Japan Economy Passed by Germany: Update May 30, 2024.

 

Japan eclipsed by Germany as No. 3 economy in 2023, enters recession

Article Source:  https://mainichi.jp/english/articles/20240215/p2g/00m/0bu/013000c

Ideas:

It highly unlikely that many Japanese citizens, if only at all, really care  the country is No. 3. or No. 4. 

They are more concerned with their daily and how they are going to pay the bills. Yes, GDP can be seen as important, and or course the higher the GDP usually the better off a country is, but these days, many Japanese workers wages/salaries are much less than many or most OECD countries.

Of course Germany too is in a recession or a near recession, so they too are not doing too good, at the moment.

Even if the Japanese economy shrank 0.1 percent from the previous quarter, that is still within the margin of error, most likely, really is not that significant overall.

But Japan is always, recently in and out of technical recessions and again, maybe most Japanese citizens don't really know they are/were in a technical recession, and maybe they are only thinking about prices and paying their bills.

Usually, in other economies and central banks, they might think about increasing the key rate as a way to lower inflation and or increase the rate if in a recession, but the Bank of Japan seems to have their own way of thinking, and maybe rightly so.

Why is the idea of negative growth in the Japanese economy a surprise as economic growth has not been too good the last 30 years. So to predict a 1.28 percent expansion might have been too soon to be completely positive, just yet, even though wages are going to increase in April.

Domestic demand too, for the most part, has never been a strong economic driver for the Japanese economy, as there might be many reasons for consumer spending and consumer demand in the Japanese economy never reaches its potential like in the US or the EU.

It goes all the way back to the early 2000's and the Toyota situation and not giving wage increases to their employees and then all the other companies followed their example.

Yes, the euphoria of the pandemic ending most likely faded a long time ago, as most Japanese households settled into their normal post-pandemic lives, which of course included living with inflation and higher energy and household costs.

And again consumer spending by Japanese consumers was/is never like US consumers who tend to, or use to, spend like crazy, while Japanese consumer were always more cautious about their spending.

Whether good or bad, an economy needs some extravagant spenders and not just cautious spenders, but Japan, maybe the Japanese character, as too many cautious spenders.

Capital spending is usually never a monthly situation and most of the time it might be just in April at the beginning of the new year.

Companies sometimes, for public relation purposes, will talk about big plans as way to impress stockholders to get then to invest in the company, with no real plans for capital investments.

Structural reforms are very much a company to company situation and many companies are reluctant to invest in whatever is needed for structural reforms.

Wage increases are good and needed, but all companies, large, midsize, and small companies need to increase wages, or otherwise the Japanese economy will be an economy of haves and have nots.

You ask the average Japanese citizen what all these numbers mean and most will say they have no idea, as they are only concerned with paying their bills, getting their paycheck and living their lives as is.

Japanese exports are still an important economic driver, meaning they contribute to economic growth significantly.

The same can be said for foreign tourism, as a lot or foreign tourists now to go Japan and spend a lot due to the weak Japanese yen, which gives tourists more purchasing power.

So the Bank of Japan needs to be careful about the yen as it being weak brings more foreign tourists to Japan, but if the Bank of Japan increases the key rate too much, it might cause the weak yen to get stronger which could cause some foreign tourists from going to Japan.

Have a nice day and be safe!