Japan Q1:

 https://mainichi.jp/english/articles/20210608/p2g/00m/0bu/027000c

Article:

TOKYO (Kyodo) -- Japan's economy in the January-March period shrank a real 1.0 percent from the previous quarter, or an annualized 3.9 percent, upgraded from a preliminary 5.1 percent annualized contraction, reflecting stronger-than-expected public demand, the government said Tuesday.

On a seasonally adjusted basis, the country's real gross domestic product, the total value of goods and services produced in the country adjusted for inflation, decreased for the first time in three quarters, according to the Cabinet Office, largely affected by the nation's second state of emergency over the coronavirus pandemic.

Ideas:

The continued pandemic is showing the Japanese economy has a long way to go before it is can maintain any kind of momentum.

As new emergency measures are put into place, the economy backtracks from any momentum might have gained.

And as of this writing related to this article, the pandemic in Japan has only gotten worse. As a result, there might be a decrease in economic activity in Q 3.

But then the Olympics will be in full operation and that might just might save the Japanese economy in Q 3.

Article:

During the reporting period, the government declared a state of emergency in 11 of Japan's prefectures including the Tokyo metropolitan area, requesting people to stay at home and restaurants and bars to close earlier.

The contraction came after the world's third-largest economy expanded by double-digit percentages on an annualized basis for two consecutive quarters with the resumption of economic activities, after the first virus emergency in spring 2020 brought about a record 28.6 percent plunge in the second quarter last year.

Ideas:

There are two or three ideas here to think about. The first being, in the spring of 2020, no really knew what was going on and as such people and businesses were following the government's orders to stay home, work from home etc. Along with the fact that some economy had become constrained due to logistics challenges, less consumer demand, and of course less or no international tourism.

The second being despite the contraction in the spring of 2020, the Japanese economy was able to come back strong with double-digit growth after a dismal spring or Q2. No economy can be kept down too long since there is always potential for economic activity. An economy is made up of people and of course businesses which are people, and people want to be out and about always doing things, as people are not just creatures to sit in their homes forever, they need to be creative and to channel that creativity in some way such as creating a business or working in a business.

The third idea is consumers need to be out and about. Yes there needs to be a balance of savings and spending, but spending in an economy is just as important as businesses creating jobs, making products, exporting products and such. 

Article:

The latest figure was better than the average forecast of an annualized 4.9 percent shrinkage by eight private-sector economists polled by Kyodo News.

On a quarterly basis, government spending dropped 1.1 percent and public investment decreased 0.5 percent, revised upwardly from preliminary declines of 1.8 percent and 1.1 percent, respectively.

The upward revisions reflect latest statistics showing higher-than-expected medical care costs and the value of public construction work, a government official said.

Ideas;

If we can do back to some Keynesian ideas, anytime the economy begins to falter, such as when business investment is down, or continues to stay down, and when consumer spending is down, and continues to stay down, the thinking is that government spending should step, temporarily, and make up the difference the best they can with increase government spending.

In this continued pandemic it would seem logical the the Japanese government would increase its spending as a way to keep the economy going. A decrease public investment doesn't seem like that is happening.

Public construction work has always been a mainstay of the Japanese government to boost the economy in times past. Maybe the Japanese government can't find any more free space to build bridges to nowhere or roads to nowhere etc.

The increase in medical care costs is not a surprise as the pandemic continues on.

Article:

The revision for the reporting quarter left the real GDP contraction in fiscal 2020 through March unchanged at the preliminary 4.6 percent.

Down for a second straight year, it was the sharpest annual shrinkage since data became available in fiscal 1955, exceeding the 3.6 percent fall in fiscal 2008 logged in the wake of the global financial crisis.

Nominal GDP, not adjusted for inflation, dropped 1.3 percent, or an annualized 5.1 percent, in the first quarter of 2021, revised upwardly from the 6.3 percent annualized decrease initially reported on May 18.

Ideas:

While the contraction is not good news, but also not unexpected. However, it should always be remembered that an economy is very complex. There are many parts to an economy, and not just the idea of consumer spending, business spending/investment, government spending and then exports minus imports as related to what GDP is.

For example Japanese exports seem to be doing just fine or even very good, but other parts of the economy are not doing so good. And it shows, while exports might be an important part of the Japanese economy, an increase or even a record increase in Japanese exports are unable to carry the economy or keep the GDP from contracting.

Manufacturing and exports still account for a large part of the economy but the Japanese economy, like all advanced economies have evolved into mostly service based economies.

And even more into a consumer spending economy, which some estimate to be as much as 50 percent of the Japanese economy.

But during the pandemic the one part that is really suffering is the services sector, or many parts of the services sector of the Japanese economy.

Long gone are the days of Japanese government public spending projects, while sometimes good, and the big manufacturing companies with their global export power being able to lead the economy.

Those days are long gone as Japan has grown into a fully advanced economy focused on services and even more on technology and services.

Connected to services is consumer spending which has been up and down since the pandemic began.

Have a nice day and be safe!