Japanese Govt. To Keep Same Economic View: Updated Feb. 23, 2024

 

Japan keeps economic view as firms upbeat, inflation eases

Article Source: https://mainichi.jp/english/articles/20231219/p2g/00m/0bu/038000c

Ideas:
The Japanese economy might be improving at a moderate pace, but what does the average consumer feel about the economy, related to inflation and prices?

Just what is corporate sentiment, and do all companies feel the same way, and some companies might b doing better than other companies, and the same with different sectors, some might be doing better than other sectors.

Are consumers prices increasing due to an increase in consumer demand or are consumer prices increasing due to companies continuing to pass-on their costs to the next in the supply chain, including the final customer.

Inflation might be slowing, but has it slowed enough to relieve the stress on households and their budgets?

Maybe, consumers are somewhat accepting with the idea that companies are passing-on their costs and again consumer maybe are OK with the idea and continue to spend and or consumers are resigned to the fact that prices are going to remain high and still continue to spend.

Maybe in May or June 2023, Japan completely lifted its pandemic restrictions and you would think by now consumer demand would have recovered back to normal. 

But consumer spending is never normal in Japan, as consumer spending is much lower than in the US due to several reasons such as an economy with a lot older citizens who tend to spend much less.

Consumer spending is about 50 percent of Japan's GDP, and maybe that is where is should be as Japan is a country of savers, as compared to the US as a country of spenders.

Economies go through business cycles meaning there might be quarters of positive growth and quarters of negative growth. A pause didn't mean everything or all economic activity has stopped, but maybe just slowed down to the point its now noticeable.

But it must be remembered, even though an economy has a quarter of negative growth, doesn't mean everything in an economy has stopped, as there might be some sectors with good growth and some sectors with less than good growth.

The July-September quarter might have been a challenging time as the weather in Japan during the summer saw record temperatures which might have limited travel or going out and doing things.

Also the hot weather in Japan continued well into September, as maybe consumer spending on fall or winter clothes might have decreased some too.

Most households and consumers probably don't pay attention to the financial and capital markets, as for the most part, they are not part of a households everyday life. The Japan stock market might be at record levels, but again, it doesn't reflect the real economy, which is households, jobs, and consumer spending.

Consumer sentiment might be both positive and negative as inflation is mostly an individual household situation, as maybe some households feels a lot stress related to increased prices and inflation, while some households might even notice the increase in prices that much.

Real wage growth, for the most part, has only affected the workers of large companies and not the 70 percent of workers in Japan who work for small and midsize companies, who didn't get a wage increase in April of 2023.

Consumer inflation might be slowing, but has it slowed enough to finally not have significant effects on consumers?

Fresh food prices are subject to changes in growing seasons and the weather, as this past summer was a very hot growing season, which might have limited the supply of some fresh food such as vegetables and fruits.

Private consumption or consumer spending might be "picking up" but is it sustainable over more than a quarter and can it last for a full year in Japan. Past data suggests its not sustainable as consumer spending is very fragile in Japan.

Here we see the word "pausing" again, which might mean business investment is never a monthly situation and always has periods of ups and downs, and that might have nothing to do with business or economic conditions.

Exports in Japan is a economic driver, which means it has significant effects on the growth of the Japanese economy. For example Japanese cars might be the main driver of exports for Japan.

The US Federal Reserve has not increased in key rate in months and plans to reduce the rate in 2024 as the US economy continues its strong recovery.

Yes, the Japan key interest rate and the US rate are far apart, which means the Japanese yen will remain weak and the US dollar will remain strong.

But a weak Japan yen is a boom for Japanese exports like Japanese cars, but not so good for Japanese importers, as Japan is relatively resource-poor country, which means Japan has to import much of what is needs and the weak Japanese yen, increases the price of imports in Japan.

The global economy is always in a "picking up" stage as there are always areas of good growth and areas of not so good growth such China at the present time, which is going through some restructuring of its economy.

Have a nice day and be safe!