Japan GDP: Updated Dec. 22

 https://mainichi.jp/english/articles/20211208/p2g/00m/0bu/019000c

Article:

TOKYO (Kyodo) -- Japan's economy in the July-September period shrank an annualized real 3.6 percent from the previous quarter, downgraded from the 3.0 percent contraction initially reported, as a technical change in the way seasonal adjustments are made led to a larger recorded fall in private consumption, government data showed Wednesday.

Private consumption, which accounts for more than half of the country's gross domestic product, fell 1.3 percent, revised down from a 1.1 percent decline, as spending on durable goods and services was lower amid the coronavirus pandemic, according to the Cabinet Office.

Ideas:

If other articles are correct, it was suggested that an increase in durable goods was a result of the government handout to households which some spent on durable goods.

The July-September period was in the middle of the delta virus period, which was very strong in Japan. As a result, consumers most likely refrained from going out and spending in the stores, restaurants, and other places.

Most likely there was an increase in online-shopping, home food delivery services, and so on. But all of that kind of economic activity was not enough to make up for the loss of buying in brick and mortar stores, or going to restaurants and other places,

Private spending might be in the 50 to 55 percent range, which seems like a lot, but compared to many other advanced nations it is considerably less. In some advanced nations consumer spending might be upwards of 60-65 of GDP.

And then add in the pandemic and add in the ageing situation, and then add in the salary situation, and the increase in prices in the economy, its not a surprise that consumer spending is not where it should be in Japan.

Article:

The overall downward revision reflected a new method in calculating seasonal adjustments introduced to give a better grasp on the state of the economy which has been battered by the public health crisis, an official told reporters.

The first decrease in two quarters in real GDP, the total value of goods and services produced in the country adjusted for inflation, corresponds to a 0.9 percent decline on a seasonally adjusted quarterly basis.

The revised figure was worse than the average projection of a 2.9 percent annualized fall by private-sector economists polled by Kyodo News.

Ideas:

No matter how the figures are figured they never lie. But there is the age old saying. "figures don't lie but liars figure." Meaning sometimes well meaning whomever, try to manipulate the numbers to achieve the result they want.

But this is not what is happening. Sometimes there are different ways of finding the true figures and there are better ways to calculate the stats to get a more reliable picture of what is is happening. 

As such the stats are always being changed or re-calculated as new data appears that might change the story of what the stats are trying to say. Stats are always being re-calculated as new data is discovered that might be relevant to the situation.

But the fact that the economy shrank in the July-September period should not be a surprise and it should not be cause for alarm. As the Japanese economy is very complex and should almost be considered a living organism with many different parts in it. 

As such some parts of the economy might have shrank in Q3 but that doesn't mean all parts of the economy shrank. As an economy is again very complex some parts might be positive and some parts might have been negative. 

But of course an overall shrinking of 2.9 percent indicates there were more negatives than positives in Q3.

Article:

During most of the reporting quarter, Tokyo, Osaka and some other prefectures were under a COVID-19 state of emergency. People were asked to refrain from non-essential outings and eateries were requested to close earlier and not to serve alcohol.

In household spending, expenditure on durable goods dropped 16.3 percent from the previous quarter, marking the largest fall since comparable data became available in 1994.

Spending on cars was sluggish, as major automakers were forced to cut output due to parts supply disruptions in Southeast Asia caused by a surge in COVID-19 infections and a global semiconductor shortage.

Ideas:

Again as it was suggested in previous articles the decline in spending on durable good might have been that consumers used the government handout to spend on durable goods the previous quarter which resulted in a decrease in Q3.

Also spending on durable goods is not something that consumers spend on ever week or even every month. Most likely as durable good like TV's, refrigerators, air-conditioners, and even furniture more expensive than going to Sogo or Takashimaya and buying clothes or  going to Uniqlo or Zara once or twice a month, there might be a surge here or there once or twice a year in the buying of durable goods, if even then. 

Spending on cars might have also been related to the long wait for a new car and consumers maybe might have felt to just wait until supplies level out and prices are lower. 

And the same can be said for the buying for cars, as it not an everyday item that households will go out and buy. Unless someone is using the subscription option of every three years consumers are not going to buy and new car except maybe once every decade.

Article:

Public investment was also revised down to a 2.0 percent drop from a 1.5 percent decline.

An initially reported 3.8 percent decrease in capital spending was revised upward to a 2.3 percent fall, taking into account Financial Ministry data released last week.

On Dec. 1, the ministry reported that capital spending by all nonfinancial Japanese companies in the same quarter rose 1.2 percent from a year earlier.

Ideas:

Capital spending sometimes depends on the sentiment of a company. If a company feels that the economy or their industry situation is improving they will invest for the future while some will wait until they are see that there are no threats in the economy.

Sometimes the best time for capital investments is when the economy or economic situation is not so good so that when the economy or economic situation does improve the company is up and running with capital investment spending and they might gain an advantage over the competition was might be risk-adverse and decided to wait until the economy was out of danger and moving forward.

But there are always different strategies and to when and how to invest. Each company has to look at their specific situation and decide when and how is the best strategy for them.

Article:

Exports fell 0.9 percent and imports sagged 1.0 percent, both upgraded from 2.1 percent and 2.7 percent declines, respectively.

Nominal GDP, not adjusted for inflation, contracted 1.0 percent, or an annualized 4.1 percent, in the reporting quarter, revised down from a 2.5 percent annualized shrinkage initially reported.

Ideas:

A drop in exports of 0.9 percent is not good but its not bad considering what the Japanese economy is experienced in Q3. Again as new data is discovered the stats for a quarter are always going to be revised.

When you add in the container ship problems in LA in the US, the shipping costs increases, the semiconductor chip shortages, the supply shortages in some areas, its not a surprise that exports might have been less than expected or wanted. 

The decrease in imports might be related to some of the same challenges affecting exports but at the same time a weak yen, which increases the prices of imports, might have affected the buying of some products or supplies needed in Japan.

Perhaps some importers decided to delay the importing of some products until they can get a favorable yen or other factors improve for them.

A contraction of 1.0 percent should not be concern, as again the Japanese economy is the 3rd largest in the world, and as such it's a very complex economy. Meaning there are always going to some positives and some negatives in the economy.

Despite the delta virus crisis in Q3 the Japanese economy situation could have been much worse but only shrank 1 percent, which might indicate there were still a lot of positive economic activities in the economy.

Have a nice day and be safe!