Japan Economy:

 https://mainichi.jp/english/articles/20211027/p2g/00m/0bu/028000c

Article:

TOKYO (Kyodo) -- The Japanese government on Wednesday downgraded its overall assessment of regional economies for the first time in 18 months, as a global chip shortage and supply chain disruptions weigh on the auto industry.

The pace of recovery in regional economies is "moderating" partly due to supply constraints, the Finance Ministry said in a report that is part of its quarterly assessment covering Japan's 11 regions, changing from the previous view in which it said they are "recovering although weakness is seen in some sectors."

Ideas:

While its good that many so-called regional economies might rely on manufacturing  such as those who rely on semiconductor chips, its not so good that the manufacturing sector might the only sustainable growth engine for a region. 

Yes farming might be important in many of the regional economies, and as much as possible, an region or prefecture should try to balance out its growth engines and not rely on manufacturing only.

And its easier said than done, and no doubt all regions know it. Perhaps, of course they have tried a lot over the years, before the pandemic in increase tourism to their region.

And no doubt, which is unique somewhat in Japan is the number of small and medium sized businesses that are either suppliers or connected with many larger manufacturing companies.

Article:

It was the first downward revision since April last year when the Japanese economy was experiencing a serious slump caused by the initial impact of the coronavirus pandemic.

The October report said car production is "pausing" as the worldwide semiconductor crunch, along with parts shortages caused by factory shutdowns in Southeast Asian nations where virus cases have surged, have been forcing automakers to cut output.

By region, the ministry downgraded assessments for four regions, while maintaining those for six regions including the Kanto and Kinki areas centering on Tokyo and Osaka.

Ideas:

This might be a good example for regional economies, as much as possible, to try and have a more balanced economy, and not rely only on manufacturing as its growth engine.

First there was the overall pandemic that might have stalled or slowed manufacturing in many regions. And now there is the chip and raw material shortage that is continuing to slow stall manufacturing in the regions.

So what can regional economies do to achieve a more balance economy that is not just manufacturing or even farming or agriculture? That is the main question that probably many regional economies have been asking for years, as maybe they see the continued decrease young people, human resources, who flock to the larger cities of Sapporo, Tokyo, Osaka, Nagoya and so on.

The chip shortage, according to reports related to Toyota, might easing some, but that doesn't mean everything will be back to normal anytime soon. 

An article in the BBC, when the chip shortage became global, stated that one German car CEO stated the shortage could be around for up to two years.

And then there is the continued raw material shortage which will continue to effect businesses.

Article.:

The downgraded areas such as the regions of Tokai in central Japan and Chugoku in western Japan are heavily reliant on auto manufacturing.

Only the southern part of the Kyushu region was upgraded. An official at the ministry told reporters output of electronic components and chip-making equipment has been brisk in that area of southwestern Japan.

The pace of individual consumption is also picking up "moderately," the report said, adding that spending on accommodation and food services "remains in a severe condition."

Ideas:

An economy is very complex and all regional areas or economies are not the same. Not even in a normal market economy with no pandemic there are always going to be some areas doing better than other areas, or some areas will grow faster than other areas.

Its seems normal that any area with companies that are actually making chip-making equipment are showing strong growth. As most likely in Japan, and globally, there are might be some new companies that have decided to produce chip making equipment.

Most likely the days are gone when only a few companies dominate a market related to an area such as chip making.

Individual consumption or consumer spending might be picking up but how long will it last or can it last with the increase prices in Japan? As producers and others pay more and more for their raw materials and pass them on those next in line and then eventually the regular consumers can the trend of increased consumer spending continue?

As the emergency measures were reduced in November might continue and even in the December and New Year's holiday period, but what about after that?

And yes the services sector is and mostly likely will continue to be the weak link in the Japanese economy. Some domestic tourism might pick up such as going to Okinawa and or to the mountains for skiing but it will continue to remain weak for some time.

And then there is the idea of international tourism. While Japan just announced now up to 5,000 per day can enter Japan, it is no intended for tourists but business people and students who plan to study at a Japanese university or a senmon Gakko ( technical college, trade school, language school).

For a  year that is about 1,825,00 people allowed to enter Japan. Japan used to get that amount in just two months. So a lot has to be done to get Japan back to its pre-pandemic level.

Article:

The report, meanwhile, said business at hotels, restaurants and department stores is on the increase recently, following a sharp fall in new COVID-19 cases and subsequent lifting of the government's state of emergency across the country on Oct. 1.

Employment conditions show some weakness due to the pandemic, although the number of job offerings is solid especially among manufacturers, the ministry said.

Ideas:

Yes, there might be on an increase but by how much. As it is enough to get these services type businesses back into the black or profitability zone. Hopefully consumers through the holiday season which include the weeklong new year period will continue spend despite the overall increase in prices now trending in Japan.

Manufacturing in the pandemic and before the chip shortage, was able to come back very quickly as it was not so much a person to person contact business like the services businesses that rely on person to person contact, unless of course, it they can or could, such as department stores or others have innovated and moved on with online platforms to survive and restaurants and similar businesses have moved into takeout and delivery type businesses to survive too.

It is possible that it might take some service type companies up to six months or more to recover back to the pre-pandemic level.

But then there is JAL and ANA, which feel they are not going to recover anytime soon, and have taken a rather non-Japanese approach to reduce their workforce over the next five years.

But they at least are not talking layoff or firings but reducing their staff through hiring less new workers along the normal retirements over the next five years.

One idea might be that now many companies have not gotten used to Zoom or Microsoft teams meeting with customers and clients and don't see the need to fly all over Japan, except for the first initial meeting which is sill very important in Japan.

And maybe there might be less customers/passengers on the shinkansens that go everywhere in Japan;

Have a nice day and be safe!