GDP Q 4 News:

https://www.yahoo.com/finance/news/japans-fourth-quarter-gdp-expected-070244520.html


TOKYO (Reuters) - Japan's economy likely shrank at the fastest pace since 2014 in the December quarter as a sales tax hike and a typhoon dented consumer spending and sluggish exports hit capital expenditure, a Reuters poll showed on Friday.
Adding to pressure to the outlook is China's virus outbreak, which has threatened exports and factory output and has already hit tourism in Japan.
Gross domestic product (GDP) is expected to have contracted an annualised 3.7% in the October-December quarter, the poll found, having grown 1.8% in the third quarter.
It would be the first contraction in the five quarters and the biggest fall since a 7.4% decline in April-June 2014, which was the last time Japan raised its sales tax.
The expected annualised contraction would translate to a 0.9% quarter-on-quarter decline after the economy grew 0.4% in the third quarter, the poll showed.
"Manufacturers' production and earnings were weak due to falls in exports, and employment and wages recovery slowed. We see the trend of consumer spending was weak," said Kentaro Arita, senior economist at Mizuho Research Institute.
"Exports and capital spending are expected to stagnate and consumer spending will stay weak. We expect economic growth in the first half of 2020 will be limited considering the coronavirus impacts."
Private consumption, which accounts for over 50% of GDP, likely dropped 2.0% for the quarter, the first fall in five quarters and the fastest decline since it fell 4.8% in April-June 2014.
Capital spending was seen down 1.6% in the fourth quarter, the first fall in three quarters and the biggest since a 3.4% drop in July-September 2018.
External demand - or exports minus imports - likely contributed 0.3 percentage point to GDP growth in the final quarter of 2019, the poll showed, although that positive contribution is mostly due to weakening imports rather than export strength.

Comment, analysis,  and ideas:

While the 4th quarter news is not as good as expected, it should not be a surprise;

1. The sales tax, as expected, dampened consumer spending, but I expect it will eventually get back to near normal.

2. The Typhoons that hit Japan might also have had an affect on consumer spending, but in the 3rd quarter.

3. A decrease in export, from maybe the virus situation and other global decreases, might have reduced capital spending and investment.

4. Of course the on-going virus situation. Now in its second month, not so much in the 4th quarter, will have an affect of the unforeseen future.

5. Tourism is now a major problem/challenge for the Japanese economy. Once a major project of the Japanese government to spur the Japanese economy, and lure the increasing Chinese middle class, and their willingness to spend in Japan, has now become a challenge, now, and most likely all the way toward the Tokyo Olympics.

What also need to be remembered, is that all economies go through a so-called business cycle, meaning no economy is an upward linear progression. There are going to be ups an downs in any economy.

Japan had five good quarters of GDP economic growth, which for Japan was very.

An economy is very complicated, with many sectors and industries.

But the three indicators; consumer spending, exports, and capital spending are always seen as maybe the most important indicators for the Japanese economy.

As such, these three are always watched very carefully.

However to be somewhat positive, even if there is a decrease in one of these indicators and even all three does not mean, the entire economy is not headed for a major downturn.

The Japanese economy is strong enough has had been seen over the past 20+ years that it most likely will overcome these decreases.

I think the biggest challenge will be China, and the Japanese businesses that have operations there.

But at the same time, the overall domestic economy most likely will eventually rebound.

As was seen in 2014, consumer spending came back to near normal in Q3 and Q4 in 2014.

I expect the same will happen in 2020 too.

As far as exports go, the global economy has been trending upward, with US economy still somewhat robust, not perfect but still good. Which indicates the global trend is/was upward.

Of course the China situation will need to be watched very carefully as to how the global economy and the Japanese economy reacts/responds and or changes strategy in terms of business in China and or moving manufacturing operation out of China in the future.

Business cycles come and go.


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