Economics & Strategy – Economics: Second

Leaping to second place after debuting as a runner-up last year is UBS’s Takuji Aida, who is unreservedly upbeat about the Japanese economy. “Japan can grow at around 1.5 percent in 2013,” he declares. “The second half should be much stronger than the first owing to recovery of corporate activity and aggregate wage expansion.” Aida points to five stages of Japan’s economic revival: the global economy hitting bottom, domestic business sentiment improving, overseas markets recovering, local companies expanding and, finally, deflation ending. Japan reached the second phase last year, he adds, and “in 2013 we expect the third and fourth stages to accelerate suddenly with Prime Minister [Shinzo] Abe’s administration’s combined fiscal and monetary easing.” As for the all-important end to the deflation that has plagued Japan for decades, that will take more time. “With continued recovery in the overseas economy and growth in total wages — unless there is a tightening of monetary policy — after a few years the corporate savings rate should return to zero, and deflation will end along with corporate deleveraging,” Aida says. “In the last economic recovery, Japan did not reach this stage, partly owing to the collapse of the U.S. credit bubble. In this recovery too there is the risk of hasty fiscal consolidation, including the consumption tax hike, and at this point whether or not Japan will reach this stage is still quite opaque.” (Japan’s 5 percent consumption tax will climb to 8 percent next year and to 10 percent in 2015.) The UBS economist provides “logical and clear explanations based on substantial economic research,” observes one ally. “And he takes good care of each fund manager with courtesy and efficiency.” — Thomas W. Johnson