Japan Economy Q3 Results

Japan’s Economy Grew Much Faster Than First Estimated in Q3

Japan’s Economy Grew Much Faster Than First Estimated in Q

(Bloomberg) -- Japan’s economy expanded in the third quarter at a much faster pace than initially reported, as capital investment and private consumption proved much stronger than first estimated.

Gross domestic product grew at an annualized pace of 1.8% in the three months through September from the previous quarter, faster than an initial reading of 0.2%, revised Cabinet Office data showed Monday. The result was stronger than projected by any of the economists surveyed by Bloomberg. The median forecast was for a 0.6% expansion.

Key Insights

Revised third-quarter growth came in faster than the initial government estimate after data earlier this month showed stronger capital spending by manufacturers. Continued robustness in business investment is a positive sign that concern over the global slowdown has yet to buckle corporate sentiment. “Capital spending was the key driver for the upward revision,” said Norio Miyagawa, senior economist at Mizuho Securities Co. A shortage of workers is forcing companies to invest in labor-saving equipment, while the Oct. 1 sales tax hike may also have pushed some companies to bring investment forward, he said. The figures come after the government last week announced 13.2 trillion yen in fiscal measures to support growth and the recovery from typhoon damage. While domestic demand has kept the economy expanding this year despite falling exports, gross domestic product is expected to contract 2.6% in the last three months of this year as consumers stay home following October’s sales tax hike. Looking ahead, the government said its fiscal package will boost growth by 1.4 percentage point over time. Economists have cast doubt on that figure and the speed at which spending will reach the economy, but they largely agree that the package makes it easier for the Bank of Japan to hold off on extra stimulus. While the U.S.-China trade war continues to cast a large shadow over the global economic outlook, Tokyo’s own trade spat with Seoul has cut spending by South Korean tourists in Japan, weighing on overall growth.

What Bloomberg’s Economists Say

“Looking ahead, we expect a sharp contraction in 4Q GDP, with stronger fiscal spending failing to offset weakness in other major components. The higher sales tax and global slowdown will leave a heavy mark. Further out, fresh stimulus should help shore up the economy.”

--Asia Economist Team

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On a non-annualized basis, the economy expanded 0.4% from the second quarter. Economists predicted a 0.2% expansion. Business investment rose 1.8%, compared with a forecast for a 1.4% gain. Private consumption increased 0.5%. The forecast was for a 0.4% gain. Separate data showed the current account balance for October was a surplus of 1.82 trillion yen, compared with the 1.81 trillion yen surplus estimated by economists.

Japanese Economy News

 

Japan Economy News:


https://www.japantimes.co.jp/news/2019/08/09/business/economy-business/japans-economy-grew-third-consecutive-quarter-pace-slowed-annualized-1-8/#.XU3oKd5K

Japanese Consumer Confidence Before the Tax Increase

Japanese Craftsmanship And Technology

Japan craftsmanship is well known, over 1,000 years of creating and making all kinds of small trinkets, that possibly only Japanese craftsman could make. Move on to the 20th and 21st century and you have thousands upon thousands of small and medium sized companies that are craftsman based; meaning they create and make small parts for other products, not the products themselves. Move on the recent so-called trade situation with Japan and Korea. The parts in question are all made by mostly small sized companies that are very much craftsman style companies, not huge conglomerates like Mitsubishi or Panasonic etc. Japan is appears to be the world leader in craftsman style technology companies. These companies provide all kinds of parts for larger companies in Japan and globally.



© 2019 Tom Metts,  all rights reserved

Japan Economy and Consumer Demand

Consumer demand/spending in Japan is always a concern, as it makes up about 60% of the Japan GDP. Exports are only about 20% of Japan's GDP. As such, as the population continues to age, at an increasing rate, and as wages are still not rising fast enough to satisfy the population, consumer demand is always a major concern. On a recent trip to Japan, all the stores seemed full. That doesn't mean all were buying but consumers were out and about. Of course the large metropolitan areas, such as Yokohama, where I took the trip, always seems to have no problem related to consumer spending or consumer demand. But the rural or lesser areas may have problems with demand if there are larger numbers of the aged populations in those areas.


 2019 Tom Metts,  all rights reserved

Population Decline and Foreign Workers

https://mainichi.jp/english/articles/20190710/p2g/00m/0dm/075000c

Japan has seen another decline in its population. Major centers; Osaka and Nagoya are especially challenged. At the same time, Japan has been attempting, through new immigration policies, to bring in more foreign workers. Also, as in Korea, Japanese young people, students seem unwilling to do certain types of work. The best example is the convenient stores, or conbinis in Japanese. In a recent trip to Japan, and visiting many conbinis, to buy and just to explore, I didn't see one Japanese young person, only international students and some older Japanese men who maybe were at the retirement age. Even visiting two different McDonald's and a Japanese fast food place, Mos Burger, there were mostly just older retired age workers at the stores. But the immigration policies, as with other areas related to Japan, seem to favor Japan, and not really making it easy for foreign workers to really enter Japan. Japan needs to find ways to make it easier for foreign workers to want to come and work in Japan.



© 2019 Tom Metts,  all rights reserved

What to make of it?

Back in the early 2000's or even before, maybe the 1990's there was all the talk about the lost decade for Japan, due to the 1989/90 asset bubble crisis. But what intrigued me was the idea, that despite all the negative press, the economy itself, really wasn't that bad off. I think if we look at the data for that period we might see Japan actually fluctuated around 1% most of the years or quarters. It didn't grow, of course like the 80's etc., but the economy was still there and there still seemed to be a significant amount of economic activity taking please, despite, again all of the ideas of a "lost decade."

 So the idea came to me what really is the Japanese economy all about? So my fascination with the Japanese economy since the late 90's early 2000's. Japan never collapsed like a major 1929 depression. It has never collapsed like a Greece type situation. So I would maybe speculate that Japan is still one of the most stable economies in the world right now.

The idea is just to observe what might be happening in the Japanese economy, not necessarily about economic theory and the economy. If that makes it more journalism that academic, so be it. I am able to write what I feel, not what I am supposed to write to please academia. So if this blog, as it continues, is just a journalistic commentary or observation, I can live with that.



© 2019 Tom Metts,  all rights reserved

The Next Tax Hike?

Prime Minister seems to indicates he plans to go ahead with the next consumer tax hike, from 8% to 10%. Consumer tax hikes are/were never popular in any country, but especially in Japan, as consumer spending is always the major area of concern for the Japanese government, due to the rising ageing society. In  2014, when the tax hike was from 5% to 8%, consumer spending plunged as expected in Q2. In Q1 of that year consumer spending increased, of course, as consumers spent ahead of the future tax hike, which is consistent with supply/demand in economics. Then in Q3 consumer spending seemed to move back to normal, as Japanese consumers, as everywhere, got used to the higher prices. It remains to be seen if the same spending pattern or behavior will again result in the quarter before a large increase, then in the tax hike quarter a decrease, and then the next quarter back to normal. The government has been laying out plans for exemptions for some products and services mainly in the retail or food service industries that would be exempt from the tax hike. But the details are not clear yet.


© 2019 Tom Metts,  all rights reserved

Japan Economy and the Weather?

I watch Japanese TV on my tablet every morning. It seems, at times, that half the news is about the weather every five or 10 minutes. There is no doubt that Japan is very vulnerable to extreme changes in weather, as Japan, for the most part, still have a rather significant, but decreasing agricultural industry, so the weather plays a huge part of what happens there. Typhoons, monsoons, mudslides, earthquakes,  and of course the never forgotten, March 11, 2011 earthquake and tsunami is never far from peoples' minds. The weather can have and other factors, natural disasters,  can have huge affects on the economy as in the Osaka area last year and the Sapporo area last year too. The western side of Japan always seems to get huge snow storms along with the affects of irregular monsoons or rain storms this summer so far and this past spring. All things equal it seems Japan gets more than its share of bad weather every year, that potentially can have huge affects on the economy.



© 2019 Tom Metts,  all rights reserved

Japan Economy and the Convenience Stores (Conbini)

Japan has a unique business model that have developed over the past 10 or so years related to the convenience store, called conbini in Japan. The conbini now is a one-stop shopping place that is become an essential part of Japan society and the economy. Go into a modern and new conbini, 7-11, Lawson, Mini-stop, Family Mart etc. and you can probably find any of your daily needs, including fresh food. I often visit a Japan conbini just to see all the fresh food on display that you might get on the go. I have never seen it anywhere else in the world. Also at the conbini you can do a number of things such as banking services, print services, even delivery services from any number of places such as Japan Amazon, which will deliver near to where you live.
Japan conbini stores, like many businesses in Japan are experiencing labor shortages and Japanese young people don't want to work in the conbini and or don't want to work in the night shift 12 to 7 for example. As such companies such as 7-11 are now experimenting with closing during those hours. The Japan conbini was/is known as the 24 hour store whenever you needed something. But because of the labor shortages the 24 hour openings might be gone in the future. Anytime I go into a Japanese conbini I now see international students working at the store, instead of young Japanese students.

© 2019 Tom Metts,  all rights reserved

Trade War?

Not sure what is really going on. I prefer not to mix economics, business, and politics. But it seems to be more and more these days. No one wins in a trade war and possibly the idea of a Korea/Japan trade war seems to be progressing. Japanese companies are going to suffer and Korean companies are going to suffer, if they aren't already from the China/US trade war. No one wins. There has got to be better ways to solve problems or challenges.

It doesn't seem to be the best strategy for either country to impose sanctions or whatever as both countries, more than ever, need each other to overcome the obstacles related to the China/US trade war. Both economies are not at their best right now and seem to be trending down, so the idea of political tactics or whatever you want to call them might not be the best idea now.

Too many other companies, such as Apple and HP, non Korean companies, are going to be affected by the Japanese strategy. It doesn't seem to be a good idea.

Both countries can do better!


© 2019 Tom Metts,  all rights reserved