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Japan's economic recovery rivals past expansions, except for pay

[TOKYO] By some measures, Japan's current run of economic growth shapes up well against booms of years gone by.

A quick glance at gross domestic product data shows six straight quarters of expansion, with a seventh on the way, which would be the best performance since 2001.

A Cabinet Office panel of experts, who examine a complex array of gauges including industrial production and the coincident index to determine business cycles, may in time judge that present upswing is the second-longest of the postwar era.

Should this streak last through September, it will beat the so-called "Izanagi boom", a 57-month expansion through July 1970 that's named after one of two deities who legend has it created the Japanese islands.

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But as the chart shows, economic growth is no longer providing significant improvement in compensation for workers.

Three decades after the Izanagi period, the record expansion named after his sister-wife - the goddess Izanami - came with little improvement in pay as deflation held sway in Japan.

The gains that now coincide with the term of Prime Minister Shinzo Abe come with the same caveat.

"This recovery feels a little phony," said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute in Tokyo.

"Japan is still facing a lack of demand compared to supply. Wages and inflation are struggling to rise as the nation's potential growth rate remains low."

Average monthly wages per worker rose 0.4 per cent in June, while core consumer prices, the Bank of Japan's preferred gauge of inflation, was 0.5 per cent in July.

The current cycle won't be named until it's come to a close, which will happen when the Cabinet Office committee sees a clear peak has been passed and conditions are in in decline.

That may be years away.

BLOOMBERG

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