Japan Economy Watchers: Updated Nov. 29

 https://mainichi.jp/english/articles/20211109/p2g/00m/0bu/048000c

Article:

TOKYO (Kyodo) -- Business sentiment among workers with jobs sensitive to economic trends in Japan jumped in October to its highest level since January 2014 as the government lifted the state of emergency over the coronavirus, and eateries and retailers began recovering from the pandemic fallout, official data showed Tuesday.

The diffusion index of confidence measuring the current mood compared with three months earlier among "economy watchers," such as taxi drivers and restaurant staff, climbed 13.4 points from September to 55.5, up for the second straight month, according to the Cabinet Office.

The monthly improvement was the largest since June last year, a month after the country's first state of emergency was fully lifted, it said.

Ideas:

Economy watchers, or more importantly, those in the services industry, most likely have not had a good last two years as the many businesses in the services industry has been hit the hardest compared to the manufacturing industry, as services requires frequent contact with people, customer, and clients.

Surveys always need to be taken with a "grain of salt" meaning no one knows the true mindset of those being surveyed. Today they might think something and next week think different as economic and business conditions can change quickly, as was seen this past week with the new virus variant emerging in many countries.

As the same time its good if economy watchers are feeling more confident, but the real proof will be in the customers and how many come back and how long it takes to get back to some kind of reasonable level that represents the pre-pandemic level.

Article:

The office also upgraded its assessment of the economy for the second consecutive month, saying, "The economy is gradually picking up though concerns remain over the coronavirus pandemic." In the previous month, the office said the economy "has been rebounding."

A reading above 50 indicates that more respondents reported improving conditions than worsening ones. The office polled 2,050 workers from Oct. 25 to 31, of whom 1,811, or 88.3 percent, responded.

New COVID-19 cases in Japan have significantly decreased recently, with the figure falling to triple digits, compared to a peak level of nearly 26,000 in August. Japan's coronavirus state of emergency was fully lifted on Sept. 30.

Ideas:

The diffusion index is just a number and just an idea at the present time. It really can't predict precisely about next week or next month or the next few months. But it a useful measurement to see what some might be thinking about now and the future.

Hopefully the services sector or industry will continue to improve, but it might take some time to get back to the all elusive pre-pandemic level in terms of real economic activity. But it may never reach the pre-pandemic level for some time as the virus situation globally might prevent the re-introduction of international travel into Japan. 

While short-term business people, students, and trainees are now being let in that might change today Monday, Nov. 29, as the new omicron virus variant has again closed Japan's immigration borders, as Kishida mentioned this morning.

The global news travels fast and most likely some Japanese citizens/consumers/customers might be thinking just how long before it reaches Japan, if it hasn't already, but hasn't been detected just yet.

Which means some customers/consumers might think twice about going out to their regular places of interest if they are crowded places. But at the same time, according to some sources in Yokohama over the weekend, the LandMark Tower plaza/mall was very busy and they said waiting at the checkout lines at the stores they visited took longer than the actual eye shopping and choosing what products they wanted to buy.

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Requests for eateries to restrict their opening hours were mostly lifted across the country in late October.

A restaurant worker in the Hokuriku region in central Japan said, "People in the prefecture are gradually starting to go out" and "the number of tourists and business travelers is growing as well."

In the Tohoku region in northeastern Japan, an employment agency worker said job openings are increasing for a wide range of businesses, including retailers, restaurants and lodging industries.

But a car dealership in Kyushu, southwestern Japan, is experiencing "an extreme sales slump" as automakers slashed production due to a lingering global semiconductor shortage stemming from the pandemic, its staff said.

Ideas:

The ideas above show that a market economy is very complicated that any time there are always some positives and always some negatives or situations not so positive.

While there might be some areas where some tourist are returning and and there are more job openings which are some good positives and then there is still the challenges from the supply and chip shortage affecting some areas.

Take away the pandemic, during normal times, there are always going to be some positives and some negatives but of course maybe not the extremes are that seen now, in a market economy.

But as people are going to "go out" how much are they now spending? Is it enough to bring the economy back, or are they being tentative in how much they spend with inflation beginning to increase in Japan, along with home energy prices increasing in Japan. So maybe consumers/customers might have less disposable income compared to before the pandemic.

And with tourism and travel, are they taking the kinds of domestic trips they took before the pandemic or are the trips limited compared to before, which might mean less spending compared to before the pandemic.

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Since many workers voiced similar worries over the impact of supply chain disruptions and recent rises in raw materials prices, the diffusion index gauging business sentiment in the coming months edged up only 0.9 point from the previous month to 57.5.

"We fear a tendency to spend cautiously could prevail among consumers this winter due to price increases in gasoline, electricity, gas and various food products," said a supermarket worker in Hokkaido, Japan's northernmost main island.

A worker at a metal product manufacturer in the Chugoku region, western Japan, expects severe business conditions to continue, as it remains difficult to pass on the higher cost of not only iron but most other raw materials to product prices.

Ideas:

Business sentiment edged up to 57.5 which again is not a number and can't really predict what businesses will think next week, next month, or even six months down the road as business conditions can change a lot as has been seen during the pandemic. 

But it's still a good measurement to see what businesses are thinking even though they can easily change their mind next week. As we can see this past week and weekend as the new omicron variant exploded and many stock markets globally didn't respond positively to the news about virus situation.

Despite the December holiday period beginning days away and the Black Friday period now in the US spending this year might not be as good as it was in years past.

As reported in the US, online shopping for the first time in years was down. So in Japan, even December is a holiday shopping period, spending may be less than expected or less than wanted.

But again, this past weekend in Yokohama, as the sources told me customers/people were out and about in large numbers as those trying to park their cars at Landmark Tower took hours to find a parking space.

And then there is the New Year week long holiday period. If the new virus situation doesn't affect Japan too much or not all, travel and spending might be somewhat normal but it's just too early to say just yet.

And yes, many businesses are very reluctant to pass on their increased supply cost to the next in the supply chain, whomever that is, and then eventually the final consumers or consumers as consumes are very price elastic meaning they are very sensitive to changes in prices.

Just look at what happened in April 2014 and October 2019 with the sales tax increasing from five to eight percent and then eight to ten percent. Consumers both times went on spending sprees before the new sales tax went into affect and then the months after the sales tax went into effect reduced their spending, until they felt they had no choice but to accept the higher prices and or got used to the higher prices, which is usually always the case in an economy, consumers eventually might get used to the higher prices.

But again many businesses are not willing to take that chance and wait for consumers to get used to the higher prices, as a company's bottom line or profit margins won't wait for the customers to return.

Have a nice day and be safe!