IMF lifts Japan's 2023 growth forecast to 2% on brisk inbound tourism
WASHINGTON (Kyodo) -- The International Monetary Fund on Tuesday lifted its 2023 growth forecast for Japan to 2 percent, up from its 1.4 percent prediction in July, citing "a surge in inbound tourism" as one of the major factors.
As more foreign travelers choose Japan as a holiday destination, drawn by their much-increased spending power due to the yen's recent weakness, the notable revision to the IMF's World Economic Outlook report is also attributed to pent-up demand, a pickup in auto exports and the impact of long-standing accommodative monetary policies.
Ideas:
In 2019 Japan had a record number of foreign tourists at maybe 30 million for the year. The numbers in 2023 might not be that high but its going to be close. And most likely, if the Japanese yen remains weak 2024 will be a record year.
I remember traveling to Japan, Haneda International Airport, from South Korea, and the lines at the immigration counters were very long that fall.
Even in Feb. of 2023, just after Japan opened again, Haneda was busy with long lines but the process was much smooth with not much a wait in the immigration lines.
An estimate of 2 percent might be just right as consumer spending seems to be holding its own, despite the continued inflation in Japan, and as maybe pend-up demand in the Japanese economy among Japanese consumers is still strong at this time.
No doubt the Bank of Japan's monetary policy must be a positive factor in the growth of the economy at this time.
As Japan is major exporter of cars to the US, and they produce Japanese cars in the US too, the demand for Japanese cars has remained strong, despite inflation still a part of the US economy, but decreasing.
Article:
After being hit hard by supply chain disruptions during the COVID-19 pandemic, Japan's auto and other export-oriented manufacturing industries have been recovering.
The number of foreign visitors, which this summer returned to about 85 percent of the level in 2019 before the outbreak of the coronavirus, is expected to increase further, given that there are some favorable developments such as China's removal of restrictions on Japan-bound group travel for its citizens in August.
Ideas:
Supply chain disruptions, while maybe not predicted or expected, the companies and their supply chains maybe could have been more proactive in considering all possibilities to protect the supply chains. Of course they probably have put into effect measures to make sure the same situation doesn't happen again.
But, to be fair, it might have have difficult to change suppliers or supply chain routes if contract had been signed and or new sources of supply maybe was hard to find at that time.
Even at 85 percent of the 2019 level, that is still a lot of foreign tourists entering Japan. What is interesting is maybe, still, global airline tickets are still high, but tourists are still going to Japan.
At the same time, Chinese tourists, again, are traveling to Japan in large numbers, despite the so-called ban in China or Japanese seafood.
And there are a record number of tourists from South Korea who are also going to Japan at this time, to take advantage of the weak yen, which gives them more purchasing power in Japan.
Article:
However, the IMF left its forecast growth for the world's third-largest economy in 2024 unchanged at 1.0 percent.
As for the entire world, the Washington-headquartered institution kept its growth forecast for this year intact at 3.0 percent and revised it downward by 0.1 percentage point to 2.9 percent for 2024.
Ideas:
Even though the IMF might have set 2023 at 2 percent growth, maybe for 2024 1 percent is about right, as in the past, the Japanese economy, as tradition goes, barely gets above 1 or 2 percent in economic growth.
Even though there are signs of improvement in the Japanese economy, its going to take some major changes to see real sustained economic growth in the future, as Japan has some significant structural challenges to overcome, such a labor shortages in most sectors, a deceasing birth rate, an ageing society, and younger people who are either too choosy about jobs and or are looking for a better work/life balance in their jobs.
For the rest of the world, economic growth of 3 percent might be correct as there are pockets of not so good growth around the world, and for example China might be only 5 percent at best.
Article:
Both projections are lower than the 3.5 percent growth estimated to have occurred in 2022.
The reasons behind the latest forecasts include a slowdown in the Chinese economy offsetting continued robust growth in the United States.
Among major economies, the IMF said the United States has seen the strongest recovery. The country's 2023 projected growth of 2.1 percent was up 0.3 point from the previous report released in July.
Ideas:
The Chinese economy, too, has some real structural problems that is has to work through. But most of the challenges are maybe as the Chinese economy begins to transition from an emerging economy to an advanced economy status, there are challenges that they need to work through before economic growth can be strong again.
The US economy, despite inflation continuing in the US, but at a much slower rate, the US economy has continued to grow, and might be one of the strongest, if not the strongest of any advanced economy at this time.
Because the US economy continues to be strong, it bodes well for Japanese, South Korean, and maybe even Chinese exporters sending their products to the US.
Article:
The updated report revised upward its U.S. growth projection for next year to 1.5 percent from the previous 1.0 percent, as private consumption in the world's largest economy remains solid amid a historically tight labor market.
Meanwhile, China's growth estimate for this year was revised downward to 5.0 percent from 5.2 percent and for next year to 4.2 percent from 4.5 percent.
Ideas:
A tight labor market in the US could be because of many reasons, such as workers being choosy about the work they need to want, more workers choosing better work/life balance possibilities, and maybe even a lower labor pool that before the pandemic.
Consumer spending is the US is estimated to be about 60/70 percent of GPD, and what that means consumer spending, or consumer sentiment needs to remain strong for the US economy to grow.
Again, China has to work through some significant structural challenges as its economy transitions from a emerging economy to eventually a major advanced economy in the future.
It could take China up to a decade to completely transition due to its geographic size and size of its population. So an estimate of 4.2 percent might be about right for China next year.
Article:
"China's growth momentum is fading," the IMF said, noting that the country is facing challenges such as "the property sector crisis" that has continued to push down housing prices and "elevated youth unemployment" that surpassed 20 percent in June this year.
It said those negative developments have undermined consumer confidence.
Ideas:
In every economy, consumer confidence and or consumer sentiment is very important. And as youth unemployment in China continues to get worse, that means Chinese young people are not going to spend much or anything at all.
Most likely, like many young people these days, like in South Korea, and Japan too, they are looking for jobs in large companies, but maybe there are not enough jobs for all job seekers, so the don't continue to look for work and or don't want to take a job as a small or medium size company.
The housing market in China is another challenge that China and Chinese households have to deal with. As housing prices continue to go down, that might be OK for new home buyers but its not good for existing home owners who are looking for better equity from their homes.
Article:
The euro area's growth is forecast to stay at 0.7 percent in 2023 and 1.2 percent in the following year, down 0.2 point and 0.3 point, respectively, from the previous projections.
The report, released ahead of the IMF and World Bank annual meetings in Marrakech, Morocco, said the euro area's economic recovery is not yet strong enough, partly because of greater exposure to Russia's war in Ukraine and a jump in the cost of energy imports.
Ideas:
Recently or traditionally, the EU hasn't grown that much in the past few decades. Part of the reason for that is the large number of countries that make up the EU, when maybe many of them such Greece and Italy have slower growth than the rest of the EU.
And then add in the Ukraine war situation and that makes economic growth in the EU not so good.
But lets not forget that the EU, unfortunately, might still be dependent on energy from Russia or it region, where energy prices might be very high.
Even Germany, an export powerhouse, is having challenges at this time, which is dragging down the EU growth forecast.
Have a nice day and be safe!
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