Japan Major Company Expectations:

 Article Source: https://mainichi.jp/english/articles/20230103/p2g/00m/0bu/011000c

Article:

TOKYO (Kyodo) -- Only around half of major companies in Japan expect the country's economy to grow in 2023 given soaring prices of natural resources and raw materials triggered by Russia's war on Ukraine and the weak yen, a Kyodo News survey showed Monday.

In the survey of 117 companies, including Toyota Motor Corp. and SoftBank Group Corp., 65 firms, or 56 percent, expect solid expansion or moderate growth in the world's third-largest economy in the year ahead, sharply down from 84 percent a year ago.

The overall percentage of firms forecasting growth was at its second lowest in 10 years in the survey, with responding companies also cautious about slowdowns in the United States and China in 2023.

Ideas:

Solid expansion or moderate growth is probably being optimistic as Japan's overall economic growth is usually only around 1 percent. 

But it was be remembered, that although Japan's growth is usually low, Japan's economy is very stable and rarely has any major shocks. 

Maybe a year ago as the Japanese economy was coming out of the pandemic period there was more optimism and maybe the Ukraine situation hadn't started.

The slowdown in the US has not really materialized yet, even though inflation is still very high. As far as China goes it's hard to predict just what is happening in China.

Article:

In the survey, carried out between late November and mid-December, 40 firms, or 34 percent, said they believe the economy will be flat while seven predicted a moderate contraction. None believed the economy would fall into a recession.

With multiple answers allowed, an overwhelming 92 percent of the companies that expect growth cited a recovery in consumer spending after its plunge due to the coronavirus pandemic.

Of the responding companies that did not expect growth, 70 percent cited rises in prices of natural resources and raw materials, followed by 45 percent forecasting personal consumption would be sluggish. Forty percent of the firms also cited slowdowns in both the United States and China, respectively.

Ideas:

It's interesting that no company believed that Japan would fall into a recession. Maybe that's because the Japanese economy, while being a low growth economy is a one of the most stable economies globally.

Consumer spending is always predicated on wage growth as at this time, there might not be enough wage growth to make consumers feel good about their wages.

Continued increase in prices will keep consumers and company spending down for now and yes consumer spending or consumer consumption will be constrained because of the continued increase in prices.

The slowdown in the US hasn't developed just yet, but there is alway a possibility as inflation is still at an all time high.

Article:

As for companies' evaluation of the rapid depreciation of the Japanese yen against the dollar, 43 percent saw it as having a positive impact on earnings, exceeding 23 percent taking it as a negative.

Exporters can benefit from a weaker yen, which boosts their overseas profits when repatriated.

But when asked about the impact of the weak yen on the Japanese economy, the outcome was reversed, with 32 percent saying it is negative and only 3 percent seeing it as positive. Many companies did not provide answers to the question.

Ideas:

Perhaps the Bank of Japan has been correct in not increasing the key rate as it keeps the Japanese yen low which of course is good for exporters.

As yes, as far at the domestic economy goes the weak yen is not so good as then import prices on everything is much higher, which if a company is not involved in export activities they feel the full effect of the weak yen if they import products.

Again perhaps, at this time the Bank of Japan is prioritizing exports and export growth for the good of the overall economy and not placing an emphasis on the domestic economy and leaving that the the Japanese government to sort out the details.

Article:

With consumers hit by hikes in prices of daily necessities, including food and energy, due to rising material costs and the weak yen, the nation's annual "shunto" spring wage negotiations between management and labor are expected to attract particular scrutiny.

A total of 36 percent of the firms said they plan to or are considering raising salaries, but 48 percent said they were undecided at the time of polling.

With regard to items in Prime Minister Fumio Kishida's policy agenda, the survey showed that around half of the companies back the promotion of digital transformation and measures to reduce carbon dioxide emissions and promote renewable energies.

Ideas:

The spring wage negotiations are going to be interesting. Some might say or have said Japanese companies sit on large sums of cash while some might be marginalized because their profit margins are too weak for any wage increases. 

Its 4 months before wage negotiations begin and or before April 2023 when the new fiscal year begins so there is a lot of time for companies to survey the economic environment and then decide what to do.

All of the ideas promoted by Prime Minister Kishida are good but the real challenge is getting companies to buy in the idea of transformation and all the ideas cost money and take time to implement.

Article:

Digitalization and decarbonization are both pressing issues companies need to tackle but require long-term investments in research and development and capital spending.

Among nonmanufacturing companies, including those in the retail and service sectors, the largest group called for government measures to tackle declining birthrates and support childrearing, as well as steps to deal with rising prices of daily goods.

Ideas:

Yes, transformation doesn't happen overnight and or it takes time for companies to figure out just how to do what about it. Some might not want to change as with some major traditional Japanese companies and or they just don't have to funds or resources needed to make the changes even though they might want to do it.

The birthrate, like in South Korea, is the lowest in the OECD and doesn't look very promising. Childreasing, again like in South Korea, is a challenge and with young women or young married women citing challenges working and raising children not to mention the high cost of after school programs and so on. 

The price of daily goods is affecting all households which means their disposable income or extra income is being decreased each week or each month as prices continue to increase.

And now if you raising young children its even worse for them.

Have a nice day and be safe!