Mainichi: Japan Economy Report

https://mainichi.jp/english/articles/20200326/p2g/00m/0bu/085000c

Article:

TOKYO (Kyodo) -- The government downgraded its key assessment of the Japanese economy on Thursday, saying it is "in severe situation" as the coronavirus pandemic wreaks havoc domestically and globally.

Comments and Ideas:

This is not unexpected. For a while, maybe, the Japanese government was reluctant to not say much of anything negative while the Tokyo Olympics was in play. But now that the Olympics has been postponed, we are getting, maybe, a more realistic picture of what is going on in the Japanese economy and society

Article:

In its monthly report for March, the Cabinet Office did not use the expression "recovering" to describe the domestic economic situation for the first time in over six years.

"The Japanese economy is in a severe situation, extremely depressed by the novel coronavirus," it said, while revising down its views on seven of the 11 main categories including private consumption and business investment.

"We are aware that the moderate recovery trend has clearly turned around and (the economy) has entered a downward phase," Yasutoshi Nishimura, minister in charge of economic and fiscal policy, told a press conference after the Cabinet approved the report.

Comments and Ideas:

Of course every government usually tries to be positive, or find something positive,  even in negative situations, but in this case, the Japanese government could no longer afford to remain completely positive, as shown above, it has maybe stopped using the expressions "recovering" and has given a somewhat less positive picture of the economy.

Business investment and consumer spending, or private consumption, are always two of the biggest categories that are watched, and that seem to move more either in positive or negatives situations.

So the idea of the "moderate" recovery is not viable and maybe a more appropriate phrase would be "downward" phase.

Article:

The report had adopted expressions such as the Japanese economy was "on the way to recovery" or "recovering" since July 2013. In February, the government said the economy "is recovering at a moderate pace, while increased weakness mainly among manufacturers is continuing, as exports remain in a weak tone."

The government last revised its assessment downward in December.

"Initially, we especially saw the downward pressure caused by the virus outbreak on consumer spending, but since around February, it has appeared on the supply side, too," a government official told reporters.

"We can't know whether the impact of the virus outbreak will be only temporary, so we can hardly predict when the situation will change," he added.

Comments and Ideas:

So since 2013 the Japanese government, again like many governments has tried to remain positive about the economy with "on the way to recovery" or "recovering".  And as late as February, "recovering" at a modest pace.

There is some psychology to the idea or trying to remain positive. And its not all just hype. The Japanese government knows how important  the mood of business and society is to the growth of the economy or society, or any government knows that trying to remain positive as much as possible is a better economic stimulus and economic driver than constant negative news or information.

Now the challenge of the Japanese government and all governments is to try and find a way out of the negative situation that each country is in along with the overall global economy.

The Japanese government now has to find ways to remain positive in the negative, which can't be ignored. Now is the time for the Japanese government and all governments to step forward with some positive remedies/solutions for the economy and society.

Real challenges can create real innovations and solutions for the economy and society.

Article:

The official noted the pace and the impact of the economic deterioration are almost at the same level as those seen after the massive 2011 earthquake and tsunami that hit northeastern Japan and the 2008 global financial crisis.

Looking forward, the report predicted the severe situation will remain and warned of "the further downside risks" to the domestic and global economy as well as "the effects of fluctuations" in financial markets across the world.

Comments and Ideas:

It looks like the Japanese government has decided it might be best, for now, to just talk about the negative news and of course try to compare this situation with other economic situations that occurred in the past.

But if anything, for the most part, economies and societies eventually were able to overcome those tragic situations. So is this tragic situation any different? Yes, no, and maybe for now.

Article:

In the report, the government gave a bleaker assessment of the situation surrounding private consumption for the first time in about three years as the virus epidemic, which started late last year in the central China city of Wuhan, has forced many events to be canceled, with people increasingly unlikely to go out.

Supply chains have been disrupted mainly due to the suspension of economic activities in China and other regions, which made the Japanese government downgrade corporate profits and business sentiment, saying they are "in a weak tone" and "deteriorating," respectively.

Comments and Ideas:

I usually take a more positive approach on consumer spending or private consumption than what is sometimes seen in the news The Japanese economy is still the 3rd largest economy and its a very stable economy. Yes consumer spending may not be at its full potential but that doesn't mean it not robust. There is still, or was, a large segment of the consumer spending population, that was out there using there disposable income in the economy.

Business sentiment, however, is another story. As the it always seems to be more suspect than consumer spending.  A "weak tone" might be a good expression. or maybe a "depressed tone" meaning businesses now, maybe more so than 2008 or eve 2011 are having major challenges.

Article:

Assessments of other categories such as public investment, imports and the employment situation were also grim, while those of exports, industrial production and the expected number of bankruptcies remained unchanged, the report said.

The Japanese economy shrank an annualized real 7.1 percent in the October-December period as the sales tax hike in October dented consumer spending.

The virus epidemic could cause the nation's economy to further contract in the January-March period and send it into a technical recession, defined as at least two consecutive quarters of declining gross domestic product.

Comments and Ideas:

First, has been written here before, the decreasing of the economy because of the sales tax increase was not unexpected or a surprise as the same thing happened in Q2 in 2014. But as has been written in previous articles like this one, the economy before always bounced back as consumers and businesses got used to the increase in the sales tax.

But as we can see, with the information here the virus situation has compounded the economic challenges. A recession is very much possible.  But to be positive, a recession, usually doesn't mean everything is bad. An economy is very complex, as there are many different industries and sectors in an economy. At any one time, there are parts of an economy that might be doing better than other parts of an economy. The same with a recession. There will be parts still doing better while some will not be doing so good.

Everyone have a nice day and be safe out there!

© 2020, Tom Metts, all rights reserved