Article Source: https://mainichi.jp/english/articles/20221208/p2g/00m/0bu/019000c
Article:
TOKYO (Kyodo) -- Japan's economy shrank an annualized real 0.8 percent in July-September, compared with the 1.2 percent previously reported, as domestic demand was slightly stronger, although its recovery from the COVID-19 fallout lacked vigor, government data showed Thursday.
Real gross domestic product, adjusted for inflation, shrank 0.2 percent on a quarterly basis, revised upward from minus 0.3 percent. After the Cabinet Office revised past data, the world's third-largest economy marked its first shrinkage in two quarters, instead of four quarters.
Japan has seen the size of its economy return to pre-pandemic levels, but its recovery has been slower than other economies.
Ideas:
With inflation still a major challenge along with supply shortages it's not a surprise that the GDP was only 0.8 percent.
Domestic demand might have been somewhat stronger but with inflation and the lack of wage increases it might not be sustainable in the future.
There could be many reasons that Japan is not recovering as fast as other countries. Perhaps of the reason the Japanese economy took longer to reach the pre-pandemic level could be related to economic structural challenges that are limiting economic growth.
Japan's economic growth, overall, never grows that much so its not surprise it saw its first shrinkage in two quarters.
Article:
The July-September quarter saw imports surge on higher energy costs and a sharp weakening of the yen that inflated the value of inbound goods. Growth in imports works as a negative for GDP, which measures the total value of goods and services produced in a country.
Domestic demand grew 0.42 percent in the revised data, slightly up from 0.36 percent seen earlier, contributing to the upward GDP revision, a Cabinet Office official said.
Inflation has been accelerating in Japan, with core consumer prices reaching levels unseen in decades. But pent-up demand following the removal of antivirus curbs helped support private consumption.
Ideas:
The weakening of the yen usually works for exporters who can get more revenue with overseas sales, but at the same time if the yen become too weak, then might offset exports and the current account decreases.
Domestic demand or consumer spending is always a challenge for the Japaneses economy as consumers in Japan just don't spend like in the US. But any consumer spending or domestic demand is a good thing for the Japanese economy, even at 0.42 percent.
Core consumer prices might be increasing but its known, that many companies are still reluctant to pass on their increased costs to the next in supply chain including the final consumer.
And yes, pent-up demand is a positive variable but is it sustainable with inflation the highest in decades.
Article:
Still, private consumption, which accounts for more than half of the economy, grew a mere 0.1 percent, much slower than an earlier reading of 0.3 percent growth.
Capital spending remained unchanged, up 1.5 percent, reflecting a strong appetite among Japanese firms to step up investment to boost output capacity and prepare for the post-COVID era.
Public investment increased 0.9 percent, revised downward from a 1.2 percent expansion
Imports jumped 5.2 percent, unchanged from their earlier reading, while exports were up 2.1 percent, faster than the 1.9 percent previously reported.
Ideas:
Once again, private consumption or consumer spending is alway a major challenge for the Japanese economy. And at only 50 percent of the economy its not anywhere near where the US is at 60 percent of more of its GDP.
Capital spending even at 1.5 percent might be high enough to help the economy, as maybe because of high energy costs, material costs, and continued inflation, it's not where it should be at this time.
As imports increased 5.2 percent and exports increased only 2.1 percent, while not taking into account the value or volume that might have been a decrease in the current account for Japan.
But of course as stated earlier the weak yen has increased the value of imports and the real value might not be known as its not possible to compare imports and exports as they are.
Article:
"Companies increased their inventory, which is a plus for GDP in preparation for strong demand as activity picks up," said Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting Co., adding that the latest GDP figures did not change his view on the economy.
"Companies have been increasing their spending, a trend that will likely continue if their current plans do not change. Consumption will likely be supported by people spending more on services by dining out and going on trips with antivirus curbs lifted," Kobayashi said.
In the current quarter ending this month, economists expect a return to positive growth. Intense yen-selling pressure has eased as financial markets pare back expectations of aggressive rate hikes by the U.S. Federal Reserve.
Ideas:
Increasing inventories is a good thing, which indicates companies feel better about the economy and of course stronger demand in future.
Also company spending is another indicator that they feel good about the economy and its future, but again can it be sustained with inflation, high energy price, and still material shortages are all challenges.
Regarding consumer spending and or consumption the real question is it still sustainable with inflation at an all time high in Japan or will it decrease as consumers feel inflation is too much after the temporary feeling of less pandemic restrictions have gone away.
Article:
But the prospect of slowing global growth caused by monetary tightening to fight surging inflation bodes ill for the Japanese economy, as the United States and China, which has its own growth concerns due to its strict COVID policy and real estate troubles, are the country's two biggest trading partners.
The Cabinet of Prime Minister Fumio Kishida has approved an economic package to mitigate the pain of rising prices on households, backed by a roughly 29 trillion yen extra budget for the current fiscal year. Its program to reduce utility bills by 5,000 yen a month per household will not kick in until January.
Ideas:
The US federal reserve, the US central bank, and what the Bank of Japan has been doing are the complete opposite strategies to keep the economy moving forward. Perhaps what works in the US won't work in Japan and what works in Japan won't work in the US and the economies are somewhat different.
The China situation is also a major challenge as its not known exactly how or when the China situation is going to improve.
Any package for families and consumers is a good thing, but the real question is how long for any relief package to have an effect and will the package help all families or do families have to apply and or require extensive paper work to get the benefits of the new package.
Article:
"Rising inflation is a concern because it apparently weighed on consumption in July-September and this will continue heading into next year. We can't expect robust growth in exports, either," Kobayashi added.
Nominal GDP shrank an annualized 2.9 percent, much faster than 2.0 percent. It decreased 0.7 percent on a quarterly basis, rather than 0.5 percent.
Ideas:
Increased inflation will continue to be a major factor related to consumer spending as consumers disposable income or extra income keeps decreasing as they pay their bills and have less and less for extra spending in the economy.
And add it the same thing as usual of no or little wage increases as companies too have to worry about their profit margins keep decreasing.
GPD growth in Japan has never been that robust since the 1989 asset bubble crisis, but overall Japan has one of most stable economies in the world despite less that good economy growth each decade.
Perhaps, maybe not, as Japan move more past the pandemic and international travel has opened up again and more and more Chinese tourists arrive it might be the stimulus needed to see some real economic growth in Japanese economy in the future.
Have nice day and be safe!
