Japan's Economic Recovery:

 https://mainichi.jp/english/articles/20210817/p2g/00m/0bu/015000c

Article:

TOKYO (Kyodo) -- Japan's economic recovery is likely to remain sluggish in the July-September period, as the resurgence in domestic coronavirus infections is expected to lead to parts of the country remaining under a state of emergency for the next few months, analysts say.

Some analysts say the economy is unlikely to return to its pre-pandemic size by the end of 2021 as projected by the government, following the release Monday of figures showing real gross domestic product increased at an annualized pace of just 1.3 percent in the April-June period.

Responding to a survey released Thursday by the Japan Center for Economic Research and conducted over an eight-day period through Aug. 6, 36 private-sector think tanks forecast average GDP growth of an annualized 2.55 percent in the July-September period, down sharply from the 4.90 percent increase projected a month earlier.

Ideas:

Most likely Japan's economic recovery is not going to change much or improve that much for the time being. There is still too much uncertainty around the pandemic situation in Japan.

Its highly unlikely that the Japanese economy can reach the pre-pandemic level anytime soon. When you have a large part of the services sector still under-performing, when you have the current semiconductor chip shortage continuing and getting worse, and when you have both the domestic and international tourism sectors almost non-existent, except for maybe travel to Okinawa, its doesn't look like the Japanese economy is anywhere near the pre-pandemic level.

Maybe even a 2.55 percent is a little too much right now. Of course many times the surveys can appear to be somewhat optimistic at best. Probably something just below 2.0 percent is a little more realistic considering the semiconductor chip situation.

Article:

The downgrade reflects the state of emergency issued in Tokyo in mid-July, which was then expanded to four more prefectures earlier this month, asking eateries to stop serving alcohol and close early and for people to refrain from unnecessary outings.

Fully covering the period of the Tokyo Olympics, held with almost no spectators from July 23 through Aug. 8, the emergency, the fourth so far issued, is currently scheduled to end on Aug. 31.

But the number of daily new virus cases nationwide has kept increasing, topping 20,000 on Friday to log a record high for the third straight day.

Ideas:

Perhaps by now most if not all people are tired of the waiting and the long drawn out measures. Of course the measures are meant to help society and keep the numbers down. But sometimes people don't see that.

An economy is very complex and there are always positive and negatives in any situation or any action that is taken. While the emergency measures have been for the good of society overall, they are not so good for the restaurants and other places that have to close early and not serve alcohol.

Of course there have been reports of up to 40 percent of such places in the Tokyo entertainment areas not following the emergency rules (suggestions) as they say they can't survive as most likely most of their business is at night.

Trying to get people to refrain from unnecessary outings is like the classic example of a man's finger in a dike which is about to flood, meaning a man using his finger to stop the flood is impossible. 

Yes, some people or many people here or there might refrain from doing things, but people now have too much pandemic fatigue, and maybe some are finding ways to cope or manage living within the pandemic situation.

Of course as more and more people become vaccinated, maybe some people have begun to take too many chances and not remain vigilant as the cases are still too high.

Article:

"The emergency will be probably extended to around October," said Keiji Kanda, a senior economist at the Daiwa Institute of Research. "That means, most of the July-September period will be under the state of emergency, and economic growth in the quarter will be very slow."

Kanda said that it has been "getting harder" to flatten the curve of infections by repeated emergency declarations as people have become less willing to comply with them.

Such a situation could remain in place until the end of October, when about 80 percent of Japan's population is expected to be fully inoculated, he added.

Ideas:

Even if there were no emergency measures economic growth probably would not be back to the pre-pandemic level. An economy does not change course or bounce back immediately overnight. There are too many moving parts of an economy that take time to get up to full speed.

Some might parts, such as exports, might and have bounced back, but now even exports are most likely not going to reach a level that was seen in the spring because of the semiconductor chip shortage.

And as the pandemic drags on most likely more and more people are less willing to comply with the emergency measures.

And not just people, as businesses maybe are becoming less willing and they need to survive and stay in business.

It wouldn't be a surprise, that the  40 percent that was reported to be not complying in the Tokyo area, more and more businesses are not following the emergency measures as they have to survive, and the number of businesses rise well above the 40 percent that was reported earlier.

Even as more and more people get vaccinated and Japan does reach the 80 percent mark, will the number of virus cases decrease? That seems to be the challenge for the Japanese government to figure out, knowing full well people want to get back to some kind of normalcy in their lives.

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During the second and third emergencies earlier this year, there was a sharp fall in people visiting retail stores and entertainment facilities from the period before the measures were introduced in the target prefectures and some other areas.

But under the current emergency, the flow was only slightly down in Tokyo and roughly flat nationwide in July, according to Daiwa's analysis.

Daiwa predicts the fourth emergency and a less strict quasi-state of emergency covering 13 prefectures will reduce Japan's GDP by 520 billion yen ($4.7 billion) from July 12 through Aug. 31, smaller than the losses incurred under the second and third emergencies, respectively.

Ideas:

Yes, the flow might be slightly down as people are tired of waiting and just want to be out and about. Maybe its time for the Japanese government and globally, to try and figure out how to "live with the continuous threat" of a virus situation with of course taking all the needed measures to protect society.

And yes the Japanese economy might not be where it should be but at the same time, its not dead too. An economy is very complex and its a living organism, meaning there are many parts to it. As such there are some parts that might be doing quite well, but because of the pandemic there are still many parts not doing so well.

So the flow of people to stores and such might be flat, but that doesn't mean negative. There most likely still a good flow of people/customers into stores and such but of course not what it should be.

Article:

"The adverse economic impact is expected to be smaller as the virus emergency has become less effective. Still, consumer spending will remain at quite a low level as long as the emergency continues," Kanda said, adding that the only realistic option for the government to contain the virus spread now is to promote its vaccine rollout.

Although Japan still lags behind other developed economies in inoculations, its rate of fully vaccinated people has been sharply increasing recently, reaching 36.70 percent as of Thursday, compared to the world's average 23.26 percent, according to the University of Oxford's Our World in Data project.

Citing expectation that progress in the vaccination campaign will boost private consumption, the Cabinet Office released an estimate in early July that Japan's GDP will return in 2021 to its "pre-pandemic level" -- defined as its size in October-December 2019 -- also supported by brisk exports and business investment.

Ideas:

Consumer spending has always been a major challenge for the Japanese economy, and has been part of the Bank of Japan's focus on increasing the inflation rate to 2.0 percent with not much success.

And while the pandemic situation continues, most likely consumer spending is not going to be where is should be or reach its potential. But consumer spending even before the pandemic was never at its full potential.

Part of the problem is structural meaning there are parts of society or economy that are not operating at their full potential.

For example part of the Bank of Japan's strategy and the negative interest rate, related to businesses has been to "use your money or lose your money" over the long term by providing workers more pay raises as a way to get workers/consumers to feel good about the extra income or "disposable income" they have a use it spend it in the economy to increase inflation.

Another area where there are structural challenges are the working women in the Japanese economy Most likely are are not working at their skill level and most likely many or some are working in lower level jobs and or are underemployed.

If this group was able to work at their skill level, and were able to be paid at their skill level, it might actually improve consumer spending in the Japanese economy and most likely consumer spending in the Japanese economy might get near to its full potential, and maybe get closer to the 2.0 percent inflation level that the Bank of Japan has been trying to reach for about seven years.

Article:

The annualized size of real GDP for the April-June 2021 was 538.67 trillion yen, while that for October-December 2019 was 547.00 trillion yen.

A government official said that the official view will be maintained even after the release of the April-June GDP data and analysts' relatively pessimistic projection for the following quarter.

"Consumption will be encouraged once vaccinations prevail and allow us to ease restrictions on economic activities, so the economic recovery to the pre-pandemic level by the end of this year is still achievable," the official said.

But Taro Saito, executive research fellow at the NLI Research Institute, said the recovery is highly likely to be delayed until next year since he projects GDP will grow by just some 1 percent in annualized terms in the current quarter, downgraded from his previous forecast of around 5 percent following the latest emergency.

Ideas:

Its too soon the project any kind of real recovery in GDP growth as unfortunately, despite the number of vaccinated is growing, the virus cases have not decreased enough for the Japanese government to feel safe or good about the situation.

Consumption or consumer spending, most likely will not be anywhere near where it should be for the time being. While there might be some who are tired of waiting and they will be out and about spending, there is most likely a large number who are still very concerned about their income and jobs and many sectors in the Japanese economy are still under stress because of the pandemic and as such are not going to spend much yet, and they are waiting to feel better about their situations.

A GPD growth of about 1 percent sounds about right because of the semi conductor chip shortage has now began to affect Japanese car makers and any company or industry in Japan that uses chips in any electronic situation.

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"As is the case with April-June, the trend of increases in capital expenditure and exports offsetting a virus emergency-induced consumption decline will remain unchanged," Saito said.

Meanwhile, he pointed out that GDP components other than consumer spending have turned less susceptible to the virus measures. Among them, capital spending will continue to grow "throughout fiscal 2021 and 2022" which ends in March 2023, he predicts.

"On the back of manufacturers' strong performances, more firms will invest on industrial machinery as well as on digitalization". 

Ideas:

While its good that exports and capital spending has increased, it must be pointed out that exports and business spending alone can't carry the Japanese economy and can't fully expand GPD growth.

Consumer spending in the Japanese economy is estimated to be around 50 percent of GDP. If consumer spending is down because of the pandemic and for other reasons GPD growth is not going to get much past the 1.0 percent level in 2021.

Yes it good that some measures are now less affected by the pandemic situation, it remains to be seen how much they can help the overall growth of the Japanese economy.

Consumer spending in the past, now, and in the future is the main component in the Japanese economy and GPD growth that is going to be the biggest challenge.

Have a nice day and be safe!