Japan Industrial Output: Update June 30, 2024.

 

Japan's industrial output in May rises 2.8% on increased car output

Article Source:  https://mainichi.jp/english/articles/20240628/p2g/00m/0bu/021000c

Ideas:

If you check the business or economic news in the US. you might not see much related to industrial output, even tough industry is important its not in the news that much.

The Toyota group and Daihatsu are probably going to be watched very carefully now as the quality test situation is going to be with them for a long time. 

Even at 103.6 for the industrial index that might be too low some investors who are not happy as they might want to see it even higher. 

Unfortunately, these days, investors expect perfect results and when an industry or company doesn't show or report the results want they get very upset.

Again, Daihatsu and the Toyota group of companies are now going to be watched very carefully and many now don't trust whatever the Toyota group does now. They have to be almost perfect in everything or try to be as transparent as possible in everything they do now.

Auto production for overseas markets continue to be strong and might stay strong for a long time, which is good news for the Japanese car makers.

Hybrid cars are now the future, not they are the present, and any car maker that isn't in the hybrid game as this time is going to be left behind.

And also any car maker that isn't producing EV cars is behind in the market too, as the EV market is going to be bigger than the hybrid market in the future.

The car parts supplier market is a huge market in Japan and includes a lot of small and midsize companies, so even though there are maybe nine car makers in Japan, there might be thousands of car parts suppliers in Japan supplying parts to the nine Japanese car makers.

And its quite possible, since the car market is very much integrated and global, that many Japanese car supplier companies are doing business and supplying car parts to overseas companies too.

And yes, most likely, consumer sentiment has improve enough that they are beginning to buy cars again in Japan, as maybe inflation and the lack of wage increased slowed consumer spending.

Fluctuations in the manufacturing industry is normal as they are always slowdowns due to logistics challenges, material shortages, work stoppages due to equipment stoppages and so on.

And of course, these days, the shortage of semiconductor parts, for all things electrical it now a major problem for many industries, and its getting worse not better and demand continues to increase, but supplies are low.

While the Japanese economy, overall doesn't seem to grow that much the industrial complex in Japan keeps on moving forward. 

Again, there seems to be two separate economies related to Japan, one being the industrial economy, which continues to be robust and growing,  and the consumer spending economy, which continues to be weaker than it should be.

Inventories need to be watched very carefully, and if inventories grows too much that might be an indication of weak demand, and or estimates were not configured correctly.

If inventories begin to accumulate too fast that is definitely as sign of either the forecast for the demand for some products were not figured correctly and again, its a good sign, that demand for some products as slowed significantly.

Japanese car makers and not just the Toyota group, again, are going to be watched very carefully for a long time as they are not going be trusted with the quality test results.

Japanese car makers are going to be very careful now as there trustworthiness might be in question due to the test situation.

What makes companies cheat on quality control tests? Are there any real consequences for them, or do they just apologize and move on. 

It seems Japanese companies are now like western companies and have to meet specific targets related to investor demands and if they don't CEO's lose their jobs. 

Japan used to be a little different, but its seems investor pressure has taken over in Japan too.

Have a nice day and be safe!

Japan Convenience Stores: Updated June 22, 2024.

 

Japan convenience store sales up 1.2% in May as visitors increase

Article Source:  https://mainichi.jp/english/articles/20240620/p2g/00m/0bu/043000c

Ideas:

Visiting convenience stores in Japan is like a hobby of mine, as I always like to see all the things that they offer. 

I'm not sure of convenience stores in the rest of the world, but between South Korea, the US, and Japan, Japan's convenience stores are world class and the other two countries don't even come close.

The offerings in a Japan convenience store is unbelievable and the food offerings are excellent, for a convenience store. Even though I wouldn't do it, but you could live on the fresh food offerings in a Japanese convenience store.

South Korean convenience stores have taken notice and now are trying to use the best practices of the Japanese convenience store industry in Japan.

Also, a news report in South Korea claims South Korean convenience stores openings in Asia have now surpassed Japanese convenience store openings, whether true or not its interesting, as maybe they have learned from the Japanese convenience store industry and applied the best for new openings.

With regard to foreign tourists in Japan, its easy to go to a Japanese convenience store and get almost any food choice you want without having to go to a Japanese restaurant.

And the same with Japanese workers, who might visit an convenience store before going to work and then they don't have to go to a Japanese restaurant at lunch.

There are some challenges that Japanese convenience stores faces such as finding workers willing to work late nights is a challenge. along with some convenience stores are operated by husband and wife team, as a second income after the husband retired from his first job.

A recent news article stated, whether true or not, that maybe 80,000 foreign students are working at Japanese convenience stores, which might indicate Japanese students don't want to work at convenience stores and or don't want to work for minimum wage.

Also, as with many service type food places, the profit margins are very thin, and as such they can't afford to pay that much in wages.

Whenever I go to McDonalds or Mos Burger in Japan I see only older workers and never any Japanese students working at those places.

Japanese convenience stores, like many stores in Japan, still use cash, paper money, and coins in their stores, but more and more are using smartphone payments and of course credit/debit cards are very common.

In South Korea, it seems only smartphone payments and cards are used an almost never any cash is used.

Most some or many Japanese convenience store companies are now beginning to use AI as a way to track customers and what customers want and need.

Lets hope Japanese convenience stores don't go completely automated, which takes the human element out of buying things.

There always has to be or should be a human element in buying things, even if its just a clerk on standby to help as needed.

Like Uniqlo in Japan, which has automated checkout areas, but sales staff are always near buy to assist customers who have challenges with buying things.

Its doubtful that Japanese convenience stores are going to completely change but no one knows the future exactly.

What has worked in the past is still good, but of course innovation is always good, as long as the customers remains important, and the employee too feels important.

Have a nice day and be safe!

Japan Core Consumer Prices: Updated June 26, 2024.

 

Japan's core consumer prices up 2.5% on year in May

Article Source: https://mainichi.jp/english/articles/20240621/p2g/00m/0bu/020000c

Ideas:

Inflation continues to be a challenge for not only Japanese households but Japanese businesses too. Ever since the pandemic inflation has been a challenge for the Japanese economy, and it doesn't seem to be ending anytime soon.

And at the same time, the weak Japanese yen has caused the prices of imports to be even higher than normal, which puts more stress on households and Japanese businesses.f

Normally, central banks, whether good or not so good, will increase the key interest rate as a way to try and lower inflation, but the Bank of Japan has decided to just let inflation run its course and not really intervene that much.

The Bank of Japan's idea of 2 percent inflation target seems to be out of reach at this time, and it might be out of reach for the next year, until maybe the weak yen can be reduced, which might make the variance between the US key rate and the Japanese key rate much more equal, if at all possible.

The US central bank of US Federal Reserve says they only plan on one key rate decrease this year or this summer, which means the variance between the Bank of Japan and the US central bank is not going to be reduced anytime soon.

Energy prices are subject to the weak yen and global supplies and Japan is resource-poor country which means it has to import much of what it needs including energy.

There have been many programs on Japanese TV which has talked about food prices and how much so much can buy these days. Even friends in Japan say 5,000 yen used to buy a lot but these days doesn't buy much at all.

Wage growth might not have an affect on Japanese households until maybe after the summer season or Obon season, and then maybe Japanese households can see the affects start to help.

Service prices, due to increased demand and service companies trying to make up for losses during the pandemic have probably increased a lot.

For example, as I survey some of the hotels in Yokohama, that I usually stay at, the hotel prices have increased a lot during the past two years.

Again,  service type companies might be increasing prices not just because of increased demand, but because of the need to makeup for losses during the pandemic, where service type companies were hit the hardest and lost a lot of sales and profits.

Not all Japanese workers got the same wage increase as large company workers did. Some might have gotten much less and again there will be haves and have nots in the Japanese economy related to wage increases.

The BOJ and the 2 percent inflation target might not be reached soon if only large companies reach the 5 percent wage increase level, as some 70 percent of Japanese workers don't work for large name brand Japanese companies.

The Bank of Japan's target has never been close and as always seemed some distance away, as inflation continues to be a major challenge for the Bank of Japan and the Japanese economy.

Yes, Japan is a resource-poor country, which means it has to import much of everything that it needs, from raw materials to make things, basic food, and basic energy needs.

Japan, for the most part, needs more free trade agreements with many other countries related to many items, as a way to reduce import prices and tariff prices which will help Japanese businesses and Japanese households.

Inflation will continue to be a challenge for Japan, but to be fair, even the US is still having some challenges with inflation as it hasn't completely gone away in the US too, at this time.

Have a nice day and be safe! 

Japan and Currency Manipulation: Updated June 29, 2024.

 

US puts Japan back on currency manipulator watch list after 1 year

Article Source: https://mainichi.jp/english/articles/20240621/p2g/00m/0bu/004000c

Ideas:

So if a country has a significant trade surplus with the US. that means it might be a currency manipulator. That criteria doesn't seem fair, as Japan, is a significant export trade country, its logical to do business with markets that want and need Japanese export product such as Japanese cars.

Unfortunately, some of this might be political, as in the 1980s' when Japan was flooding the US market with Japanese products, which seemed to be in high demand at that time, but US companies were upset that Japanese products were so popular in the US at that time, and maybe the problem was not Japanese products but US products which were not very good at the time.

So any country that has a significant trade surplus with the US might be put on the list just because that countries products are popular in the US. It doesn't seem logical as trade should be based on demand for products not whether one has a trade surplus. 

Japan is a resource-poor country, which means it has to import much of what it needs, and at the same time, its having challenges with inflation, which might cause its currency to be weak compared to the US dollar or Euro.

And at the same time, as Japan is a major export country, its exports tend to usually be more than imports due to the weak Japanese yen, which seems to help Japanese export companies, which means it increases Japan's current account.

You can't blame a country for doing what is does best, which is exporting its products around the world, and if countries are upset about that than those countries are upset with the global trading system in place.

The Bank of Japan chose to follow a different strategy related to inflation and just let inflation run its course and keep its ultra low interest rate policy, compared to the US and the EU, which increased interest rates, to fight inflation.

As a result, because the US rate and the Japanese rate significantly not even close together, the Japanese yen, has weakened significantly.

So its only natural that the Bank of Japan intervenes with its currency to try and keep the Japanese yen from becoming even more weaker, as the weak Japanese yen, has caused a lot of challenges for the Japanese domestic economy and Japanese importers.

So Japan is just on the list of countries that are being monitored for currency manipulation and its not the same as being on the list as a currency manipulator.

Again, its seems a little like the 1980's when Japanese products were very popular in the US and US companies went to the US government and complained that they couldn't compete with the low priced Japanese products, when it reality, Japanese products were far superior to US products at the time.

Most likely the US trade department puts out the list with no real intention of putting any country on the currency manipulator list, but more of just an idea of what is happening related to trade with the US and other countries.

At the same time, its seems China is always on the US trade departments radar, meaning its always being watched very carefully, while the other countries are just seen as having significant trade situations with the US.

And even China, might be more political than trade related as there might be a trade war with China that has spilled over to the political side and not just the trade side.

But back to Japan, as Japan is going to do what its going to do, being a major export country and as its Japan's products are popular globally, including in the US, it will continue to export to the US or any other country where Japanese products are popular.

And its going to monitor the Japanese yen, and inflation, and take the needed and appropriate action to help the Japanese economy, regardless of what the US wants or thinks.

Have a nice day and be safe!

Japan Trade Deficit: Updated June 25, 2024.

 

Japan logs $7.7 billion trade deficit, exports hit record in May

Article Source:  https://mainichi.jp/english/articles/20240619/p2g/00m/0bu/008000c

Ideas:

Japan's current account, lately, seems like a rollercoaster of ups an downs due to the weak Japanese yen.

Exports, for the most part, seem to be robust but so does imports. The problem is the weak Japanese yen makes imports more expensive and their value goes up which causes the Japanese trade deficit.

A trade deficit happens when imports are more than exports. Traditionally Japan has been a trade surplus economy, but lately, because of the weak Japanese yen, it has become a trade deficit economy.

Its not the volume of imports that is causing the problem, its the value of imports related to the weak Japanese yen.

Again its the value of imports that is causing concern, as the export volume most likely is still more than the volume of imports but the weak Japanese yen is causing all of the challenges for the Japanese economy at this time.

An economies current account is like a country's bank account, and imports take money/yen out of the account but exports put money into the account.

Golden Week in Japan is always slow for the Japanese economy as most companies take the week off and of course not much is produced or shipped during that week.

Even a 15 percent decrease in the Japanese yen can be significant for Japanese importers and for other companies as Japanese importers will pass on their costs to the next in the supply chain, including the final customer.

And of course, the Japanese car industry is a significant economic driver for the Japanese economy, meaning it helps significantly with economic growth.

The Japanese economy is still the 4th largest economy in the world, after being passed recently by Germany. But its still a large domestic economy, but for the past 50+ years its been focused on exporting and not so much on the domestic economy.

The US economy seems to be the one bright spot in the world now, despite all of its political challenges.

However, like before the pandemic, when Japanese companies became too dependent on Chinese tourist going to Japan, Japanese companies that export to the US need to be aware that, even though things seem stable in the US, there is always the chance that demand for Japanese products could decrease some.

Its easy to say, and of course Japanese companies are always looking to improve in other markets, but when the good is good, its hard to change things such as when US demand its very good, why change?

The Chinese economy might still be going through a period of transition from an up and coming economy to a quasi-advanced economy. 

But every since the pandemic, it seems the Chinese economy just hasn't been the same, as there are some structural challenges still in the Chinese economy.

As China is still a major trading partner with Japan, Japanese companies are going to stay the course until the Chinese economy finally gets back to some kind of normal.

The Asia market is a very large market and its more than just China and South Korea, as the other countries have significant economies too.

The EU, excluding the United Kingdom, its having its own challenges, and of course the Ukraine war might still be causing some economic challenges in the EU.

But take away the Ukraine situation, and the EU is still not where it should be as its economic growth its barely at 1 percent if even that.

But the main challenge for the Japanese economy is that its a resource-poor country and has to import much of what it needs, which makes it very susceptible to the weak Japanese yen with higher than normal import prices.

Have a nice day and be safe! 

BOJ and Policy Rate: Updated June 20, 2024.

 

BOJ likely to keep policy rate unchanged, debate bond purchases

Article Source:  https://mainichi.jp/english/articles/20240613/p2g/00m/0bu/017000c

Ideas:

Most likely the Bank of Japan understands that if it changes its ultra-low policy too fast and too much, it could cause a lot of side effects in the Japanese economy. 

At the same time, the Bank of Japan might be under pressure to increase the rate, as the weak Japanese yen is causing major challenges for importer in Japan.

So the Bank of Japan has move slowly, and at the same time, the Japanese economy, again, has contracted, which means the Bank of Japan will most likely not do much related to increasing the key rate.

The Bank of Japan might not guide monetary policy that influences foreign exchange rates, as it doesn't want to be seen or labeled as a exchange rate manipulator which some central banks are considered to do.

Its a very thin line between currency balance and manipulation and the Bank of Japan might be skilled at balancing and not manipulating.

The weak yen is both a positive and a negative for the Japanese economy, as it hurt importer and importers but helps foreign tourists that come to Japan.

There is a wide variance between the US key rate and the Japan key rate, which influences the Japanese yen, so the Bank of Japan, looks like, this year, its not going to get much help from the US, as the US is only going to lower the rate one time.

The Bank of Japan might say its going to do something, but in reality, there is not much it can do at this time, as the US/Japan key rate variance is just too far apart.

Inflation in Japan might be decrease some, but it still too high for most Japanese households and as such consumer spending is going to remain reduced until inflation is reduced to a level that Japanese households feel good again.

Central banks, including the Bank of Japan, might spend, as needed, within limits as a way to balance its currency with other currencies, but they have to be careful to make sure they are not manipulating the currency.

Its going to take time for Japanese households to see the effects of the wage increases as inflation has overshadowed the wage increases and there might not be any real notice until after the summer season this year.

But it must be remembered that not all Japanese households or Japanese workers got the same wage increase or the same amount that large company workers got, which means there is still going to be a major discrepancy between large company employees and small and midsize workers.

The Bank of Japan is well aware that a sharp increase in borrowing costs will further hurt the Japanese economy along with reducing consumer spending and business investment spending too.

The Bank of Japan might continue to buy government bonds, but it only going to kick the can down the road, meaning more government debt, which at the present time, as the highest government debt to GDP than any other advanced economy.

There is always debate between government spending and reduced government spending, as there are examples of positives and negatives on both sides of the issue.

Like households, there is always talk of reducing spending and sticking to a budget and even though the Bank of Japan says it might reduce bond buying, most likely, it will continue, as needed to help the Japanese economy.

And yes, the Bank of Japan is going to be very cautious, maybe even too cautious about increasing interest rates in the future. 

But its better to be cautious than make a mistake with increasing interest rates too fast and too much, as there are many side effects related to increased rates.

The 2 percent inflation target is a long way off and it might not happen until 2025 or later, as the weak yen, inflation situation along with a stagnant economy is not going to change anytime soon.

Have a nice day and be safe

Japan And Wage Increases: Updated June 27, 2024.

 

Japan seeks wage hikes, over 1% GDP growth as population shrinks

Article Source:  https://mainichi.jp/english/articles/20240612/p2g/00m/0bu/003000c

Ideas:

The Japanese economy and society has many pressing concerns these days, but so do many countries globally too.

There doesn't seem to be any easy solutions to Japan's challenges, and if there were, they might have been solved or lessoned by now.

Being one of the fastest greying societies, doesn't help with consumer spending and of course the inflation situation makes it more challenging for senior citizens in Japan or some of them, as they might be on fixed incomes.

Labor shortages is another major challenge for the Japanese economy. But for good or not so good, Japan could have tried to solve this situation much sooner with improved immigration policies, but unfortunately, Japan has been slow to implement much that helps the labor situation.

An inflation-adjusted growth rate of over 1 percent is needed to show or indicate improved consumer spending in the Japanese economy, as consumer spending it they key for any large advanced economy, but its been lacking in recent years in Japan due to continued inflation.

And especially as the birth rate in Japan, like other countries, continues to decrease more and more consumer spending is needed to help the social security system maintain its current level.

And yes, Japan's government debt to GDP is the highest in the world among advanced countries, but its not an easy situation to solve. Its like households who try to keep a budget but there are always situations and or emergencies that come up that keeps households from sticking to their budget, and the same with governments.

All plans are good, but in the end, with politics, things always change. Yes, there are good and needed intentions, but in the final outcome, what was originally proposed, usually is not the final product.

So, yes, the Japanese government knows and understands it needs to reduce the government debt, but can it really do it or will different political factions water-down the original idea to where the government doesn't really reduce the current debt situation.

But its the same with all governments, who make or have good plans but they get watered down by different factions within the government.

Short on details seems to be true of many different governments as they try to make the ideas as flexible as possible, but they don't really give any real detailed ideas how they are going to solve the problem.

Yes, a 2 percent inflation target is good and needed, and even more wage growth over the 2 percent inflation target by all companies is needed to ensure there is adequate growth in the Japanese economy.

Wage growth in the Japanese economy is very much needed, as the debacle, first started by the Toyota group in the early 2000's has slowed wage growth for decades and now Japan is trying to play catch-up and even the 2023 wage increase and the 2024 wage increase might not be enough to help the economy recover from many years of no wage increases.

If the Japanese government can easily solve the problem, now it would be good, but it seems the situation is very complicated and its going to take some time before all of the significant variables are in place to get the Japanese economy growing again.

Wage increases are the key, or one of the most important variables, but all companies have to play their part in giving needed wage increases, and not just large name-brand companies, but small and midsize companies too.

The other variable is inflation, and the Japanese government and or the Bank of Japan, has to find a way to decrease the current inflation below the wage level increases, so that Japanese households can feel good about their wage increases and again begin to spend in the Japanese economy.

When that happens, then natural inflation related to consumer demand and consumer spending will replace the cost-push inflation, which is related to companies/importers passing on their costs to the next in the supply chain.

Yes, a temporary fix, but a needed fix, as Japanese households have been hit with inflation ever since the pandemic period.

It might be good, if possible, but of course it might increase the debt, but two or three more 40,000 yen payouts would really boost the Japanese economy and might get people spending again.

Not to say anything not so good of the Japanese government, but its taken a long time for any action related to inflation and or subsidies, beyond the energy subsidies in the Japanese economy.

A minimum wage increase is very much needed in Japan, as it might be a boost to get more young Japanese students back to the workforce, as they seem have left many of the service type jobs/companies that rely heavily on minimum wages.

Japanese need the ability to move from one job to the other, as there seems to a difficulty in changing jobs in Japan. At the present time, Japan's workforce seems to be to rigid and or not very flexible to allow workers to easily change jobs.

For example, why should a Japanese worker need or have to use an agency to tell their current company they are leaving, as maybe they are afraid and or afraid of what the current company will say or do.

Automation and digitalization is good as long as it doesn't displace some current workers, who probably at this time worried about their jobs being replaced.

Japan. long ago, lost the war with semiconductor chips to South Korea and Taiwan, and even China, but only recently has it began to get back into the game, and it might take a few years before any significant change take place.

All of the above ideas are good and needed, but again, governments come up with great plans but sometimes, due to economic pressures, or governments needs in other areas, they sometimes are forgotten or take a long time to get started. Lets hope the Japanese government can stay focused and do what they need for the Japanese economy to grow again.

And yes, Japan needs to expand globally and just focus on China and the US, but all areas of the world, that might be new niche markets as more and more countries, middle class, keeps growing.

Again, it seems Japan has fallen behind related to chips and artificial intelligence, and even if they haven't the image of Japan falling behind seems real.

Yes, Japan is a resource-poor country, Japan needs some energy FTA's with energy producing countries so that that when the energy markets begin to increase prices Japan doesn't need to worry too much about the supply and demand related to global energy prices.

Nuclear power might still be a negative in Japan after the Fukushima situation, but despite that its still a cheap source of energy that Japan needs to find a way to use safely and correctly.

The Japanese government should keep the energy subsidies for a long time or at least until wage increases begin to take affect and Japanese consumers feel good about spending again.

Have a nice day and be safe!

Japan Current Account: Updated June 19, 2024.

 

Japan logs current account surplus of $13.1 billion in April

Article Source:   https://mainichi.jp/english/articles/20240610/p2g/00m/0bu/005000c

Ideas:

It must be remembered, as the Japanese yen is weak anything overseas will be inflated. Of course its a good situation for Japanese companies as they can get more yen due to the weak yen.

The current account is like a country's bank account, as imports take money out of the current account and exports and other situations such as foreign investments put money into the current account.

Japan, maybe more than other countries depends on its current account to keep the government moving and also to help with current debt situation, which has one of the highest government debt to GDP among OECD countries.

As the Japanese domestic economy, by now, might be too small for most Japanese companies to be profitable, or to get the profits they want, foreign investments or operating in foreign markets keeps Japanese companies profitable.

In today's globalized world, many companies, in all countries, are expanding their business operations.

Again, due to the weak Japanese yen, investments and profits from overseas might be inflated now.

Japan's international goods trade situation might be related to the Japanese car situation, which has suspended manufacturing some cars at this time.

The Japanese car industry, which has maybe 9 car manufacturers, is an significant economic driver in the Japanese economy, which means it helps with economic growth a lot.

The Japanese car industry of 9 car manufacturers, has some car companies that are subsidiaries of the major car companies.

There doesn't seem to be the severe competition in the Japanese car industry that is present or was present in the US car industry, as there seems to be more cooperation than competition.

Japan is a resource-poor country, which means it has to imports almost everything from oil to some food materials, and as such if the Japanese yen is weak, that means imports are gong to cost more, which means importers are going to pass-on their costs to the next in the supply chain.

For exports, the weak Japanese yen, means exporters can get more for their products overseas, which helps the Japanese current account.

Its only natural, due to the weak Japanese yen, and the numbers, there are more foreigners coming to Japan than Japanese going abroad to where ever.

And again, the weak Japanese yen, might be a negative for Japanese travelers who want to travel globally.

Have a nice day and be safe!

Japan Jan.- March Economic Contraction: Updated June 11, 2024.

 

Japan Jan.-March economic contraction revised to annualized real 1.8%

Article Source:  https://mainichi.jp/english/articles/20240610/p2g/00m/0bu/009000c

Ideas:

While a economic contraction is not good, a 1.8 percent decrease is not that bad, but at the time, the Japanese economy seems, still, to be stuck in a deflation or stagnation situation.

Of course 1.8 should be better but for the Japanese economy it seems it one quarter of positive growth and then one or two quarter of negative growth. The Japanese economy can't make up its mind what it wants to do.

Domestic demand, in the Japanese economy is never where it should be for many reasons, and of course inflation and the weak Japanese yen might be the main reasons.

It seems the Toyota situation has now expanded to other car companies besides just the Toyota group companies.

Of course there might have always been this idea that Toyota was the/a model Japanese company, but now we see that its not like that at all, as the safety rigging situation has exposed Toyota and many other Japanese car companies too.

An annualized estimation is if an economy stay exactly the same, which of course an economy never stays the same as its always increasing and decreasing in many different sectors at the same time.

The average Japanese citizen of course probably didn't even feel or know the Japanese economy decreased 0.5 percent or even 0.45 percent, as they are just focused on their daily lives and not that interested in what some economists might be saying.

There are times, the media and some economists, and the financial markets get too caught up in the quarterly results instead of focusing on the big picture or even one year results.

Of course this the result of the financial markets placing too much emphasis on quarterly results forcing companies to do the same thing, and abandoning their 5 year plans.

 Capital investment might be in the margin of error as 0.8 percent or even 0.4 percent is not that much of a decrease, and again, whomever, focuses too much on trivial matters, such as quarterly results and not focusing on yearly results.

And the same with private consumption or consumer spending as a 0.7 decrease, again, might be in the margin of error, but instead of focusing on quarterly results look at yearly results to see what is really happening.

At the same time, most likely private consumption or consumer spending is not going to be much different for a quarter or a year as consumer spending in the Japanese economy just never reaches its fullest potential due to, these day, inflation and the weak yen.

And yes, as noticed consumer spending or private consumption has now declined for four consecutive quarters or for over a year, again, due to the weak yen and continued inflation.

GDP is made up of consumer spending, business investment, government spending, and net exports, meaning exports minus imports.

The Japanese government, or whomever,  always likes to use the phrase "recovering moderately," as a way to not scare the financial markets. 

So just what might be the weakness in the Japanese economy? Is it consumer spending, most likely, is it capital spending, most likely, is it government spending, probably not, and is it exports minus imports? 

If we consider exports alone, exports seem to be fairly strong, while imports is different story with a weak Japanese yen, its causes import prices to increase.

Consumer sentiment is always a major variable in any economy. If consumers feel good they spend a lot if they don't feel good they don't spend much.

Japanese companies might be willing to invest but most likely labor shortages are keeping many companies from investing at this time.

If there labor shortages are a challenge for Japanese companies, just what related to labor shortages is the main challenge? Is it finding the needed workers to run the equipment for example, or is it just an overall worker shortage?

There always seems to be uncertainty in the Japanese economy, these day, so it nothing really new, but, to be fair, every economy has its share of uncertainty about the future.

But the Toyota group situation is a real challenge and its now affecting many Japanese car companies, and it could turn into a major challenge for Japanese car companies.

Or it might not, as maybe, globally, it might not have a big of an affect on global sales in the future.

The tax cut will help, but will it be enough, but of course something is better than nothing, as inflation continues on in Japan.

And yes, it might take until August for the wage increases to have a full affect and then it might not as maybe inflation will continue.

And remember, not all Japanese workers will get a good wage increases and some will get smaller wage increases and some will get larger wage increases.

So private consumption or consumer spending, for the time being, is not going to be where it should be, and, again, even when the wage increases start to take a real affect, consumer spending still might not be that great.

So there, maybe globally, we begin to see the affects of the Toyota auto scandal, and again, its not just Toyota, as many Japanese car companies seems to be involved too.

The 5.1 percent decrease in exports, might not be related to sales, but Japanese car companies voluntarily suspending production of some Japanese car models.

Foreign tourism in Japan, might be the only real bright spot in the Japanese economy at this time, as the weak Japanese yen gives more purchasing power to foreign tourists.

At the same time,  some Japanese areas, or popular tourists areas, might be reaching a breaking point, as some local Japanese are getting upset with the behavior of foreign tourists and how they are behaving in Japan.

It would not surprise me, if the Bank of Japan, intentionally increased the Japanese key rate, to move it closer to the US key rate, which would make the Japanese yen, less weak, which eventually might dissuade some foreign tourists to go to Japan as the Japanese yen now is not as weak as before.

Public investment, or government spending is always a key player in economic growth and or used a lot by the Japanese government when consumer spending and business investment is not where they should be.

But these days the Japanese government is somewhat weary, besides the tax cut and other household subsidies, to use public investments too much due to the Japanese government debt to GDP ratio, which is now estimated to the highest in the world.

During or after the second quarter, and after the wage increases maybe begin have some affect then maybe, just maybe the Japanese economy has move out of its stagnation phase and or deflation phase. But that is a lot of wishful thinking at this time.

Have a nice day and be safe!