Japan Economy: Updated Oct. 6, 2023

 Article Source: https://mainichi.jp/english/articles/20230608/p2g/00m/0bu/018000c

Article:

TOKYO (Kyodo) -- Japan's economy grew an annualized real 2.7 percent in the January-March quarter, much faster than previously reported, with an upward revision to spending by companies providing fresh evidence of a recovery in domestic demand, government data showed Thursday.

The world's third-largest economy was initially reported to have expanded 1.6 percent. With the October-December gross domestic product data also upgraded, it was confirmed that the economy had escaped a recession.

GDP, the total value of goods and services produced in a country, expanded 0.7 percent in January-March from the previous quarter, revised up from growth of 0.4 percent reported last month.

Ideas:

Japan appears to finally be moving past the pademic as the economy seems to be on the right track. But, at the same time, the Japanese economy, as an advanced economy, never moved past the 2 percent growth level.

While Japan might have been in a technical recession of two consecutive quarters of negative growth, did  anyone feel or think the economy was in a recession despite the inflation challenges at the time.

GDP might be the stat that is used globally to measure growth in the ecoomy but does it tell the complete story as an economy is very complex and complicate as there are many different sectors. Some migth have grown and some might have grown less over the quarter, and some might have not grown at all.

Article:

With the economy continuing to recover since the lifting of COVID-19 curbs, companies have been stepping up investments that had been postponed during the pandemic, while private consumption remains resilient despite rising prices for everyday goods.

Capital spending rose 1.4 percent, upgraded from 0.9 percent in the preliminary data, reflecting investments by companies to increase output, the Cabinet Office said.

Private consumption, which accounts for more than half of the economy, was revised slightly downward to growth of 0.5 percent from 0.6 percent. While pent-up demand remained strong, people spent less on dining out than initially thought.

Ideas:

Capital investments, while increasing and improving, are never a linear straight line as companies don't all invest each week, each month, or even each quarter at the same time.

There will always be periods of increased investmens, periods of less than good investments, and periods of no investments at all.

But the fact is companies are investing again which might suggest they see the pandemic as lessoning and and they see the economy is positioned for improvement.

Private consumption or private spending, for most advanced economies is usually 50 percent or more of GDP.

But for Japan, it never seems to be enough as Japan seems to be more of savings economy and not so much as spending economy like the US.

Inflation might be a constraint for some consumers as the have reduced their spending at restuarants and other places.

Article:

"The GDP data provides evidence that the economic recovery was intact and the question is whether the momentum will be sustained. Recent data indicates growth is slowing in the current April-June quarter," said Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting.

"Consumer spending appears to have slowed in recent months, partly because real income is falling while prices are rising. This is a worrying sign because there were hopes that the change in the legal classification of COVID-19 would give the economy a boost," Kobayashi added.

Japan in May downgraded the novel coronavirus to the same category as seasonal flu, meaning that people testing positive for COVID-19 are no longer asked to stay in hospital or quarantine.

Ideas:

GDP data and the recovery might be real but can it be sustained for more than one quarter and consumers begin to cutback due to increased inflation and of course will the new wage increases really help the average consumer in the coming months and year.

While most large companies increased wages maybe many of the small and medium sized companies, might have wanted to increase wages, but because of their profit margins being so small were unable to provide any kind of wage increases.

Perhaps the change in classification and the pandemic has no real effect on most citizens as they have long forgotten or move past the pandemic situation but the government just now move past and upgraded their classification.

Maybe the surge in the economy, of whatever surge their was, happed quarters ago and now consumers are adjusting to the cotinued increase in inflation.

Article:

Major companies have agreed to raise pay to keep pace with accelerating inflation, but the sustainability of wage growth is seen as critical to supporting domestic demand, a point made clear by Prime Minister Fumio Kishida, who is pushing for greater wealth redistribution, and the Bank of Japan.

The revised GDP data showed higher inventories than previously reported, a positive factor for growth because it signals companies have been making products.

A revival of inbound tourism since the easing of COVID-related border controls has seen spending by foreign visitors contribute to exports in the GDP data.

Ideas:

Large companies might have increased wages but what about the rest of the economy with small and medium sized companies.Were they able to offer the same wage increases as the large companies.

An increase in inventories is both positive and negative. While higher inventories might be seen as a positive with companies now producing more products, it could also be seen as a negative as companies might being unable able to sell their products as demand could be less than expected and inventories are increasing too fast.

When the ABE administration opened the economy more back around 2014 or earlier it was a boost to the economy and more foreign visitors entering Japan and spending money in Japan.

Of course 2019 with around 31 million international visitors was the high point of tourism in Japan, with the Chinease leading the way but it remains to be seen just how many international tourists come to Japan in 2023.

Article:

Overall exports, however, declined 4.2 percent in January to March, unchanged from the preliminary report, as shipments of cars and machinery fell.

Public investment was revised down to an increase of 1.5 percent from 2.4 percent.

Global growth is expected to slow as aggressive interest rate hikes in the United States and other advanced economies will curb demand and inflation.

Ideas:

While exports are important, they might only be about 20 percent of Japan's overall GPD. But even at 20 percent that is still a large amoung of an economy's GDP.

Public investment is never linaer s there will be period of investment growth and periods of less than good growth in any year or quarter.

The US central bank used to consider what affects a rate hike might have on other economies in the world and they used to say they are not going to increase rates at this time as it might affect other countries too much. But maybe now as their are different people in charge they see things a little differently and might continue to increase the key interest rate.

Article:

Slack overseas demand bodes ill for export-reliant Japan, calling into question how much longer the recent recovery in domestic demand will continue.

The Organization for Economic Cooperation and Development, which expects the global economy to expand 2.7 percent this year, still below pre-pandemic levels, has warned of greater uncertainty as inflation could be more entrenched than expected.

Ideas:

Trying to decrease inflation with key interest rates hikes, while the standard strategy, doesn't seem to be working exactly according to form as inflation is a very complicated situation to solve. 

Japan has taken a different strategy and maybe might be just letting inflation run its course, with limited government intervention related to oil and gas supplies, but the Bank of Japan has kept the key rate a 0 percent for a very long time, while the US is at 5.5 points/percent for its key rate.

Most likely the affects of the pandemic and add in the Ukraine war situation are going affect the global economy fo some time.

The global economy might not get back to the pre-pandemic level for several more years as inflation is still a major challenge for most economies.

Article:

Japan's economy is forecast to grow at a much slower pace of 1.3 percent.

In the January-March period, nominal GDP grew an annualized 8.3 percent, up from 7.1 percent.

Ideas:

Japan's economy growing at 1.3 percent is about how much the economy grows each quarter before the pandemic. As an advanced economy, advanced economies never grow at the 3 percent or even at the 2 percent level that much as it takes more and more resources, to grow an advanced economy.

An annualized growth projection is/was nothing more that a projection for the entire year and sn economy might not even reach that amount of growth as everything has to be perfect in terms of growth.

Nominal growth also includes inflation so if inflation increase 3 or 4 percent during the year it is included in the growth rate.

Have a nice day and be safe!