Japanese economic growth surges on strong exports and tourism
TOKYO (AP) -- Japan's economic growth jumped at an annual pace of 6% in the April-June period, marking the third straight quarter of growth as exports and inbound tourism recovered.
Real gross domestic product, which measures the sum value of a nation's products and services, grew 1.5% in the fiscal first quarter for the world's third largest economy, the Cabinet Office said Tuesday.
Ideas:
Annualized economic growth is just an estimate about what the growth might be if it remained the same for the entire year. But it rarely stays the same as most times growth rate is nonlinear and never follows a straight upward path.
Inbound tourism or foreigner tourists coming to Japan has increase steadily on the weak yen, as tourist are taking advantage of improved purchasing power, which allows them to buy more products because of the weak yen.
If the real gross domestic product were to continue to grow 1.5% for the entire year it would be a strong economic growth rate for the Japanese economy, which usually doesn't grow more than 1%.
Article:
The annualized pace shows what the growth would have been if what was marked during the quarter had continued for a year. The rate outpaced what analysts had forecast at 3.1% growth.
The latest quarter showed the strongest growth since October-December 2020, when Japan's GDP grew 1.9% on-quarter, and 7.9% annualized rate.
Ideas:
Again, the annualized rate is just a "guess" or estimate if the growth rate continues as it is now or was. The original forecast of 3.1% was probably what was expected based on previous historical data and what they might happen in the future.
It must be remembered, that Japan's previous growth during and right after the pandemic was not that good, so the economy might just be making up for the down-turn of the pandemic with more than usual good economic growth.
But at the same time, anytime there are spurts of good economic growth in Japan, something happens that seems to slow or constrain Japan's economic growth.
Article:
Exports grew 3.2% in the three months through June, according to the government. Auto exports have grown lately, after a period in which they had stalled on the shortage of computer chips and other parts. Production was crimped because of social restrictions related to the COVID-19 pandemic.
Also contributing to quarterly growth was the return of tourism, as social restrictions eased, and borders opened to inbound travel. Tourism revenue contributes to export growth in such GDP data.
Ideas:
During the pandemic and shortly after there were many stops and starts in auto manufacturing related to semiconductor chip shortage, pandemic related shutdowns, and Chinese supply chain challenges that slowed down Japanese manufacturing.
In 2019, Japan saw almost 30 million tourists enter Japan. Japan might not see that many in 2023 but most likely 2024 will see a return of that many tourists into Japan, as they spend large amount of currency, which contributes to GDP growth through exports.
South Korea and China are seeing large number of tourist entering Japan taking advantage of the weak yen and the three years of not being able to travel to Japan, they are taking advantage of the re-opening of Japan for tourism.
Article:
On the negative side, private consumption stalled, declining 0.5% compared to the previous quarter. Public demand, which includes government spending, rose 0.3%.
Some analysts think signs of recovery will prompt Japan's central bank to take action on a policy change and move toward higher interest rates.
Ideas:
Private consumption or consumer spending decreased 0.5% but its not that significant of a drop in consumer spending as with all statistics there are built in possible variances plus or minus so it could have easily have been 1% above or below the 0.5%.
The Bank of Japan is not going to make any drastic change in its key rate at this time and its going to take more than just a 0.5% drop in spending to get action from the BOJ.
Japan's debt to GDP ratio is one of the highest in the world, which indicate Japan's government spending is more than other countries.
Article:
The Bank of Japan has taken a super-easy monetary policy for years, at zero or below-zero interest rates, to jumpstart an economy beset by deflation, the opposite of what the world is worried about lately, or inflation.
Deflation can be lethal, signaling stagnation. Japan has a shrinking population caused by an extremely low birth rate.
Ideas:
The Japanese economy has some significant structural challenges such as low birth rate and a shrinking population. Another challenge is the number of working women in higher level positions.
There a lot of women in lower level clerk type positions but not enough in the higher level executive type positions.
Deflation has been a major challenge for the Japanese economy for some time, as consumer demand just hasn't been able to sustain the Japanese economy for many reasons, such as low wage growth and recently higher than normal or expected inflation.
The challenge is, companies are sitting tons of money but until recently they have refused to increase wages for the good of the economy or even its employees.
Article:
But recent data show the economy may be gradually picking up and wresting itself out of stagnation and deflation. Complicating matters is that high interest rates can make borrowing more expensive and contribute to a slowdown, just when the economy is starting to rebound.
"The data is likely to provide the Bank of Japan with more room for normalization, although the initial short-lived bounce in the Japanese yen seems to reflect some market expectations that patience from the central bank is still the likely stance," said Yeap Jun Rong, market analyst at IG.
Ideas:
The Japanese economy will indeed be increasing but can it continue to grow or is it going to start/stop like its done in the past.
At this time, what Japan doesn't need or want are increased interest rates, which are an incentive to not borrow or use money in the economy.
What the BOJ needs to do at this time is just stay the course with the low interest rate policy, let inflation runs is course as is.
Maybe, for example, in 2024, if and when the Japanese economy continues with sustained economic growth, the Bank of Japan and then begin to gradually increase the key interest rate.
Have a nice day and be safe!
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.