STRUCTURAL changes in Japan's retail sector rather than renewed export growth may be the key to the country's efforts to bolster its sickly economy.
Lehman Brothers managing director Robert Barbera told a luncheon at the Mandarin Hotel yesterday that Japan could not depend on exports and investments to emerge from recession, due to the strong yen and the absence of higher price cuts on Japanese exports.
Mr Barbera said that in 1985-86, for example, export growth was possible despite a 30 per cent jump in the yen's value, because prices tumbled 24 per cent, increasing consumer prices by only three per cent.
However, he said the yen's recent 40 per cent surge had been paralleled by only a 20 per cent price decline, which substantially hurt export volume.
As a result, Mr Barbera said, substantial changes in Japan's retail distribution sector would be crucial to spark an economic recovery.
Given the yen's strength, he said many retailers were buying cheaper imports, lowering their prices and still making healthy margins. Sales for these firms had increased sharply while total retail sales fell 10 per cent.
Mr Barbera said falling retail prices for imports would force many domestic firms to follow suit and create a resurgence in retail sales, leading to the first domestically-led economic recovery since World War II.