Japan News:Economy Recovering Despite Virus:

https://www.yahoo.com/finance/news/japan-keeps-view-economy-recovering-084028406.html

Article:

TOKYO (Reuters) - Japan's government kept its view that the economy is recovering moderately in a monthly report in February as the labour market remained solid, but it warned about risks to the outlook from the coronavirus epidemic.

The new assessment came even after Japan's economy shrank at the fastest pace in almost six years in October-December last year as a sales tax hike hit consumer and business spending.

While the government maintained its view, it slightly changed the wording to say the economy was "recovering at a moderate pace, while an increased weakness centered on manufacturers remains intact amid continued softness in exports."

 

Comments:

 

I tend to agree that, despite the tax increase situation in Q4, the Japanese economy is/was on moderate recovery. I also agree the labor (labour) market looks solid, despite the need for a continued increase in salaries to increase demand in the economy. As workers seem more income, they feel better, and as such might save some and might been some. Good for the banks or whatever, and good for consumer spending at the same time. All consumer spending is not good and all saving is not good. An economy needs the right balance of both.

 

The manufacturing sector is another situation since manufacturing is highly linked to exports and supply chains in China. So it remains to be seen how this sector will be at the end of Q1.

 

Article:

 

A Cabinet Office official said: "The virus outbreak is the biggest risk to the economy. We need to pay a close attention to its adverse impacts to the economy."

The government also kept its view that factory output remained weak and said it was expected to stay sluggish for a while as the virus drags on China's economy and disrupts

global supply chains.

Among other key elements, the report said consumer spending was "picking up" and capital spending was "increasing moderately but showed some weakness". Both assessments were unchanged from last month.

And the government said exports were weakening.

 

Comments:

 

Yes, again, the manufacturing sector is a challenge now with global exports and supply chains. The virus situation, of course, it the real challenge related to the manufacturing sector.

 

Yes, most likely, as in 2014, after the initial shock of the tax increase consumers are beginning, or were, beginning to get back to somewhat normal consumer spending.

 

However, there is always a "however" related to economics, the virus situation most likely is going to slow down consumer spending in Japan as consumers decide to not go out and do their regular spending and buying.

 

But another "however" as online shopping may actually increase in Japan as consumers will buy online instead at stores. So its a good thing for logistics and delivery companies in Japan as the demand for home and even business delivery pickups or even delivery to convenience stores if not to a home.

 

Capital spending, in whatever form, is sometimes suspect because you will not find every business doing its capital spending at the exact same time as other companies. But its good to see the month to month for previous years for example January in 2019 to January in 2020 to see how much a change maybe and then weigh that against, for example, the current economic situation, to see if they are might something in the current economic situation, such as supply chain disruptions, low business sentiment or feeling and or the trend of maybe low growth of exports.

 

Article: 

 

Data this week showed Japan's machinery orders tumbled at their fastest pace since 2018 while exports fell for the 14th straight month.

The number of foreign visitors to Japan fell for the fourth straight month in January as the impact of a South Korean boycott continued to weigh. Sharper falls are expected ahead as the virus keeps away Chinese tourists and dampens global air travel.

Japan's financial watchdog has begun conducting an emergency survey on domestic financial institutions with business operations in China to gauge how the coronavirus outbreak could affect credit costs.

With growing global fallout from the epidemic, many private analysts believe that Japan's economy is on brink of recession.

 

Comments:

 

Yes all of this news seems not to good right now. But again related to machine orders, a large drop like this may just be a temporary decrease.  A drop in exports is not good, but not unexpected. I think it is important to realize or understand an economy is not always going to have perfect economics indicators every month or every quarter of the year. There are going to be ups and downs through the business cycle of the year. The government and businesses should be somewhat prepared that everything is not going to be perfect every month and every quarter. Again there will be ups and downs in any business situation.

 

As far as South Korean tourists coming to Japan, to be fair, while important, the number is not even close to the number coming from China.

 

Yes, it quite possible Japan, now because of the virus, and not because of slow exports, slow capital spending, or the tax increase, is headed for some kind of recession. But again to be somewhat positive, a recession, while never good, is just part of the business cycle, and for the most part, is usually just a temporary thing, or maybe just a one quarter situation.

 

But the virus situation alone could turn it into two or three quarter recession because of global supply chain disruption.

 

Time will tell.

 

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