Japan Economy Assessment:

 https://mainichi.jp/english/articles/20210916/p2g/00m/0bu/052000c

Article:

TOKYO (Kyodo) -- Japan's government on Thursday downgraded its economic assessment for September, saying the recovery pace has "weakened" due to slower consumption and industrial output and a cutback in car production triggered by the coronavirus pandemic.

"The Japanese economy is picking up, although the pace has weakened thanks to the severe situation caused by the novel coronavirus," the Cabinet Office said in its monthly report.

Last month the report said the economy showed "further" weakness in some components.

The assessment was revised downward for the first time since May, the third downgrading this year.

Ideas:

The Japanese economy is not yet able to sustain any kind of recovery as the emergency measures, while maybe needed for public safety, keep getting in the way of a sustained recovery.

And of course the chip shortage is not helping as Japanese car makers and other have had to reduce their production and manufacturing efforts.

The slower consumer or consumer spending has always been a challenge for the Bank of Japan as it never seems to reach its potential.

Part of that is structural meaning for example companies with huge cash reserves need to increase the wages or salaries of their employees.

It that way consumers/workers feel better about their salaries and might actually use it or spend more in the economy.

And then there is the continued challenge of females not being paid the same as men and or not in higher positions instead most likely many are underemployed with lower salaries compared to men.

If Japan would unleash the spending power or potential of women in the economy with higher job positions or higher salaries, consumer spending do doubt would and could reach its potential in the future.

But until then, the Japanese economy might continue to underperform and never reach its full potential.

Article:

By component, the office slashed its views on consumer spending and industrial production after a surge in COVID-19 infections in Southeast Asia led to supply chain disruptions and forced some Japanese automakers to reduce output and sales, a government official told reporters.

The disruptions have further dealt a blow on the auto industry, which was already affected by a global semiconductor shortage, while they have also started to hurt electronic components and construction equipment makers, the official said.

Reflecting the worsening situation, the report said production is "picking up, although some weakness is seen recently."

Ideas:

Supply chain challenges are global and not just related to Japan. For example in the US there are reports again of shortages related to many products.

That could be related to panic fears and or supply chain challenges and even in major ports such as New York and Los Angeles there are upwards of 10 percent of the total number of container ships waiting in harbors or nearby for many days because there just aren't enough workers in the ports to unload the container ships fast enough.

Supply chain challenges, especially in the car industry, most likely are going to remain for the time being.

In a BBC article recently some German car maker said the chip shortage could last up to two years.

So the potential for more global challenges and now there is the ongoing situation in China with the Evergrande situation and the global economy including Japan doesn't look ready to begin a full recovery.

Article:  

Looking forward, the government also warned of "negative effects through the supply chains," though the economy is expected to continue picking up.

As for private consumption, the report said it "shows weakness" though the expression "especially in service spending" has been deleted since August, as the sluggish trend has spread to outlays for goods including cars and home appliances, the official said.

Expenditure on dining out and trips remained slow amid a record-breaking resurgence of virus infections since late July that forced the government to repeatedly expand and extend its ongoing state of emergency covering Tokyo and many other areas.

Ideas:

The challenges with supply chains will begin to affect more and more consumers in the future, with some shortages and some delays in purchases. 

While the average consumer might not feel it or see it as an economy very complex and not everything affects everyone, but there is the potential that the ongoing supply chain challenges, while not affecting some consumers with shortages they might begin to see increases in prices due to the supply chain challenges.

Dining out and trips might begin to increase as the current emergency measures are set to end or will being to set to end gradually over time.

But that doesn't mean consumers are now all going to rush out to their favorite restaurants or Izakaya pub in the future or to their favorite fall places to view the changes in the leaves, as most or some are still going to be cautious and maybe taking a wait and see approach to make sure the virus cases don't increase again.

Articles:

Meanwhile, the assessment of housing construction was upgraded, saying it is showing "movements of picking up recently." The report took into account a demand surge for homes in suburban areas amid the growing trend of remote working and meetings.

Views on other major components were unchanged. The office assessed business investment as "picking up," while exports "continue to increase moderately."

Ideas:

It will be interesting see what just what is going to happen with the housing and construction industries as the emergency measures are lifted and more and more companies might require their workers to return to their workplace offices.

Maybe not all companies can be like NTT which will allow all of its 322,000 employees to work from home.

Most likely for some companies they might begin to adapt a more flexible work scheme that allows employees, especially women the freedom to choose a more family friendly work lifestyle, such going to the office three times and week and work from home two days a week.

But the challenge still is what about the construction and housing industry if companies all require their employees to only go to the office in the major Tokyo area business districts and not allow workers/families who might want to have a home in suburban areas, and not too close to the Tokyo business districts.

Business investment might continue to increase as more and more companies begin to feel good about the future.

If not they will continue to take a wait and see approach on business investment spending.

Exports were looking very good in the spring and summer but now with the chip shortage the pace of export expansion might be less in Q3 and Q4 in the future.

Have a nice day and be safe!