Japan GDP:

 Article Source:  https://mainichi.jp/english/articles/20220518/p2g/00m/0bu/022000c

Article:

TOKYO (Kyodo) -- Japan's economy in the January-March period contracted a real 0.2 percent from the previous quarter, or an annualized 1.0 percent, on sluggish private consumption and increased imports such as coronavirus vaccines, government data showed Wednesday.

Real gross domestic product, the total value of goods and services produced in the country adjusted for inflation, decreased following growth of 0.9 percent in the previous quarter, according to the preliminary data released by the Cabinet Office.

The latest quarterly GDP decline was better than the average projection of an annualized 1.8 percent shrinkage by private-sector economists.

Ideas:

While its good to look at the numbers and understand what they might mean and the trends, what is more important is what do the numbers mean for businesses and households.

As an economy is very complex, meaning there are always some positives and negatives, some households might be OK while some might be not so good still, and the same with many businesses.

Private spending or private consumption is always a challenge in the Japanese economy. Its not that the Japanese consumers, for the most part don't have the money to spend, but overall, the Japan consumer is more conservative than those in the US where they might be considered big spenders.

Of course we can't say that about every consumer in Japan as again some might spend more than others, such as singles who live a home with their parents and don't need to worry about rent or other things.

Article:

Takeshi Minami, chief economist at the Norinchukin Research Institute, said the GDP contraction shows the Japanese economy, especially the retail and tourism-related sectors, was hurt by COVID-19 with the government repeatedly asking for measures that curbed economic activity after the resurgence of the virus.

To contain the coronavirus spread, over 30 of Japan's 47 prefectures were put under a quasi-state of emergency at one point during the reporting quarter. People were asked to refrain from traveling across prefectural borders and restaurants and bars were requested to close earlier under the restrictions, which were fully lifted in late March.

Private consumption, which accounts for more than half of the country's GDP, fell 0.03 percent, compared with a 2.5 percent growth in the previous quarter.

Ideas:

The first quarter was not so good for many countries as the virus situation was somewhat out of control as virus cases exploded. 

But they seem to slow down considerably in the second quarter so hopefully the Japanese economy can get back to some kind of normal or at least a new normal.

Of course the Golden Week period proved that Japanese households and consumers were ready to get out and about and move around and spend some extra money.

If consumer spending can be increased to at least 55 to 60 percent of GDP like on other advanced economies than there might be some real economic growth in the Japanese economy.

But its consumer spending is just around 50 percent and not much more its going to be  a challenge for any real growth in the future.

Article:

Declines in spending on eating out, transportation and leisure accommodation contributed to the overall decrease amid a resurgence of coronavirus infections caused by the highly contagious Omicron variant, a government official said.

Among household expenditures, a fall in spending on services as well as durable goods including cars was partly offset by higher electricity bills. Unseasonably cold weather may have prompted people to use more heating during the reporting quarter, the official said.

Import growth outpacing that of exports also contributed to the overall GDP decline.

Ideas:

Yes, the first three months were very challenging globally related to the omicron version of the pandemic.

Spending on durable goods is not a weekly, monthly, or even a yearly thing activity so there might be periods of highs and lows in sales of durable goods.

The decrease in services is understood as services, for the most part, except maybe online services, is a people to people activity meaning people need to see other people and the pandemic might have reduced contact in the services sector.

The car situation might still be related to the semiconductor chip shortage as there might be as long as year wait to buy a new car.

A combination of a cold winter along with overall energy prices inceasing globally might have caused even higher energy bills including higher gas prices for car owners.

For GPD measurements, exports minus imports is then added to the overall GDP measurement.

So even though the volume of exports might still have been more than the volume of imports the value of imports versus exports was the main factor as the weak yen, the increase in raw material prices, and the increase in energy prices of imported good made it look like there were more imports than exports which would have caused a decline in GPD growth.

Article:

Imports grew 3.4 percent, following a 0.3 percent expansion in the previous quarter, with an increase in shipments of coronavirus vaccines and mobile phones as well as higher payments for research and development conducted by overseas companies contributing.

Exports rose 1.1 percent, compared to a 0.9 percent increase in the previous quarter led by a recovery of car shipments to the United States.

Meanwhile, capital expenditure, another key pillar of domestic demand, increased 0.5 percent, following a 0.4 percent growth in the previous quarter, on solid investments in general machinery such as gas turbines as well as on research and development.

Ideas:

When talking about imports and exports is the volume or value. Overall the volume of imports might be less that that of exports but because of the surge in energy prices, raw material prices, and the weak yen, the value of imports actually might be more than exports.

But of course the weak yen helps exports prices that is brought back to Japan, but the trend seems to be the weak yen with the combinaton of increased energy prices and raw material prices, at the moment, makes it look like imports are more than exports.

Captial expenditures is usually dependent on the mood or sentiment of companies about what they think is going to happen in the future related to the Japanease economy and how is that going to effect their overall business situation.

If they feel good they might begin to invest/spend, but if they don't they might decide to wait for a better time to spend.

But as the global economy is somewhat good, minus inflation many companies might think its time to get back to capital spending.

Article:

Private residential investment fell 1.1 percent for the third consecutive quarter of decrease as construction material prices remained high.

Government spending climbed 0.6 percent on procurement of COVID-19 vaccines but overall public demand, which includes government consumption, public investment and change in public inventories, decreased 0.2 percent.

Looking ahead, some analysts expect Japan's GDP will return to a growth path in the current April-June period, as consumption recovers after the removal of COVID-19 restrictions.

Ideas:

Higher construction prices are going to be a major constraint for the consturction sector and or for companies in that sector and or for companies that want to increase their spending in the construction sector or want to build new homes or complexes, as material prices are now out of control.

Now is not the time for government spending to decrease but the Japanease government needs to keep the pumps open, meaning they need to keep the money flowing into programs and subsidies that are going to help businesses and households who still need help.

The Japanease economy might show some signs of improvement in the future, but with inflation related to energy prices, raw material prices increasing. along with a continued weak yen, there might be too many constraints for the Japanese economy to show any kind of signficant growth in the near future.

Consumer spending might show some growth but the above constraints, including a lack of wage inceases, might not see that much of an improvement.

Article:

But they also say surging fuel and food prices amid Russia's invasion of Ukraine exacerbated by the weaker yen against the U.S. dollar could weigh on the country's economy.

Norinchukin's Minami said, in addition to the Ukraine crisis, China's "zero-COVID" policy that led to a lockdown in Shanghai has caused supply disruptions and may dent private spending.

In nominal terms, unadjusted for price changes, Japan's economy expanded 0.1 percent, or an annualized 0.4 percent.

Ideas:

Again an economy is very complex with many different moving parts, meaning some in society or the economy might not feel any changes related to inflation, while others might see some real changes and some real challenges and as such they might not spend as much.

The China situation might still be causing some supply challenges and not just in consumer spending of some products but also for businesses that have production plants in China along with getting other products out of China and into Japan too.

An expansion of 0.1 percent might not sound like much but its still shows some kind of economic growth despite all of the challenges the economy is going through. 

As Japan is the third largest economy in the world even a 0.1 percent growth is large but of course not what the Bank of Japan or the Japanese government wants or needs.

Article:

In fiscal 2021 through last March, the world's third-largest economy grew 2.1 percent in real terms, expanding for the first time in three years.

The annualized size of real GDP for fiscal 2021 was 537.02 trillion yen ($4.2 trillion), still lower than the 550.51 trillion yen posted in pre-pandemic fiscal 2019.

Revised GDP data for the January-March quarter are scheduled to be released on June 8.

Ideas:

For the Japanese economy to grow 2.1 percent in a normal year is really good. But it must be remembered the previoud fiscal year was not so good, meaning 2020.

So at 537.02 trillion yen the Japanese economy still has a way to go to reach the pre-pandemic 2019 level.

But for many industries or sectors in the Japanese economy that is probably the same, as most probably haven't reached their 2019 levels yet, and might not reach them for some time to come.

And many might not get there anytime soon, especially any business related to the services sector or the tourism sector as only allowing tour groups into the country is not going to make up for the loss of 31 million international tourists from 2019.

Have a nice day and be safe!