Japan's GDP falls 2.1% in July-Sept., 1st contraction in 3 quarters
TOKYO (Kyodo) -- Japan's economy shrank an annualized real 2.1 percent in the July-September period for the first pullback in three quarters, reflecting sluggish private consumption amid elevated prices and weak capital investment, preliminary government data showed Wednesday.
Real gross domestic product, the total value of goods and services produced in the country adjusted for inflation, decreased 0.5 percent from the April-June quarter, according to the Cabinet Office.
The figure was worse than the average market forecast of an annualized 0.42 percent contraction in a poll conducted by the Japan Center for Economic Research.
Ideas:
Annualized projections are what might happen if the same amount of activity was for the entire year. It doesn't mean that it is going to be the final result, as an economy is very complex and there are quarters of good growth and periods of not so good growth.
But at the same time, as inflation continues in Japan, private consumption of consumer spending it taking a hit meaning consumers might be cutting back on how much they spend.
Weak capital investment might be related to companies feeling not so good about the Japanese economy and maybe are waiting for better situations in the Japanese economy.
Whether 0.42 or 0.5 is not that big a difference when you consider the margin of error in statistical projections. Even so, 0.5 percent is not that big of a decrease in GDP.
Article:
Private consumption fell 0.04 percent, dropping for the second quarter in a row, on the back of a slump in car sales and spending on food items even as households loosened their purse strings for eating out amid an easing of coronavirus restrictions.
Business investment decreased 0.6 percent, down for the second straight quarter, mainly hit by slowed expenditure on equipment used for the production of semiconductors.
Consumer spending for the third quarter of this year "lacked dynamism" amid inflation, while poor capital expenditure possibly reflected "a cautious view on overseas economies prevailing among businesses," said Keiji Kanda, a senior economist at the Daiwa Institute of Research.
Ideas:
Private consumption or consumer spending or household spending, however you want to describe it at a decrease of 0.4 percent, again, is not that much of problem, as there could be more reasons than just increased or continued inflation of the decrease.
For example the summer and early fall had record high temperatures in Japan. So maybe consumers waited to buy late fall or winter clothing. At the same time, because of the record heat in Japan, maybe some households or consumers didn't travel or do things as much outside.
Business investment is always a mixed bag of reasons for or against spending either in Japan or globally. It always seasonal or quarterly as business all don't spend exactly the same week or each month or each quarter.
Consumer spending " lacking dynamism" is a constant part of the Japanese economy as consumer spending, while 50% of GPD, just doesn't reach the level needed for significant economic growth.
Article:
Exports gained 0.5 percent, supported by brisk car shipments amid the yen's weakness against the U.S. dollar.
But growth decelerated compared with a 3.9 percent jump in the previous quarter, partly due to China's ban on Japanese seafood imports following the release of treated radioactive water from the disaster-ruined Fukushima Daiichi nuclear power plant into the ocean, according to a government official.
Exports of services were down 0.2 percent, as consumption by inbound tourists fell for the first time in five quarters.
Ideas:
Japanese exports are a key economic driver in Japan, as a key driver has a significant affect on economic growth.
Of course the weak Japanese yen has increased profits as a weak currency helps Japanese exporters get more profits for their sales, such as in the US or the EU.
The Chinese situation is an on going situation, as the Chinese ban on Japanese seafood seems to be partly politically motivated. As for example there are still many Chinese tourists to go to Japan and they each a lot of Japanese seafood such sushi.
Its quite possible there was just a lull in tourists coming to Japan in the late summer or early fall because of the record high temperatures in Japan and the high of airline ticket prices have continued.
Article:
Imports, whose growth impacts GDP negatively, rose 1.0 percent, compared to a 3.8 percent decline in the previous quarter, as royalty payments by Japanese firms to foreign companies swelled, the official said.
Government spending climbed 0.3 percent as medical care costs grew, while public investment saw the first decline in six quarters.
As for the outlook, Kanda said that the world's third largest economy is expected to "remain on a mild recovery path, although far from being strong," projecting around 3 percent growth in the October-December period.
Ideas:
Imports actually reduce the Japan current account while exports increase the current account. Imports have to be paid for to overseas companies or wholesalers and so on.
Japan is very much a resource poor country and because of that the weak yen, makes imports more expensive in Japan, which affect GDP growth.
Government spending was only 0.3 percent, as usually the Japanese government is a big spending government related to many things.
At the same time, as Japan is more and more an ageing society, medical care costs might continue to increase in Japan.
"Remaining on a mild recovery path, although far from being strong," is a not really a bad sign as a mild recovery is still better than nothing, but of course stronger growth is what is needed to get the Japanese economy out of its stagnation phase.
Article:
"There is still room for recovery" in private consumption, Kanda said, noting that auto production has yet to catch up with orders following production suspensions at some of automakers' domestic factories. He also pointed to a rise in the minimum wage and an expected slowdown of inflation as positive factors.
Annualized real GDP in the July-September quarter totaled about 555 trillion yen ($3.7 trillion), staying above the pre-pandemic level of some 540 trillion yen logged in the October-December period of 2019.
Nominal GDP was down 0.04 percent from the previous quarter, or 0.2 percent at an annualized rate.
Ideas:
Private consumption or consumer spending has always been the weak spot in the Japanese economy. Beside inflation continuing there is also the idea that Japanese wage earners, for the most part, have not reached significant wage increases for many years, if not decades.
The there is the idea that Japan is an ageing society, and the older groups usually don't spend as much as the younger groups. But something else might be happening, and this is global too, as the current group of young wage earners are actually worse off than their parents, and just don't have the income or extra income at their parent did at the same age.
The minimum wage situation meant to help part-time or contract workers actually might make the situation worse. As maybe some companies can't afford the extra payments to workers, such as many service type companies that rely on paying minimum wage or not much more than that.
For example, as in South Korea, many companies reduced hours of part-time workers, or laid-off part time staff as their profit margins couldn't handle the extra pay required by the South Korean government.
Again annualized GPD or growth is just a projection for what might happen if they same situation existed for a year. But rarely do the exact situation exists for a entire year and an economy is very complex and many things can happen during the year.
Have nice day and be safe!
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