What moved the economy back into recession was the outbreak of the Asian currency crisis in the summer of that year and the failure of a number of Japan’s major financial institutions in November. Unlike then, emerging economies today are much more resilient to adverse shocks and Japan’s financial system is stable.
In addition, this time around, the economic recovery maintains its momentum as shown in favorable business sentiment, and the employment situation, as measured in terms of the unemployment rate, is also firm. This will have a positive effect on both current labor income and the outlook for future labor income – and hence permanent income – and is therefore expected to underpin private consumption.