Japan Firms and Economy Optimism: Updated August 16, 2024

 

Japan firms less optimistic about economy amid weak yen, inflation

Article Source:  https://mainichi.jp/english/articles/20240811/p2g/00m/0bu/023000c

Ideas:
Even at 70 percent only of companies expecting the Japanese economy to expand, that is still a good number.

The key of course will be consumer spending and whether wage increases will take an effect in the Japanese economy this summer or in the fall.

Inflation and the weak yen, is still going to affect the Japanese economy, as consumer may feel both related to the increased prices related to imports.

Inflation has been affecting the Japanese economy, significantly ever since the pandemic, and it hasn't really come down that much. It is trending down, but not by that much yet.

Japanese companies have some good reasons to be cautious, as the Japanese economy hasn't done much in the last decade.

Consumer spending may or may not improve this summer, as the yet again, the summer heat wave might deter consumer spending, as a Japanese article recently stated when the temperature gets above 35 C, consumer spending might be less than normal.

Capital spending is another animal altogether, but the principle is the same, if companies feel good about the economy, that might spend or they might wait, just like consumers.

Spending by foreign visitors is an important economic activity but it should not be considered an economic driver of the Japanese economy, as there needs to be even more foreign tourist spending in Japan.

But the challenge is, maybe now some might think there are now too many tourists in Japan, but if you compare the number of tourists in Japan with France, Japan still has a long way to go to reach the level of tourists that travel and spend in France.

Consumer spending in Japan is always a challenge and consumer spending is only maybe 50 percent of Japan's GDP, while in the US its over 60 percent. That 10 percent difference might just be the difference in the Japanese economy growing or being flat or stagnant, and if it decreases that makes it even more difficult for the Japanese economy to grow.

An increase in prices, depending on the product or service can affect many consumers or just a few consumers, depending on consumer sentiment, or feeling about price increases.

The weak Japanese yen is both positive and negative depending on whether you are a Japanese exporter or a Japanese importer.

The weak Japanese yen is a positive for Japanese exporters, as it they can get more for their products overseas, but it a negative for Japanese importers, as it increases the price of products brought into Japan.

Until recently, many Japanese companies were reluctant to increase prices and they basically just absorbed their material costs and other costs, and allowed their profit margins to get thinner and thinner.

But those days seem a long time ago, as its a different age in Japan now, as Japanese companies, like western companies, have no problems increase their prices, even for the final retail customer.

The focus now, with Japanese companies, seems to be satisfying the shareholder and not so much customers or even company workers these days.

The Prime Minister of Japan and the Japanese Diet can only do so much, and it has be society related to the low birth rate and the aging population situation, along with companies policies that help working women, and also continuing to allow older workers to continue working and not force them to retire.

Its natural and normal for Japanese companies to focus on Japan, but there might be some benefits to moving operations to another country such as Vietnam, which might be considered the new China in terms of economic growth.

And of course some companies want to be in the US with its huge economy and huge consumer base which might be good for some Japanese companies.

Not wanting to be in China, at this time, is again normal, as the Chinese economy seems to be going through a rather long transition period and who knows exactly when it going to get back to some kind of normal.

Just in the last few days, while there were concerns of a possible recession in the US, new information came out that consumer spending in the US economy increased in July and the recession fears have been reduced greatly.

Stock markets and or financial markets are always jittery about every little thing, and must be taken literally every time there is change here or there in the stock markets or financial markets, and the big picture or the long term is what is most important.

The Chinese economy, might not be back to normal at this time, but if Japanese companies can see the big picture that China as a huge consumer base, like the US, it might be good to remain in China, and stick it out until the Chinese economy eventually gets back to some kind of normal.

Have a nice day and be safe!