The annualized 0.2 percent growth in Japan's gross domestic product during the July-September period — much slower than the 1.8 percent rise in the preceding quarter — indicates that the economy, billed by the government to still be in its longest-ever postwar boom cycle, is at a crossroads. Since the October-December quarter is widely expected to see a drop in GDP due to the impact of the consumption tax hike, the coming months will likely test the economy's resilience.
Prime Minister Shinzo Abe has instructed his administration to compile a stimulus package to the tune of trillions of yen, partly to finance reconstruction in areas ravaged by the recent series of typhoons and beef up disaster-prevention infrastructure, and partly to shore up the economy in view of the growing downside risks.
Investing in projects to make the nation more resilient to natural disasters is essential, given that major disasters caused by extreme weather are becoming more frequent and more devastating, as demonstrated by the extensive damage from recent typhoons. Along with near-term steps to shore up the slowing economy, the stimulus package should feature measures that contribute to structural reforms to pave the way for sustained growth led by more brisk domestic demand — given that a full-scale recovery in export demand does not appear likely anytime soon.