Japan Economy Expectations:

 https://mainichi.jp/english/articles/20210104/p2g/00m/0bu/063000c

Article:

TOKYO (Kyodo) -- Japan's economy is expected to make its sharpest rebound in decades this year, with consumption set to pick up toward the end of 2021 as the impact of the coronavirus pandemic on the broader economy eases.

The world's third largest economy is projected to grow 3.42 percent in the next fiscal year to March 2022 following a 5.37 percent shrinkage this fiscal year, according to the average forecast of 35 economists polled by the Japan Center for Economic Research.

If the estimate is borne out, it would see a turnaround from the worst contraction to the highest growth since fiscal 1995, when comparative date became available.

Ideas:

Its very good to be optimistic but it might be a little too early to say how much the Japanese economy is going to rebound.

If it does grow 3.42 percent it would be extraordinary considering how much the economy contracted in 2020.

But it must be remembered an economy is very complex and has many different sectors and not all sectors and companies grow equally, not in a normal period and especially coming off of a contraction it might take some time for many sectors and businesses to get back their pre-pandemic level, if they do all at.

For example, how long is it going to take for the airline industry, the hotel industry, the restaurant industry, and the overall tourism industry to get back to some kind of normal or even a new normal?

Article:

The government aims to bring the economy back to pre-pandemic levels with help from stimulus measures next fiscal year. But economists said such a view seems too optimistic and that a recent resurgence of infections with new virus variants emerging could even stall the recovery in early 2021.

Consumer spending is poised to gather momentum as COVID-19 vaccines become available for widespread use by summer and would also get a one-off boost if the postponed Tokyo Olympics and Paralympics go ahead from July as currently planned.

"Japan's economy is going to benefit from the effect of nationwide vaccination," Atsushi Takeda, chief economist of the Itochu Research Institute, said.

Ideas:

Stimulus measures are more than needed now and in the future. It might take a few more stimulus even as the economy is beginning to turn around as again not all companies or sectors are going to come back at the speed.

Consumer spending is always a key component of an advanced economy and Japan is no exception. But the level of consumer spending is very dependent on jobs and the future and what consumers feel and think. If they feel their jobs are safe and secure and or they see a brighter future ahead then there is the possibility that consumer spending could begin to get back somewhat to pre-pandemic levels.

If the virus situation drags on a there are areas in the economy is not coming back very fast then consumers/workers in those industries are not going to spend like before the pandemic.

And if there is continued news that the pandemic is not ending soon that might also affect even more consumers/workers in other areas of the economy.

But of course if Tokyo is able to pull off the Olympics as planned that might help boost the economy some, but some recent reports indicate that not everyone, at this time, think the Olympics are a good idea.

Article:

Prime Minister Yoshihide Suga has promised to procure enough vaccine shots for the nation's needs by the first half of 2021, and the government estimates 4.0 percent growth next fiscal year.

The domestic economy shrank an annualized real 29.2 percent in the April-June period from the previous quarter, possibly the largest contraction on record since 1955, according to the government.

Roughly a month long state of emergency declared last April brought many businesses to near standstill, with spending on trips, eating out and shopping falling sharply amid stay-at-home requests.

Ideas:

Right now Suga and company are weighing the positives and negatives of another lockdown emergency, with knowing full well how much the economy contracted in the April-June period.

If there is there a way to not declare an emergency and at the same time save jobs, businesses etc. I'm sure they are looking at all possible options.

Unfortunately, there might not be many options left, but at the same time, how much of a lockdown can the economy manage without full-scale budget supplements and stimulus to those businesses and companies in need including families and workers.

There probably is no best idea out there but what idea or strategy brings the least amount of damage to the economy and businesses. 

Article:

The economy rebounded in the following quarter with annualized 22.9 percent growth as economic activity restarted gradually. The July-September period's real gross domestic product totaling 527.14 trillion yen ($5.1 trillion) on an annualized basis outstripped 500.63 trillion yen in the previous quarter, though it was still below 545.72 trillion yen in January-March, before the virus had a full impact on the economy.

With Japan having maintained recovery momentum into the final quarter of 2020, the Tokyo Games will likely offer an opportunity to propel spending this year, economists said.

The Organization for Economic Cooperation and Development last month raised its forecast for Japan's growth for 2021 to 2.3 percent, saying the summer's games will "temporarily boost consumption."

The NLI Research Institute estimated in March that the postponed games would carry over demand worth 2 trillion yen to next fiscal year.

Ideas:

While the April-June contraction was huge the 2nd and 3rd quarter growth was also huge but of course not a pre-pandemic levels. Quarter may grow equally as quarter 2 and three but not at the pre-pandemic level.

What needs to be understood again, while there is economic growth in the 2nd, 3rd, and 4th quarters that doesn't mean there was equal growth in all sectors. It is well known there are many services sectors that are not doing so good. The services sectors had the most contractions compared to other areas. 

The summer games might boost some consumer spending but how much are Japanese consumers really going to spend on the games? The games and the economy need foreign tourists to really spur consumer spending and unless the Japan can open the economy again for tourists during the games, Japanese consumers alone might not be enough to boost overall consumer spending.

Article:

The Itochu Research's Takeda said the games will not just lift personal spending but also strengthen consumer confidence.

"Fostering an atmosphere that we have been able to hold the games by bringing the virus spread under control is important for the economy," he said.

If coronavirus vaccines become available as expected, service businesses such as entertainment, transportation and travel companies will be among the sectors to reap significant benefits, Toshihiro Nagahama, chief economist at the Dai-ichi Life Research Institute, said.

"Domestic consumption in the service sector could possibly normalize in the latter half of the year" with restrictions removed on human mobility and personal contact, Nagahama said.

Ideas:

This all sounds good and well, but the question remains how fast can the economy get back to some kind of normal and how fast can Japan get the vaccine into the economy is the real question.

Just the idea of being able to hold the games helps but the economy and consumers need to see sustainable progress and if not, consumes are still going to be hesitant to move around and spend in areas such as services that really need help.

Not to be negative but part of the problem was how long last winter and spring did it take the Japanese government and the Tokyo government to admit that there was a problem. Of course  the idea was because of the summer games they were trying to minimize the virus as long as they could to salvage the summer games for 2020.

And maybe the same thing is happening now, as they decide what to do with the 3rd wave that has hit Japan in December.

Article:

If, on the other hand, vaccination falls behind schedule, it would "jeopardize" the country's efforts to host the games and consumption in the service sector would "continue to be forced into stagnation," he added.

The recovery scenario could be complicated by record numbers of new virus cases reported since November. Japan has confirmed more than 230,000 infections with the tally of daily cases topping 4,000 for the first time Thursday last week.

Requests were issued again recently for reduced business hours at establishments serving alcohol and avoiding nonessential outings. The government last month suspended its nationwide travel subsidy program over the New Year holidays. It was the first halt to the campaign since it was launched last July to spur domestic travel demand.

Ideas:

Most likely exactly right. If Japan can't get the vaccines moving forward as soon as possible, there could be even more challenges for the economy and especially the services sectors. 

The idea of reduced business hours is a tricky challenge. It might help or might not help, depending on who goes where and when. 

The Go To Travel campaign, at the time, might have been a good idea, but again no one expected a surge or a 3rd wave.

The strategy in itself can't be blamed as the idea was to spur the economy and especially the services economy areas. 

Article:

These anti-virus measures add to uncertainties along with the lagging impact of the pandemic on employment and income, some economist said.

"If virus infections keep spreading, companies will have to prepare for prolonged poor earnings," Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting Co., said. "They might have to adjust their payrolls, cut wages, and in the worst case, some may have no choice but to go bankrupt."

He forecast the economy will contract an annualized real 0.5 percent in the January-March period in 2021.

Ideas:

Yes a prolonged virus situation will not be too good for the economy. For the most part, in some situations the Japanese economy and Japanese businesses have take a very different approach than their western counterparts. 

Japanese companies usually are not a quick to layoff workers or even cut salaries as they usually take a long term approach or strategy to downturns.

Western companies are quick to layoff, cut salaries and so one even after one not so good quarter. While Japanese companies are not so quick no normal not so good times.

But the Japanese economy is not in "normal" not so good period. 

In the spring of summer ANA for example, decided to trim salaries but keep everyone on staff.

Some Japanese companies have used the strategy of loaning out or transferring their staff to other companies when the company is unable to use or need the staff for the decided future. 

You might not see that in the US or the EU.

But if the virus situation continues on and the vaccines don't arrive soon enough Japanese companies may have not choice resort to some kind of layoff strategies to survive.

Have a nice day and be safe!