Article:
TOKYO (Kyodo) -- Japan's economy in the October-December period of last year shrank an annualized real 7.1 percent from the previous quarter, revised down from a 6.3 percent contraction initially reported, as businesses spent less on equipment, government data showed Monday.
The shrinkage in real gross domestic product, or the total value of goods and services produced in the country adjusted for inflation, corresponds to a 1.8 percent decrease on a seasonally adjusted quarterly basis, according to the Cabinet Office.
Comments and Ideas:
A decrease in GDP should not have been a surprise. But to be fair, we always need to remember, a one quarter decrease does not mean a yearly decrease, in most situations. Of course as we know, the quarters later Q1 and Q2 are maybe going to be the same. But if all things were normal, then the sales tax increase, the typhoon, and some usual slowdowns might not have been that big of a deal. But we know now its different.
Article:
The first GDP contraction in five quarters, which came after Japan raised the consumption tax rate to 10 percent from 8 percent last October, was worse than the average 6.8 percent annualized shrinkage forecast by private-sector economists polled by Kyodo News.
The result compares with an annualized 7.4 percent slump logged in the April-June quarter of 2014 after the previous consumption tax hike from 5 percent to 8 percent in April that year.
By item on a quarterly basis, private capital expenditure dropped 4.6 percent, deteriorating from the preliminary reading of a 3.7 percent fall and posting the worst record since a 6.0 percent drop was logged in the January-March period in 2009 amid the global financial crisis, according to the Cabinet Office.
Comments and Ideas:
The decrease in private capital expenditure might have been a given or expected during this time period. But a 4.6 percent might not have been expected. Japan had almost five good years of economic growth, so to have a down quarter might not be too unexpected, as most economies don't see a upward linear path always. There are always going to be some dips in an economy. But of course what is coming beyond this article is more than expected.
Article:
In the first quarter of 2009, the country's GDP contracted an annualized 17.8 percent following the failure of Lehman Brothers Holdings Inc. the previous year.
The revisions in the GDP statistics reflected corporate financial results for the October-December period released by the Finance Ministry last week, which showed capital spending by Japanese companies had dropped 3.5 percent from a year earlier to 11.63 trillion yen ($113 billion), the first decrease in 13 quarters.
Comments and Ideas:
Again, all things considered, or even all things equal, a decrease maybe should not have been unexpected. It needs to be remembered that capital spending like consumer spending, or even like individual spending has it ups and downs. There is usually never an upward increase every month in how we spend, whether a business, a family, or individuals. Yes that may be a little simplistic but its reality. To expect every company to spend equally every month is unrealistic.
Suppose we all went out and bought a new car this month. So now do we need a new car next month, or even the same month next year. We sometimes forget that spending is decreased not because of external variables, which are always there, but because there is just not the need to use, spend etc at the present moment.
Article:
Private consumption, which accounts for more than half of Japan's economy, decreased 2.8 percent, upgraded from the initial reading of a 2.9 percent drop, due to a revision in spending on beverages.
Public investment grew 0.7 percent, downgraded from 1.1 percent.
A government official told reporters that the impact of last year's sales tax hike should be evaluated particularly in terms of private consumption, whose 2.8 percent drop in the reporting quarter was smaller than the 4.8 percent fall logged in the 2014 April-June period.
"We can say that the decline in private consumption was numerically limited compared to the previous time (when the sales tax rate was raised)," the official said.
Comments and Ideas:
Five percent to eight percent, a 4.8 percent decrease and then an eight percent to ten percent a 2.8 percent decrease. Perhaps this time, Japanese consumers were more prepared mentally for the increase. Of course all through September there were sales campaigns going to get consumers to buy early before the sales tax increase. But after seeing the news in October related to the sales tax increase, many consumers felt they didn't need to binge spend before the increase.
Article:
Takeshi Minami, chief economist at the Norinchukin Research Institute, pointed out that the GDP growth in the July-September period of 2019 was also downgraded to an annualized 0.1 percent from the previous figure of a 0.4 percent in the latest revisions.
"We can learn from the latest results that Japan's economy had already been stalling since last summer," Minami said, adding, "The government and the Bank of Japan have argued that the economy is still expanding, but I guess the time has come to consider changing their assessment."
Referring to the impact of the ongoing worldwide coronavirus outbreak, Minami said the view that the global economy will further decelerate is firming more every day. "The slow growth of Japan's economy will continue at least until the April-June quarter, and negative growth in fiscal 2020 is coming into sight."
Nominal GDP, which is not adjusted for inflation, contracted an annualized 5.8 percent in the reporting quarter, down from a 4.9 percent decrease.
Comments and Ideas:
Japan is still the third largest economy in the world. That is still a lot of economic activity and transactions taking place. Yes the economy may have been slowing since the summer. But again sometimes economies do not follow an upward continuous upward progression.
Of course the BOJ is going to try and be positive. Its the job of the BOJ, not just to find ways to help and stimulate the economy, but also maybe to find some positives in the economy.
No economy, again all thing equal and all things considered, is ever all up or all down. There are always going to be industries and businesses that are doing good and there are always going to be industries that are challenged in the same situation.
To we have to look deeper to see what is really going on rather than some statistic that doesn't always explain or tell us everything.
Have a nice day and be safe out there!
© 2020, Tom Metts, all rights reserved
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