Editorial: Japan's 6% economic growth not felt among public amid high prices
Japan's real gross domestic product grew at an annual pace of 6% in the April-June period. Since the government downgraded COVID-19's legal status in May, it appears the economy is recovering smoothly.
However, while the figure itself suggests a level of growth seen during the country's economic "bubble" period from the 1980's to early 1990's, it is unlikely that many people who are struggling amid rising prices can feel it.
Ideas:
An Annualized GDP rate sounds good but rarely does an economy, at the end of the year, grow that much real results.
An annualized rate is just an estimate of what it might be if all conditions were perfect.
GPD growth and what people feel in the economy are two different situations. Most times GDP growth might be related to exports or government spending but rarely does the average consumer have the same feeling or benefit related to economic growth.
Maybe in 80's and early 90's many people saw their income and standard of living increase but since the market crash for the early 90's not many people/consumers have seen their standard of living increase, but actually there has been a decrease in the standard of living in Japan.
Article:
Prime Minister Fumio Kishida argues that the COVID-19 downgrade has "created a positive motion together with measures to realize a positive economic cycle of growth and distribution." But in reality, economic activities suppressed during the coronavirus crisis have returned to normal and this, rather than effects of the policy measures, is what has pushed up GDP.
Similarly, the number of inbound tourists has skyrocketed because Japan's strict quarantine measures were relaxed. And car exports have picked up thanks largely to the recovery of semiconductor production that had been slow.
Ideas:
Indeed, normal activities in the Japanese economy have resumed which has lifted economic growth but so far there hasn't been a huge surge, yet, related to government measures.
And of course, the resumption of foreign tourists into Japan has helped the Japanese economy grow. The number of tourists, in 2023, might not reach the 2019 record of 30 million, but for sure 2024 could see record numbers.
Car exports are always a major driver of the Japanese export economy and will continue to grow and expand in the future. Cars are the backbone of the Japanese export market, and as the supply of semiconductors as improve more cars will be exported in the future.
Article:
In contrast, private consumption -- an indicator of people's livelihoods -- declined from the previous quarter. Prices have remained high, casting a shadow on domestic sales such as food and electronic household appliances. While wage hike rates following this year's labor-management negotiations reached a 30-year high mainly among big companies, the raises have still not caught up with price increases.
People are experiencing tighter household budgets. According to the Bank of Japan's survey on lifestyle, 56% of respondents said they were not financially as comfortable as they were a year ago, about the same rate recorded in the wake of the 2008 global financial crisis.
Ideas:
Prices most likely will continue to remain high through 2023 and even into 2024. As a result unless wage increases can be even higher consumer spending, for the time being, might not reach its potential in Japan, which of course will put a constraint on economic growth, as consumer spending is more than 50 percent of Japan's GDP.
The buying of electronic appliances is not a daily, weekly, monthly or even yearly purchase as they are most likely big ticked items and households don't buy them all that much.
As inflation continues in Japan, household income continues to shrink which means they have less income to use outside of the home such as for shopping at department stores, going to restaurants or even taking short-term weekend trips.
Wages might have increased among big companies but how many people actually work for big companies compared to working for small and mediums sized companies.
Most likely many small and medium sized companies wanted to increase wages but because their profit margins have decreased over the past two years they have no room for wage increases at this time.
Article:
The Japanese government has repeatedly taken fiscal action to combat rising prices in forms of subsidies for gasoline and electricity, but these have only proven to be stopgap measures.
The rapid rally from the COVID-19 crisis is only temporary. To fully rebuild the economy, revitalizing private spending, which accounts for more than half of Japan's GDP, is essential. Wage hikes must be expanded.
Ideas:
Yes, stopgap measures while a first step need to be expanded even more, as energy prices are eating away at households extra income.
As the Japanese economy came out of the pandemic situation, people were eager to get out and about and do things and spend. But as the post-pandemic wears off and reality sits in inflation is still around and consumers feel it and have begun to cutback on their extra income spending levels.
More wage hikes are needed, as it been suggested, there large companies have been sitting on large sums of cash for many decades and not using it for the good of their employees.
They have, unfortunately, become too westernized and they don't think of their employees as stakeholders or important member of the company anymore, instead placing emphasis on investors and not employees like Japanese companies used to do.
Article:
The key lies with small- and mid-size businesses, where 70% of Japan's labor force works. A Japan Chamber of Commerce and Industry study found that many such businesses decided to increase wages out of necessity to combat staff shortages and price increases even though their performance had not improved. If unaddressed, this could eventually create hardship for businesses.
Ideas:
Small ad medium-sized companies, some of them, might be challenged with smaller profit margins because of raw material costs and energy cost increases.
There is not easy solution for these companies. Yes they need to increase wages to keep the staff they have and not get more talent if there are shortages.
But how do they increase performance is another question altogether. Many of these companies probably already have challenges with performance, sales and profits and the solution for them is not easy.
But unfortunately, in any market economy, not all companies are profitable or even survive their rigors of the market.
Article:
The distorted labor structure where nearly 40% of workers are in unstable non-regular employment has not changed since before the pandemic. Unless the base of consumption is expanded, it will remain uncertain whether Japan can achieve stable growth.
The government must quickly act to combat the income gap by aiding small- and mid-size businesses, pushing for permanent employment for non-regular workers and advancing minimum wage hikes.
Ideas:
With labor market being 40% of non-regular or unstable worker situations, there is not way those workers can spend their income as maybe they are always out of money because of their low salaries.
Again, maybe another example of Japan companies becoming too westernized and following western style structures instead of the Japanese structure of thinking of workers and an important part to the company and not just a person to throw out the door when profits are not there.
The income gap between big companies and small/medium sized companies will continue to grow unless there is drastic action by whomever to alleviate the situation.
Most likely, around 2008, and the global financial crisis, Japanese companies started to increase the number of contract workers and part-time workers more than permanent full-time workers with good benefits.
But for the Japanese economy to grow its needs a strong base of full-time workers that willing and able to spend freely in the economy.
Have a nice day and be safe!
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