Article:
TOKYO (Reuters) - Japanese homes extended their frugal spell for a fourth straight month in January as an earlier sales tax hike and a warmer winter kept wallets shut, adding to headaches for firms as they struggle with the growing hit to business from the coronavirus.
The world's third-largest economy is trying to cushion the blow to output and exports from the global health crisis, which threatens to tip it into its first recession in nearly five years.
Household spending fell 3.9% in January from a year earlier, government data showed on Friday, largely in line with a median forecast for a 4.0% decline.
That marked the longest stretch of contraction since a five-month run to June 2018, a government official said.
The gloomy data suggests households were tightening their purse strings even before the coronavirus forced many retail outlets to close their doors in February and March as shoppers stayed at home.
"The reduction in going outside is likely to have a big impact, especially on spending related to services," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
The coronavirus crisis now threatens to spoil chances of the domestic-led recovery many policymakers had hoped for after the economy shrank at its fastest pace in nearly six years in the past quarter.
In central Tokyo's exclusive Aoyama district, some of the fashion and hairdressing shops are already seeing strains from the virus outbreak.
Clothing store manager Sayaka Nishi said her shop selling cotton dresses hand-woven in India is seeing noticeably fewer patrons, while foreign shoppers have fallen by as much as 90%.
"Customers aren't buying clothes that they would want to wear right now. My worry is about unsold items, such as spring coats," she said.
Florist Toshiyuki Fukano has seen sales drop by as much as a fifth from before the outbreak, partly due to order cancellations for concerts and weddings.
"The street has gotten really quiet," he said.
Comments and Ideas:
Consumer spending has always been a major challenge in Japan. And now it seems even more so. In 2014 the sales tax increase from 5 to 8 percent saw a drop in consumer spending in Q2, but rebounded in Q3 as consumers seemed to adapt or adjust to the 3 percent increase. The increase this time was only 2 percent was why the continued decline in consumer spending
The weather is always a challenge if it does't follow what is/was expected, and in this case a warmer than usual winter as decrease sales of winter type products.
A decrease in consume spending will continue to have ripple affect as everything is interconnected. Its not just global economics connected to each other but many different segments of a domestic economy are connected to each other as we see above.
Article:
LOWER TRAVEL SPENDING
Household consumption had already been under pressure in recent months, after the government in October pushed ahead with the country's first sales tax rise since April 2014.
Spending in January fell 1.6% from the previous month, pulled down by lower spending on gasoline and overseas and domestic travel amid mild winter weather, a government official said.
Some people expect Japan's economy to get a boost from pent-up demand after the virus impact fades later in the year.
"Many people have stopped eating and drinking out altogether," said Daisaku Nagayoshi, whose firm produces marketing goods. He expects a burst of activity with people flocking to restaurants again once the virus threat clears.
The Bank of Japan may take steps this month to ensure companies hit by the virus do not face a financial squeeze before the March end of the current fiscal year, sources familiar with the central bank's thinking said on Thursday.
BOJ Governor Haruhiko Kuroda said earlier this week the virus could inflict serious damage on the economy, indicating a growing concern among BOJ policymakers over the deepening cost of the crisis.
Inflation-adjusted real wages provided a bright spot, gaining 0.7% in January to see the first rise in four months, labour ministry data showed on Friday.
The index of coincident indicators, which includes readings on factory output, employment and retail sales, rose to 94.7 in January from 94.4 in December, the Cabinet Office said.
The government maintained its view on the index as "worsening", suggesting the economy may be slipping into recession.
Japan's economy shrank an annualised 6.3% in the October-December period as the sales tax hike hit consumer and business spending. The Cabinet Office will publish revised GDP data on March 9 at 8:50 a.m. Japan time (2350 GMT, March 8).
A preliminary U.S.-China trade deal had raised hopes globally of a let-up in the pressure businesses face worldwide, in particular export-reliant nations like Japan.
But uncertainty over how the spread of the virus could affect global and Chinese economic growth has now cast a shadow on the BOJ's rosy economic projections.
Comments and Ideas:
As we see above an economy is very connected. Its not just one indicator but a lot of indicators which might be connected to each other, which in turn as one start to show signs of trending downward, the we begin to see signs of other indicators beginning to trend downward. Once this begins to happen it is almost like an acceleration affect meaning the downward trend increases faster and faster in all indicators.
But at the same time, for the most part, an economy is very complicated and has many moving parts, and as such not all industries or sectors are connected to each other. That is the positive side of a market economy, in that while there might be some negatives there might possibly be some positives in the same economy.
An economy is made up of people, so in a sense an economy is a living being, in that it can only survive if it remains active, and not just active but has to be moving at a certain speed. If it is too slow, it slow begins to become a very unhealthy economy.
The same with humans. Humans are meant to be moving, to be active and not just hibernating, even for a short period of time.
An economy can't afford to hibernate for too long. There are too many parts of an economy that needs to remain active and not just active but active at a certain speed.
Right now, the Japanese economy is not very active and seems to be slowing down, and not slowing down in the sense of a recession slowdown but something even more.
Economies are societies and societies are economies. The Japanese economy needs to figure out when it can get moving again at a speed that is good for society and society needs to figure out when it feels safe enough to become a part of the economy again.
Both need each other. Neither one can exist without the other.
Have nice day and be safe out there.
© 2020, Tom Metts, all rights reserved
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