Japan Economy Contraction: Updated June 16, 2024.

 

Japan's economy contracts annualized real 2.0% in Jan.-March

Article Source:  https://mainichi.jp/english/articles/20240516/p2g/00m/0bu/017000c

Ideas:

This is a common trend with the Japanese economy, some quarters, a slight increase and then some quarters a slight decrease in GDP. But to be fair, the Japanese economy never completely collapses as always testers on some slight increase or some slight decrease.

And another common trend has been consumer spending, or domestic demand, has never been where is should be as the 4th largest economy in the world.

You would expect the 4th largest economy to have a larger consumer demand base but that doesn't or has never been the case for the Japanese economy. Even though consumer spending is estimated to be about 50 percent of GDP, it never seems that it that much.

An annualized contraction is if the economy stayed the same for 4 quarters, but of course an economy, any economy, never does that, as there are many different sectors involved in a economy.

And yes the Toyota group situation might have reduced export sales and shipments as it could be a challenge related to future exports in the future.

A rate hike is usually never called for when there is slow growth, and a rate decrease is the usual strategy, but in Japan's situation, maybe they have had a low interest rate policy for a little too long.

The Bank of Japan might increase the rate during the summer, but they of course will be cautious as they don't want to scare the financial markets with too much of an increase.

At the same time, the Bank of Japan knows it needs to be be very careful about how it handles the weak Japanese yen, and a weak yen is very good for foreign tourists who go to Japan and spend a lot as the weak yen gives them more purchasing power.

But there is also the idea that many/some locals are becoming unhappy with the foreign tourists in Japan, with regard to how they behave in Japan, and maybe some might think there are now too many foreign tourists entering Japan.

So the Bank of Japan, just might try to increase the weak Japanese yen, as a way to discourage come foreign tourists, as maybe a stronger yen might be too much for some tourists.

Again, consumer spending has never been one of the strong parts of the Japanese GDP, as it seems exports have always carried the Japanese economy, and maybe too much.

And of course government spending has always been a strong component of Japan's GDP, as for the most part, the Japanese government is a big spending government.

So the Japanese government is more like a EU government and not like the US, but in recent years the US government has spent a lot too.

For example, the Japanese government debt to GDP is the highest or one of the highest among advanced economies and OECD countries.

Exports seem to be more important than consumer spending in the Japanese economy, as consumer spending, again, just doesn't seem to be that much compared to exports,

And yes, the Japanese car industry, with 8 or 9 car companies are a major economic driver in the Japanese economy.

But these days not just the Toyota group, but all Japanese car companies have become targets of government inspections into testing situations.

Nominal GDP is really not that important as the real GDP and real wages are what affects the average Japanese household.

The average Japanese household doesn't think real or nominal, as it only sees its wages as what is important and how much it goes related to continued inflation in Japan.

Again, the Japanese economy always continues onward and never really collapses, as it move up or down and even if it is a 600 trillion yen, its a very stable economy, with periods of up and down.

Have a nice day and be safe!