http://www.bloomberg.com/news/articles/2015-01-29/japan-s-production-rises-less-than-forecast-in-challenge-for-abe
Some good news out of Japan as industrial output rose 1.8 percent in the third quarter. Also the labor market improved as the ratio of job to applicants increased which might indicate companies are beginning to expand, somewhat. Furthermore, a 1 percent increase in production in December was the largest in since 2010.
Of course consumer spending is still the main drawback in the Japanese economy, as consumers are still taking a wait and see approach, or more a wait and see for the last 20 years. Until they see their wages increase to the point of feeling good, there might not be much help from consumer spending. The government still needs to find strategies to stimulate the economy enough to get consumers feeling and before that try to get businesses to feel good enough to raise wages and improve investment spending. Along with fiscal and monetary strategies.
Its a puzzle that keeps getting more complicated. How to get the economy out of its short term up and down mode the last twenty years into some real sustainable growth. Too many pieces of the puzzle have to be manipulated or stimulated at once and which do you ignore and which do you put a priority on to get more growth.
© 2015 Tom Metts, all rights reserved
Thursday, January 29, 2015
Monday, January 26, 2015
Japan Should Never Be Like Greece
Recent news of a new prime minister in Greece who is not so keen on the austerity measures imposed on Greece by different groups, might be welcome news. Yes Greece had a lot of debt but the austerity measures imposed on Greece in 2010 seemed to make matters worse instead of better. Its easy for other countries to ask a country to implement austerity to reduce debt problems as long as your country is doing OK. While most debt owed by Greece is from foreign sources, Japan's debt is mostly internal so it doesn't need to listen to others as closely, to rid itself of its debt. There might be other more sane ways to reduce the debt.
The Greece austerity experiment is a tragic example of how not to revive an economy and reduce the debt. Too many lives have been hurt in this tragic experiment. Its a classic case of dampening demand and reducing consumer and business sentiment, which is vitally important for economic growth. If Greece really wanted to reduce its debt and revive the economy, it should have found other strategies that would have increased demand and improved business and consumer sentiment as a way to increase revenues to reduce debt and improve economic growth.
Japan, in April 2014, almost tried a similar strategy, with its 8% sales tax hike. No country should increase taxes on a society where its consumers and businesses are already weary of the economy with any slight negative activity only causing an acceleration of reduced sentiment which reduces spending and investments. Japan doesn't need to worry about being Greece in that it doesn't need to worry too much about external voices and its debt. And it shouldn't try another tax hike strategy with its consumers voicing their disapproval by not spending up to their potential.
If Japan can come up with other strategies, as it is presently doing, it doesn't need to worry about becoming another Greece. Lets hope no country ever has to go through what Greece has gone through. Who knows how long it is going to take Greece to recover from failed austerity measures.
© 2015 Tom Metts, all rights reserved
The Greece austerity experiment is a tragic example of how not to revive an economy and reduce the debt. Too many lives have been hurt in this tragic experiment. Its a classic case of dampening demand and reducing consumer and business sentiment, which is vitally important for economic growth. If Greece really wanted to reduce its debt and revive the economy, it should have found other strategies that would have increased demand and improved business and consumer sentiment as a way to increase revenues to reduce debt and improve economic growth.
Japan, in April 2014, almost tried a similar strategy, with its 8% sales tax hike. No country should increase taxes on a society where its consumers and businesses are already weary of the economy with any slight negative activity only causing an acceleration of reduced sentiment which reduces spending and investments. Japan doesn't need to worry about being Greece in that it doesn't need to worry too much about external voices and its debt. And it shouldn't try another tax hike strategy with its consumers voicing their disapproval by not spending up to their potential.
If Japan can come up with other strategies, as it is presently doing, it doesn't need to worry about becoming another Greece. Lets hope no country ever has to go through what Greece has gone through. Who knows how long it is going to take Greece to recover from failed austerity measures.
© 2015 Tom Metts, all rights reserved
Sunday, January 25, 2015
Japanese Exports and US Economy
http://www.bloomberg.com/news/print/2015-01-25/japan-exports-rise-more-than-forecast-paring-record-deficit.html
Recent news indicates that Japanese exports increased 12.9 percent from a year earlier. Much of this can be attributed to a rise in demand in the US economy as consumers become more confident. This might sound like good news for Japanese exporters, and of course the help of the weakening yen against the US dollar, but how times before have we seen where Japanese exporters become too much the focus on improvements in the Japanese economy.
While its good news, any good news is welcome and encouraging, how much of a benefit will the rest of the Japanese economy get from an increase in exports? Exports is just one part of the GDP equation as consumption and government spending also play a large part. Fiscal and monetary actions are attempting to due their part of the real problem in GDP potential, but the real problem of course is domestic demand and consumption. No large/modern economy can exist on exports alone. Another possible recession in the US would possibly swing Japanese exports back into the abyss, with no help from the EU at the moment. There is no indication of a US recession of course, quite the opposite, but the point is the main challenge of Japan and its government is finding a way to get the real GDP up to potential GDP, and it seems the only way to do that is to stimulate demand in the domestic economy.
Also the Chinese economy has been slowing after three decades of recovery. So an export country, such as Japan, only relying on the US for export growth is not going to bring about a full recovery of the Japanese economy. The EU also has its own consumption problems.
Japan is still running a trade deficit after years of a surplus. The lower oil prices have helped and the weakening yen has been good for exports and of course not so good for importers, with the BOJ'S goal of inflation targeting now reduced to a !% goal.
Many pieces to the puzzle to get real GDP up to the potential GDP for Japan has been the challenge the last 20 or so years.
© 2015 Tom Metts, all rights reserved
Recent news indicates that Japanese exports increased 12.9 percent from a year earlier. Much of this can be attributed to a rise in demand in the US economy as consumers become more confident. This might sound like good news for Japanese exporters, and of course the help of the weakening yen against the US dollar, but how times before have we seen where Japanese exporters become too much the focus on improvements in the Japanese economy.
While its good news, any good news is welcome and encouraging, how much of a benefit will the rest of the Japanese economy get from an increase in exports? Exports is just one part of the GDP equation as consumption and government spending also play a large part. Fiscal and monetary actions are attempting to due their part of the real problem in GDP potential, but the real problem of course is domestic demand and consumption. No large/modern economy can exist on exports alone. Another possible recession in the US would possibly swing Japanese exports back into the abyss, with no help from the EU at the moment. There is no indication of a US recession of course, quite the opposite, but the point is the main challenge of Japan and its government is finding a way to get the real GDP up to potential GDP, and it seems the only way to do that is to stimulate demand in the domestic economy.
Also the Chinese economy has been slowing after three decades of recovery. So an export country, such as Japan, only relying on the US for export growth is not going to bring about a full recovery of the Japanese economy. The EU also has its own consumption problems.
Japan is still running a trade deficit after years of a surplus. The lower oil prices have helped and the weakening yen has been good for exports and of course not so good for importers, with the BOJ'S goal of inflation targeting now reduced to a !% goal.
Many pieces to the puzzle to get real GDP up to the potential GDP for Japan has been the challenge the last 20 or so years.
© 2015 Tom Metts, all rights reserved
Positive Affects?
http://asia.nikkei.com/Japan-Update/Most-Japanese-voters-see-no-effect-from-Abenomics
According to the article, a small percentage of those polled in a survey have not felt any benefits from Abenomics. This is not surprising news as it seems, for whatever reason, the Japanese consumer, these days, tend to be somewhat pessimistic of their economy. Why not? When the economy is continually in a roller coaster mode, consumers and companies tend to take a wait and see and or always cautious mood instead of being optimistic which might result in negative results later.
Perhaps, unfortunately, Japanese companies and consumer have now internalized a pessimistic mood about the economy, never really expecting to see much in the way of improvement or growth. However, this might not be what is needed for the economy to get out of its long time roller coaster trend of up a little, down a little, up a little, down a little, never gaining any real momentum or acceleration in growth.
One strategy that might be needed is, however small, is to promote or advertise anything that might be positive in the economy. There always seems to be negative news surrounding the Japanese economy, but usually very little in the way of what sectors might actually be growing, what companies, large or small that might actually be investing, growing, expanding.
If companies and consumers can actually begin to see any areas where growth is actually happening, it might help other companies to see that there is life in the economy. Too much news focuses on the negative and not enough on anything that might be positive.
As has been suggested before in many news articles, the Japanese government should provide incentives for companies to invest and increase wages. Lower tax rates for companies that increase wages over a specific time period and or lower tax rates for specific kinds of investments.
Also instead of tax hikes, possibly the government should provide lower tax benefits for consumer spending. More spending at the current tax rate might be better than increasing the tax rate on consumers who are weary of any tax increases. What is lost in the tax breaks is more than made up in increased consumer spending if the incentives are big enough. This might help to stimulate the economy some and provide some needed positive benefits.
The same with company tax breaks. What is initially lost can be gained by more investments and more wage increases in the long run.
Also as part of the incentives for SME's provide low cost loans, more money in the economy, as has been mentioned before, as another strategy for growth.
Getting companies and consumers to see the benefits of increased spending is needed as long as they have incentives to do so. New strategies are needed by the ABE government besides bond buying and relying on exports to increase economic growth.
© 2015 Tom Metts, all rights reserved
According to the article, a small percentage of those polled in a survey have not felt any benefits from Abenomics. This is not surprising news as it seems, for whatever reason, the Japanese consumer, these days, tend to be somewhat pessimistic of their economy. Why not? When the economy is continually in a roller coaster mode, consumers and companies tend to take a wait and see and or always cautious mood instead of being optimistic which might result in negative results later.
Perhaps, unfortunately, Japanese companies and consumer have now internalized a pessimistic mood about the economy, never really expecting to see much in the way of improvement or growth. However, this might not be what is needed for the economy to get out of its long time roller coaster trend of up a little, down a little, up a little, down a little, never gaining any real momentum or acceleration in growth.
One strategy that might be needed is, however small, is to promote or advertise anything that might be positive in the economy. There always seems to be negative news surrounding the Japanese economy, but usually very little in the way of what sectors might actually be growing, what companies, large or small that might actually be investing, growing, expanding.
If companies and consumers can actually begin to see any areas where growth is actually happening, it might help other companies to see that there is life in the economy. Too much news focuses on the negative and not enough on anything that might be positive.
As has been suggested before in many news articles, the Japanese government should provide incentives for companies to invest and increase wages. Lower tax rates for companies that increase wages over a specific time period and or lower tax rates for specific kinds of investments.
Also instead of tax hikes, possibly the government should provide lower tax benefits for consumer spending. More spending at the current tax rate might be better than increasing the tax rate on consumers who are weary of any tax increases. What is lost in the tax breaks is more than made up in increased consumer spending if the incentives are big enough. This might help to stimulate the economy some and provide some needed positive benefits.
The same with company tax breaks. What is initially lost can be gained by more investments and more wage increases in the long run.
Also as part of the incentives for SME's provide low cost loans, more money in the economy, as has been mentioned before, as another strategy for growth.
Getting companies and consumers to see the benefits of increased spending is needed as long as they have incentives to do so. New strategies are needed by the ABE government besides bond buying and relying on exports to increase economic growth.
© 2015 Tom Metts, all rights reserved
Thursday, January 22, 2015
BOJ and Bonds
http://the-japan-news.com/news/article/0001876940
The ECB took the step of buying bonds to inject more funds into the EU economy as a strategy of more loans and more profits for companies who export. Some might say its too little too late, and or it will only help a little, more needs to be done by central governments beside the ECB.
The BOJ recently used similar strategies to help the 98% of companies that are small and medium sized, injecting more funds at low interest rates into the economy with the strategy of getting more money flowing through the economy, more for investments and more for wage growth.
However, the challenge seems to be whether SME's will feel any benefits from the increase of extra money moving through economy, enough as an incentive to invest and increase wages as needed.
Also as stated in a earlier blog, business, small and large have to feel there is enough demand for them to increase investments and wages. A lot remains to be seen.
Other sources have stated that a 1% increase in real wages is needed for the economy to see real increases in inflation. Again will SME's and the Toyota's feel demand is good enough to increase wages.
If there is very little or no movement in the labor force there will be very little incentive for companies to increase wages as labor is reluctant to move as they might continue to be weary of the economy.
The final question might be, what needs to break or change before green shoots of economic growth become enough for all stakeholders to start moving, for an increase in growth acceleration.
The BOJ seems to be doing as much as it can but is waiting on industry and business to start making some moves also.
© 2015 Tom Metts, all rights reserved
The ECB took the step of buying bonds to inject more funds into the EU economy as a strategy of more loans and more profits for companies who export. Some might say its too little too late, and or it will only help a little, more needs to be done by central governments beside the ECB.
The BOJ recently used similar strategies to help the 98% of companies that are small and medium sized, injecting more funds at low interest rates into the economy with the strategy of getting more money flowing through the economy, more for investments and more for wage growth.
However, the challenge seems to be whether SME's will feel any benefits from the increase of extra money moving through economy, enough as an incentive to invest and increase wages as needed.
Also as stated in a earlier blog, business, small and large have to feel there is enough demand for them to increase investments and wages. A lot remains to be seen.
Other sources have stated that a 1% increase in real wages is needed for the economy to see real increases in inflation. Again will SME's and the Toyota's feel demand is good enough to increase wages.
If there is very little or no movement in the labor force there will be very little incentive for companies to increase wages as labor is reluctant to move as they might continue to be weary of the economy.
The final question might be, what needs to break or change before green shoots of economic growth become enough for all stakeholders to start moving, for an increase in growth acceleration.
The BOJ seems to be doing as much as it can but is waiting on industry and business to start making some moves also.
© 2015 Tom Metts, all rights reserved
Wednesday, January 21, 2015
Companies and Wages
More recent news and old news is the Japanese government has been encouraging companies, with large cash reserves to pass some of reserves to employees in the form of increased wages as a way to improve low consumer spending.
This seems to be a global problem not just a Japanese company problem. While the US economy, so it seems, is beginning to show real signs of life, compared to the rest of the global economy, US companies have also been somewhat reluctant to increase wages.
Possible reasons for this might be a chicken and egg problem. Employees have been reluctant to change jobs since the great recession, preferring to remain with the current companies. Companies then realize there is no need to increase wages if there is not a lot of demand or change among the workforce. Even more so in Japan.
Second, companies might still be wary of how deep the great recession was and still are reluctant to increase wages and or investments in anything now, in the US, Japan, and the EU.
Possibly even more so in Japan, too many workers are contract or temporary, in which wages are usually lower than full-time or even so called lifetime employment, if there is even such a concept still in Japan, and as such companies feel they don't need or want to invest in its workforce any more than is needed.
This of course might be a short-term or a short-sighted approach of Japanese companies, especially those with most of the business in the Japanese domestic market. Again a chicken or an egg idea, invest in their employees and company by increasing wages, which sooner or later, might begin to see more consumer spending as employees, i.e. consumers begin to feel the increased wage benefits which in turn improve the overall Japanese economy.
But usually companies take a wait and see approach. As long as the economy is sluggish, they will wait and see, and then begin to think about improving wages. Of they wait and see if demand for there products or services improve and then they think about improving investments and wages.
Unfortunately, the wait and see approach is far more common than a more proactive approach of investing the excess cash reserves into more wages and more investments to stimulate economic growth more demand which then the accelerator affect becomes positive, growth and demand increases more growth and demand.
Or the opposite less growth and demand actually promotes less growth and demand.
Lets hope Japanese companies can see the positive of investing in employee wages and more investments overall.
© 2015 Tom Metts, all rights reserved
This seems to be a global problem not just a Japanese company problem. While the US economy, so it seems, is beginning to show real signs of life, compared to the rest of the global economy, US companies have also been somewhat reluctant to increase wages.
Possible reasons for this might be a chicken and egg problem. Employees have been reluctant to change jobs since the great recession, preferring to remain with the current companies. Companies then realize there is no need to increase wages if there is not a lot of demand or change among the workforce. Even more so in Japan.
Second, companies might still be wary of how deep the great recession was and still are reluctant to increase wages and or investments in anything now, in the US, Japan, and the EU.
Possibly even more so in Japan, too many workers are contract or temporary, in which wages are usually lower than full-time or even so called lifetime employment, if there is even such a concept still in Japan, and as such companies feel they don't need or want to invest in its workforce any more than is needed.
This of course might be a short-term or a short-sighted approach of Japanese companies, especially those with most of the business in the Japanese domestic market. Again a chicken or an egg idea, invest in their employees and company by increasing wages, which sooner or later, might begin to see more consumer spending as employees, i.e. consumers begin to feel the increased wage benefits which in turn improve the overall Japanese economy.
But usually companies take a wait and see approach. As long as the economy is sluggish, they will wait and see, and then begin to think about improving wages. Of they wait and see if demand for there products or services improve and then they think about improving investments and wages.
Unfortunately, the wait and see approach is far more common than a more proactive approach of investing the excess cash reserves into more wages and more investments to stimulate economic growth more demand which then the accelerator affect becomes positive, growth and demand increases more growth and demand.
Or the opposite less growth and demand actually promotes less growth and demand.
Lets hope Japanese companies can see the positive of investing in employee wages and more investments overall.
© 2015 Tom Metts, all rights reserved
Recent Observations
This week there have been quite a few news stories regarding the BOJ, Bank of Japan, and their downgrading of their inflation goal of 2%. A 2% inflation goal, it seemed was never really achievable in the time frame they wanted. Reason being, it takes time for businesses to raise wages, for employees to feel the effects of those wages, and for consumers in the economy to begin to feel some benefits.
After the sales tax last April the 2% goal became even more unrealistic. However, just because it hasn't been achievable yet, doesn't mean its not a doable goal. You have an economy that has been entrenched in deflation for a number of years. You have a economy with a mindset that, for the most part, has become less that optimistic, which many times, results in an economy that is not operating at full potential. You have an economy while still # 3 in the world, with a huge output, is nowhere near where it should be.
It will take time for potential wage increases, fiscal stimulus, monetary stimulus, and increased or improved consumer mood to really see an affect.
So the BOJ changing or admitting that 2% inflation is not doable just yet is not a failure on the part of the BOJ, it just realizes there are still too many forces at work that need to improve before increased demand and more inflation becomes a real part of the Japanese economy.
© 2015 Tom Metts, all rights reserved
After the sales tax last April the 2% goal became even more unrealistic. However, just because it hasn't been achievable yet, doesn't mean its not a doable goal. You have an economy that has been entrenched in deflation for a number of years. You have a economy with a mindset that, for the most part, has become less that optimistic, which many times, results in an economy that is not operating at full potential. You have an economy while still # 3 in the world, with a huge output, is nowhere near where it should be.
It will take time for potential wage increases, fiscal stimulus, monetary stimulus, and increased or improved consumer mood to really see an affect.
So the BOJ changing or admitting that 2% inflation is not doable just yet is not a failure on the part of the BOJ, it just realizes there are still too many forces at work that need to improve before increased demand and more inflation becomes a real part of the Japanese economy.
© 2015 Tom Metts, all rights reserved
Tuesday, January 20, 2015
Tourism Increases in Japan?
http://www.wsj.com/articles/japan-tourism-rebounds-to-record-level-1421723623
With the Japanese economy still not growing up to potential there is one bright area, that being tourists to Japan have increased. Thanks to friendlier Japan visa requirements, a weak yen, and more affluence in the Asia region.
While Japanese consumers are still wary of spending and still reeling from the ill-advised tax hike last April, tourist consumers seem to be picking up the slack, ever so slightly.
The Japanese government realizes that tourism is now a major economic growth industry that might be able to help the economy. How much will tourism actually help remains to be seen as Japanese consumers themselves need also to feel that something positive can come from their spending like their Asian counterparts.
Its one thing to go to Japan for a few days or a week and spend freely, its another thing to live and work in Japan and feel good about the economy. But lets hope this little stimulus of tourist spending can lead to better things to come.
© 2015 Tom Metts, all rights reserved
With the Japanese economy still not growing up to potential there is one bright area, that being tourists to Japan have increased. Thanks to friendlier Japan visa requirements, a weak yen, and more affluence in the Asia region.
While Japanese consumers are still wary of spending and still reeling from the ill-advised tax hike last April, tourist consumers seem to be picking up the slack, ever so slightly.
The Japanese government realizes that tourism is now a major economic growth industry that might be able to help the economy. How much will tourism actually help remains to be seen as Japanese consumers themselves need also to feel that something positive can come from their spending like their Asian counterparts.
Its one thing to go to Japan for a few days or a week and spend freely, its another thing to live and work in Japan and feel good about the economy. But lets hope this little stimulus of tourist spending can lead to better things to come.
© 2015 Tom Metts, all rights reserved
Sunday, January 18, 2015
Cheap Oil: Economic Boost
http://blogs.wsj.com/japanrealtime/2015/01/16/analysis-why-cheap-oil-helps-japans-industries-more-than-consumers/
Will cheap oil actually boost the Japanese economy? According to the article, most of the cheap oil goes to producers not consumers. The real questions is if producer costs decrease, will they pass on the benefits to consumers and employees?
Even if they do pass on the benefits, how long will it take for consumers and employees to begin to feel the affects of the benefits? And how long before they actually start acting on the benefits with more consumer spending, that is badly needed in the Japanese economy.
The article further states that producers are not going to increase investments etc. until they see demand for their products increase. That could be a challenge. How do producers get consumers to demand more if they don't feel good about the economy due to perceived benefits being less that desirable, either with increased wages or other benefits.
© 2015 Tom Metts, all rights reserved
Will cheap oil actually boost the Japanese economy? According to the article, most of the cheap oil goes to producers not consumers. The real questions is if producer costs decrease, will they pass on the benefits to consumers and employees?
Even if they do pass on the benefits, how long will it take for consumers and employees to begin to feel the affects of the benefits? And how long before they actually start acting on the benefits with more consumer spending, that is badly needed in the Japanese economy.
The article further states that producers are not going to increase investments etc. until they see demand for their products increase. That could be a challenge. How do producers get consumers to demand more if they don't feel good about the economy due to perceived benefits being less that desirable, either with increased wages or other benefits.
© 2015 Tom Metts, all rights reserved
Tuesday, January 13, 2015
Economic Observations
Hello,
This will be my first economics blog. In this blog I will attempt to focus on the Japanese economy and some of its positives.
There is always a lot of negative news regarding the Japanese economy but rarely do we see anything positive about it. This idea came about from several sources; 1. I've always been interested in the Japanese economy from an observer perspective and from a research perspective, 2. I was asked to give a lecture to an international business club at the university I teach at, since I teach economics. I decided to give a lecture on what's good about the Japanese economy these days.
So I will focus on that in this blog. For one I'm not a Japanese apologist, one who is always defending the economy, my goal is simply to find positive aspects of the economy when so much of the news seems to be negative. My views or ideas may or may not be correct. They are simply observations as I seem them. I have traveled to Japan on and off, since 1998, up to 3 times a year.
This blog will also have observations about the Korean economy and other economies as well. The focus is not academic but merely general observations of what is happening.
I will approach this blog the same way I teach economics. Except for the core economics course I teach from time to time, most of my economics class are not theory based but focused on what is happening in an economy, society, etc. Basically looking at economic activity and trying to understand why its happening the way it is.
© 2015 Tom Metts, all rights reserved
This will be my first economics blog. In this blog I will attempt to focus on the Japanese economy and some of its positives.
There is always a lot of negative news regarding the Japanese economy but rarely do we see anything positive about it. This idea came about from several sources; 1. I've always been interested in the Japanese economy from an observer perspective and from a research perspective, 2. I was asked to give a lecture to an international business club at the university I teach at, since I teach economics. I decided to give a lecture on what's good about the Japanese economy these days.
So I will focus on that in this blog. For one I'm not a Japanese apologist, one who is always defending the economy, my goal is simply to find positive aspects of the economy when so much of the news seems to be negative. My views or ideas may or may not be correct. They are simply observations as I seem them. I have traveled to Japan on and off, since 1998, up to 3 times a year.
This blog will also have observations about the Korean economy and other economies as well. The focus is not academic but merely general observations of what is happening.
I will approach this blog the same way I teach economics. Except for the core economics course I teach from time to time, most of my economics class are not theory based but focused on what is happening in an economy, society, etc. Basically looking at economic activity and trying to understand why its happening the way it is.
© 2015 Tom Metts, all rights reserved
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