewhere in the country, as well. But over time, people will go back there. They'll restore it. And right now there is a huge rebuilding operation.
They recognize, though, that tourism is going to be a part of their recovery, is a part of their solution, and so they're going to do everything they can to rebuild these areas so that they can make it an economic hub again. And part of that is tourism.
WERTHEIMER: So what is the outlook, do you think? How long do analysts believe it will take before Japan's economy returns to normal whatever normal or healthy may be for Japan these days?
Mr. CUKIER: In terms of when Japan will return to the level that it was at prior to the quake, it'll be about a year after the quake. So by next March, things should be returned to normal, per se. But you've put your finger on the essential issue. What normal means in Japan is different than elsewhere. The economy has been underperforming its global peers for the last 20 years. It's been a period of a sort of stagnation. And as a result, even if it goes back to what it had been prior to the quake, that's still not very good. That means that there's stagnation. That means that there's a sort of genteel decline. You're going to have very low-to-zero growth in many industries, overcapacity throughout industry. That's a real problem.
Many people had hoped - sort of silently hoped - that this was the crisis that would have spurred Japan back into a growth mode. It isn't. And the reason why it is that the people who make decisions are in Tokyo, and Tokyo was not hit quite badly, and because there's a sort of complacency in Japan, which is a real problem. We're seeing great companies outperform their peers and do very, very well, but these are small, little companies on the margins of the rest of corporate Japan. The rest of Japan has been sinking, and that's been a real problem for the country. It's not going to change.
WERTHEIMER: Kenneth Cukier covers japans business and finance for The Economist.
Mr. Cukier, thank you.
Mr. CUKIER: Thank you.
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