Japan GDP Growth Outlook: Updated July 26, 2024.

 

Japan gov't cuts GDP growth outlook to 0.9% from 1.3% in FY 2024

Article Source:  https://mainichi.jp/english/articles/20240719/p2g/00m/0bu/030000c

Ideas:

There is nothing new related to the Japanese economy as 0.9 percent economic growth is about what the economy has done in recent years.

Private consumption or consumer spending has always been weak in Japan as Japanese consumers just don't spend like US consumers. And add in the continued inflation situation and it gets worse and add in the weak Japanese yen, with imports continuing to be high.

Consumer spending, as indicated might be 50 percent of GDP but the numbers don't show it as Japanese consumers don't seem to spend that much recently.

The Japanese auto industry situation might not be that bad as demand for Japanese cars in the US remains strong.

Economies always go through ups and downs and Japan is no different, but, recently, there seems to be more downs than ups. At the same time, an economy is very complex, as there are many sectors or industries in an economy, and they usually are not all positive at the same time, as some might show growth and some might show negative growth, while some might show no growth and just stagnant.

Domestic demand is always a challenge in the Japanese economy, as Japanese consumers, have been hit hard, recently, with increased inflation, which cuts into their extra income to be used in the Japanese economy.

Japanese auto production, even though there might be a controversy with improper data, US demand for Japanese cars is still very strong and most likely will remain strong through 2024.

To be fair, how can wage growth keep up with inflation and for the most part a 5% percent wage increase is good, but can't compete with inflation that increases almost every month in Japan.

Yes, a 5% wage increase is for every month, but add in inflation that keeps increasing every month, as the extra income from the wage increase is not that much or even disappears over time.

The weak yen makes is both a positive and negative for the Japanese economy, as it helps Japanese exporters get extra profits but it hurts Japanese importers, as imports prices are inflation, due to the weak Japanese yen.

The Japanese government can't do much but they can use price controls, as needed on some basic items to help Japanese households, by maybe putting a freeze on prices on some items in the Japanese economy. The price freeze doesn't need to be permanent, just a short-term freeze until inflation is under control and or the weak Japanese yen, gets a little stronger.

All of the above ideas related to energy subsidies are good and needed, but what about the basics related to food, and maybe there should be a freeze on prices related to food.

A government can't do everything, but like in the Northern European countries, they seem to have been able to meet the needs of most of their citizens. Japan maybe should be more like the Northern European countries and less like the US.

The Japanese yen situation is very complicated as a weak yen helps some in the Japanese economy but hurts some in the Japanese economy. The Bank of Japan has to manage both sides of the economy, as much as possible, to try and find a mid point that contributes to both sides of the economy.

Deflation might have been good for some in the Japanese economy, but not so good for some in the economy, as profits might have been too stagnant for too long.

And of course, for a very long time, it seemed like wage increases were not much, if even at all, might have been a challenge for Japanese households and spending in the Japanese economy, as there was very little or no extra income to use in the economy.

Forecasts are always needed and important, but rarely are they correct, due to many variables interacting at the same time in an economy. So if its 2.5 or 2.8, whichever, it might be good or it might be not so good.

But if its 2.8, for consumer price increases that means Japanese households have to deal with increased inflation, again, through 2024, and again, less extra income available to be used in the Japanese economy.

Nominal GDP is not the same as the real GDP, which should be the real target as nominal also includes inflation in the economy. 

The real GDP is what affects households more than nominal and it shows the real amount of economic activity in an economy, without inflation included.

Of course nominal shows how much inflation might be affecting households and so on, but the real GDP is what matter for Japanese households.

Have a nice day and be safe!