Japan Q3 GDP: Updated Dec. 10

 https://mainichi.jp/english/articles/20211115/p2g/00m/0bu/009000c

Article:

TOKYO (Kyodo) -- Japan's economy in the July-September period shrank a real 0.8 percent from the previous quarter, or an annualized 3.0 percent, amid a COVID-19 state of emergency as well as slow car sales and exports due to global chip and parts shortages, government data showed Monday.

The nation saw the first decrease in two quarters in real gross domestic product, or the total value of goods and services produced in the country adjusted for inflation, following growth of 1.5 percent in the previous quarter, according to the preliminary data released by the Cabinet Office.

Ideas:

The idea that the Japan economy shrank in the July-September period might be of interest the central banks and governments, it might not be of interest to the average person or even the average company unless they were affected by the slowdown. 

The Japanese economy, like all economies are very complex and just because there was a 0.8 percent slowdown doesn't mean all economic activity slowdown. Even the pandemic is going to be some positive economic activity and some negative economic activity. But of course a 0.8 slowdown means that there might have been more negatives than positives overall or the value of the negatives was more than the value of the positives.

Car sales and exports are very important to the Japanese economy. But at the same time, they might only be about 20 percent of Japan's GDP which means cars and exports are not all of the economic activity in the Japanese economy. 

Sometimes, like in South Korea, there seems to be too much emphasis placed on cars sales and exports as if that was all there was to the South Korean economy or the Japanese economy. And of course they area very important for both economies for economic growth, but cars and exports are not the entire economies of both countries.

Article:

The GDP figure was worse than private-sector economists' average projection of a 0.6 percent annualized contraction, with the government's latest projection of a rebound to a pre-pandemic level by year-end from its worst slump on record last year becoming less likely.

Consumer spending fell 1.1 percent, down for the first time in two quarters, as expenditures on services including trips and dining out remained sluggish under the government's months-long virus emergency, which was fully lifted nationwide on Oct. 1.

Ideas:

GDP estimates or projections should always be taken with a "grain of salt" meaning they are almost never correct, because for the most part, they are just guesses as to what economic growth will be in the future.

Again an economy is very complex and because an economy is about people and businesses, sometimes they don't react or respond exactly as expected. Sometimes the actual economic growth might be more than expected and sometimes it might less than expected. But the real and most meaningful idea what happened to consumers/workers during the July-September period? Were they better off or worse off than the previous quarter? 

And even that is very complicated as an economy is made up of different businesses and different groups of people, and what happens in the economy affects each business and each person/group differently.

Consumer spending is always a challenge for the Japanese economy and the Bank of Japan. Just when everyone thinks consumer spending is about to turn the corner and get back to some kind of normal, or a normal for Japan, another virus or something happens and consumers again become risk adverse and don't spend as much as expected or needed for the economy to grow.

Article:

With the aim of curbing a coronavirus resurgence driven by the highly contagious Delta variant, the emergency targeted 21 out of Japan's 47 prefectures at one point, requesting people to stay home and restaurants and bars to close early and to stop serving alcohol.

Household spending on vehicles was weak as automakers were forced to cut output due to limited chip and parts supplies since around the summer amid a worldwide semiconductor shortage and parts supply disruption resulting from virus infection surges in Southeast Asian nations.

Ideas:

Household spending or consumer spending its seems to always be the main constraint in the Japanese economy, meaning it might be the main variable that keeps the economy from reaching a significant level of economic growth. 

And there might be some real challenges related to that such as inflation now and the continual problem of increase in wages or to be precise the lack of an increase in wages.

Consumers/workers need to see an increase in their wages and feel good about what disposable income they have, that is what they have left over after paying their high energy bills and other monthly bills. 

If they don't see or feel and increase in their wages, with energy prices continuing to increase, how can the Bank of Japan or the Japanese government expect consumer spending to reach the level it needs to be at to have a significant impact on economic growth.

Kishida might want companies to increase wages in April of 2022, but how many are considering doing it? The latest reports indicate maybe about 40 percent are considering increasing wages in April 2022.

If the output of cars was reduced, which might mean the supply could be less, does that mean, in regular supply-demand theory, that Japanese car makers are going to or have increased the prices of cars, like when there is a shortage?

Most likely not as they know Japanese consumers or many of them are elastic consumers meaning they are very sensitive to increases in prices and companies are always reluctant in Japan to increase prices for fear of losing customers.

Article:

The reduced auto production also led business investment and exports to decrease 3.8 percent and 2.1 percent, respectively.

In nominal terms, or unadjusted for price changes, the economy contracted 0.6 percent, or an annualized 2.5 percent, in the reporting quarter.

Revised GDP data is scheduled to be released on Dec. 8.

Ideas:

If normal business activity is not normal because of reduced auto production and most likely less sales there is no reason to expect an increase in business investment, or at least from the companies that are affected by the reduced auto production and the reduced exports.

But again an economy is very complicated and just because some businesses might have reduced business investments doesn't mean all companies reduced investments. And just because exports might have decreased for car makers doesn't mean exports dropped for all exporters. 

And finally just because the economy contracted 0.6 percent doesn't mean all business activity for all businesses contracted 0.6 percent as there are always going to be some positives, some businesses still had a good July- September quarter and some negatives meaning some businesses not having a good July-September quarter. 

But with a 0.6 contraction of course we can most likely there were more negatives than positives in the July-September quarter.

Have a nice day and be safe!