Friday, September 6, 2013
Kondratiev Wave Points To New Golden Age For Japan
TOKYO (NQN)--According to business cycle theory, periods of economic growth and sluggishness can be seen as a series of waves moving through history.
One of the first to posit the existence of such waves was Russian economist Nikolai Kondratiev about 100 years ago. His "long economic cycle," which is somewhat fatalistic, has been out of favor among economists who came up with a "new normal" theory characterized by modest growth. Historical rules of thumb were dismissed.
Recently, however, some analysts have been taking a fresh look at Kondratiev waves.
- Yuji Shimanaka
Yuji Shimanaka, head of the Business Cycle Research Institute at Mitsubishi UFJ Morgan Stanley Securities Co., who has long experience studying economic ups and downs, argues the long economic cycle is the best tool for forecasting. According to Shimanaka, Japan is entering a sustained expansion phase for the first time in 46 years.
According to business cycle theory, there are four types of waves with differing periods. Short-term waves of about four and a half years, medium-term waves of nine and a half years, long-term waves of about 25 and a half years, and a ultralong waves of 56 years. The Kondratiev wave is the ultralong cycle and is said to be driven by big changes such as innovation.
Shimanaka also belongs to a Cabinet Office study group that analyzes business conditions. His conclusion that Japan is on the cusp of a new period of growth is based on a number of factors, including nominal capital investment as a share of gross domestic product. During this "golden cycle" all four subcycles are on the upswing. If his prediction holds true, it will be the first time Japan has entered such a growth phase since 1967, just before Japan's longest postwar economic expansion, the Izanagi Boom.
Recently, both domestic and overseas market players are taking a fresh look at business cycle theory in light of Prime Minister Shinzo Abe's plans for Japan's first major infrastructure-building program since the bursting of the economic bubble about 25 years ago. The recent revival of the U.S. economy due to the shale-gas revolution and the growing use of 3-D printers in manufacturing are also seen as long-term positives.
Shimanaka predicts the economy will continue to expand until about the July-September quarter in 2017, with short-term slowdowns included. Business cycle theory could provide hints for long-term investment, but like any theory, it is subject to constant verification.
-- Translated from an article by NQN staff writer Youichi Nagai
(Nikkei Quick News, Sept. 6)