Japan Economic View:

 Article Source: https://mainichi.jp/english/articles/20221025/p2g/00m/0bu/015000c

Article:

TOKYO (Kyodo) -- Japan on Tuesday maintained the view that its economy is recovering moderately, supported by a resurgence of demand following the lifting of anti-coronavirus curbs, but it remained vigilant against volatility in financial markets after the yen's rapid depreciation.

The Cabinet Office retained the economic view for the fourth straight month in its report. It was more optimistic about business investment but downgraded its view on imports due mainly to slowing inbound shipments from Asia.

The views on other major components of the economy, including private consumption and exports, remained the same.

Ideas:

The economy might be improving but it might not be in every sector in the economy as there are probably many sectors that haven't reached the pre-pandemic level just yet.

The depreciation of the yen is of course the major challenge that the Japanese government has to figure out as its difference between the yen and the US dollar is still too far apart. 

In the meantime, imports will continue to be higher than normal and businesses and the average consumer will have to pay more because of it.

Article:

"The Japanese economy is picking up moderately," the Cabinet Office said in the October report. "Full attention should be given to price increases, supply-side constraints and fluctuations in the financial and capital markets."

The reference to movements in financial markets was reinstated in the September report, after Japan intervened in the currency market by buying the yen with U.S. dollars.

The yen's depreciation to its lowest levels in decades against the U.S. dollar is partly to blame for accelerating inflation that has prompted the government to compile a fresh economic package.

Ideas:

The term moderately might be a cautious approach as they don't want to say significantly picking up just yet as there are too many sectors still not what they should be.

Price increases most likely are going to continue but maybe not as much in other countries. 

Supply side challenges most likely will continue as the chip shortage is still a problem along with companies unable to meet its supply demands, including prices increases, as the continued challenges facing companies.

The capital markets will be a challenges as long as their significant difference between the yen and the dollar. 

Article:

After core consumer inflation jumped 3.0 percent in September from a year earlier, a 31-year high excluding the special effects of sales tax hikes, the October report said consumer prices are "rising."

The brighter view on corporate spending, which the report said is "picking up," comes as many Japanese companies plan to ramp up investment to boost output capacity and promote digitalization and decarbonization beyond the COVID-19 era. The upward revision was the first since February.

Private consumption, another key component of the economy, has been recovering moderately, the report said. The lifting of antivirus curbs has led more people to dine out and go on trips, in a much-awaited boost to the services sector that was pounded by COVID-19.

Ideas:

Core consumer inflation in Japan is nowhere near what it is in the US for the EU. as most likely companies, some or many are still reluctant to pass-on their increased costs the next in the supply chain including the final consumer.

What this means of course is that many or most companies profits margins are shrinking including the ability to maybe increase the wages of its employees.

Private consumption might be increasing due to latent or bent-up spending as consumers are just beginning to spend again, but how long will it take for most or many service sectors businesses to get back to their pre-pandemic levels.

Article:

Monetary tightening in major advanced economies, excluding Japan, has raised recession fears but the October report left its view on the global economy unchanged, saying that it continues to recover.

China reported Monday a 3.9 percent expansion in its gross domestic product for the three months to September, but uncertainty remains over whether the Asian powerhouse can achieve its annual target of around 5.5 percent for 2022.

The GDP data was not taken into account in Japan's latest economic report, a government official said.

Ideas:

Most likely Japan will continue to be in a recession-like situation for sometime but not a real recession.

As the main challenges will be the yen which increases inflation even more and the fact that many companies are still not increasing wages for its employees, which is very much needed to get consumer spending back to a significant level again.

Even though tourism is returning to Japan it might take some time for tourism sectors businesses reach the pre-pandemic like in 2019 when 32 million tourists visited Japan.

Of course most or many of those tourists were from China which has yet to fully open up and let their citizens to travel freely.

Have nice day and be safe!