Japan

FOOTBALL IN JAPAN As a host country, Japan has been exempt from the regional qualifying matches, which has been a concern for the team due to the fewer international match opportunities than teams in Europe and other geographical areas. Nonetheless, the recent victory at the international test matches against Ukraine and Poland will give the players renewed hopes and confidence. As mentioned, the French World Cup was the first-ever appearance for Japan...where Japan couldn’t win a single game.BUT!...We have a chance this time! The past record of the host country’s performance has been remarkable....out of 16 world cups since 1930, the host country became the champion six times. The host country team has never failed to proceed to at least the second round. What does this mean? Japan will be makinghistory if it fails to proceed further than the first round. Football has become increasingly popular over the past decade. The professional football league that began in 1993 has no doubt been a major catalyst for the popularity of the sport. There seem to be more youngsters playing football than baseball these days. TV broadcasts of international matches consistently attracts nearly 30% of the audience, even at odd-hours of the night. The enthusiasm for theworld cup is heating up. THE STATE OF THE ECONOMY We are beginning to see scattered signs that deflation is subsiding, but this trend has not yet permeated the entire economy. Prices of goods have come much more in line with prices in other countries, but service prices still remain high. The economy seems to be bottoming out, especially industrial production, but demand—the driving force behind this rebound—consists largely of export demand, and it will likely be some time yet before there could be a full-scale recovery in the crucial area of domestic demand. Consumers are still cautious to spend, given the ongoing deterioration of the labour market and the uncertainty of the income environment. In this respect, enthusiastic football fans from overseas are expected to bring some cheer to long-battered Japanese retail stores, as well as to football stadiums (and bars near by). Street economists estimate that theWorld Cup would boost April-June quarter GDP by between +0.1% and +0.3%. On the corporate restructuring front, businesses’ fixed-expense burden is gradually declining, chiefly through reductions in personnel costs, but fixed-cost cuts are not keeping pace with the slowdown in sales. With deflation likely to persist through the year, it will be difficult for corporations to achieve their currently optimistic profit growth outlook, without further aggressive restructuring. Therefore, despite the windfall from World Cup, GDP growth is likely to remain negative in 2002 in both real and nominal terms.We hope to see realGDP returning to positive growth for the first time in three years in 2003, although this will continue to depend greatly on export recovery. Besides the boost overseas football fans are expected to bring in May-June, the World Cup has already created publicworks demand over the past fewyears. Seven stadiums were newly built for this occasion The World Cup and Economics 26 World Cup 2002 Japan THE 2002 WORLD CUP We are civilized football players now! The previousWorld Cup in France was Japan’s debut, and now we are ready (?) to host this grand tournament with Korea. Four years ago, the Japanese football league still very much depended on thorough-bread foreign players; now we proudly “export” Hide Nakata to Palma (Italy), Jun Inamoto to Arsenal (England), and Shinji Ono to Feyenoord (Netherlands). These young starts will undoubtedly play well for the national team in theWorld Cup. (out of 11 to be used in Japan). Around US$1.6bnwas spent in building the newstadiums alone. Taking into account that most of these stadiumswere constructed as a part of a huge sports-complex-area which costs two to three times more, total spending was much greater. With the construction demand almost over, local authorities are heavily indebted due to the construction bill, as well as the daily running cost of these huge stadiums – most of which will never host a “sold-out” event once theWorld Cup is over. THE STATE OF THE NATION The young (by Japanese standards) reformist prime minister Koizumi took office just over a year ago. Initially the support rate for his cabinet was phenomenal...over 80% for more than eight months, a rating never seen in recent Japanese history. It seemed as if the structural problems, the banking sector issues and NPL, would quickly be resolved under this PM who has less sympathy with the old conventional pressure groups in the Japanese economy. However, after a year in office, people are finally learning that Koizumi is also a Japanese politician, moreover, a member of the LDP. The Koizumi cabinet has announced several “grand” reform propositions, but they only affirmed the “direction” of the structural reform, and significantly lack substance. The government is now working on the tax reform plan for next year. The Council of Economic and Fiscal Policy reconfirmed the basic direction of the tax reform plan: namely, expansion of a taxable income base for income and corporate taxes, as well as easing of progressive tax rates. A shift to these incentive-oriented tax systems is a precondition for equity markets’ sustained recovery. Let’s see if young Koizumi finally proves himself in this game. Previous Appearances: 1 1998