Economic Forecast from FY 2007 to 2017 by Macro-econometric Model
- Economic Forecast in Latter Half of FY 2007 -

Economic Research Section

The Economic Research Section of the Research & Development Department has developed "Japan-Hokkaido Macro-Econometric Model" in collaboration with Nakamura research laboratory at the International University of Japan.　With this model, we regularly forecast 10-year mid- and long-term economy. The following descriptions provide the results of the mid- and long-term economic forecast for Japan and Hokkaido made in the latter half of FY 2007.

FY 2008; Growth under 1%

The real GDP growth rate is expected to be under 1% due to several factor: the slowdown in Private final consumption expenditures affected by little increase of real income, smaller Private capital investment due to declining corporate earnings from rising crude oil and raw material prices, and little increase in Export of goods and services because of the U.S. economy slowed by sub-prime crisis.

Average growth rate of period from FY 2007 to FY2017; Growth at approx. 1%

Structural factors in the population reduce Private final consumption expenditures. Specifically, it is expected that (1) the number of employee hardly increases as the population dwindles. and (2) due to aging society, more and more elderly households individually reduce consumption than they did when they were working generation. Amid economic globalization, the wage per capita cannot be higher in the manufacturing industry, thereby not expanding consumption expenditures. Private capital investment is being hardly increased because of the least possible expansion of domestic consumer market, resulting in the period average 10-year growth rate of real GDP of at most 1%.

Fig-1 Changes in real GDP growth rate in Japan and Hokkaido
(Period average growth rate from FY 2007 to 2017)

FY 2008; Small growth at 0.25%

We strongly believe that the G8 Hokkaido Toyako Summit will bring positive effects. The effects contribute to positive growth in Private capital investment, the other private sector, Private final consumption expenditures and Private residential investment, show little growth. Likewise, the public sector will show negative growth due to reduced Hokkaido development project costs. Exports will increase in volume from a solid Japanese economy, but the real GDP will present only a 0.25% growth. It is expected that the G8 Hokkaido Toyako Summit can produce positive effects, i.e. real GDP growth of 0.08%.

Average growth rate of period from FY 2007 to 2017; Growth of less than 1%

During the first 5-year period, it is forecasted stable growth from Government final consumption expenditures related to the increase in medical expenses for elderly people in the growing aging society and a greater volume in Exports. In the latter 5-year period, gradually improving Private final consumption expenditures and steadily increasing Export volumes can produce another economic growth. Government final consumption expenditures are expected to demonstrate a decline in growth due to a modest increase in the elderly population and reduced growth of medical expenses for elderly people in the latter period. Through the whole 10-year period, Hokkaido economy can achieve growth of less than 1% because of increased Exports despite sluggish demands in private and public sectors.