Japan Dec. Economic View: Updated Dec. 21, 2024.

 

Japan retains economic view in December, warns of moderate firm profits

Article Source:  https://mainichi.jp/english/articles/20241220/p2g/00m/0bu/036000c

Ideas:

The Japanese government wants to be very careful about what is say as it doesn't want to upset the financial markets in Japan or globally, so they continue to say recovering at a moderate pace.

An economy is very complex as there are many parts or sectors to an economy and the sectors are never growing or not growing at the same pace.

And yes, the weak Japan yen increases the price of imports such as parts and supplies that Japanese companies need from overseas suppliers.

And then there is increased labor costs, as most companies have had to increase wages just to keep or recruit workers as there is a labor shortage in Japan, which means workers potentially have a choice for jobs.

It is no surprise that corporate profits are not where they are expected to be because of the weak Japanese yen and the need to increase wages which both reduce a company's profit margins.

The challenge is small and midsize companies which don't have the same financial resources that large name-brand companies do, so their profit margins are even thinner and some might not have been able to increase wages as they couldn't afford wage increases.

Again, large Japanese companies might be seeing their corporate earning steady but not growing significantly too because of the weak Japanese yen, and increased labor costs.

Its quite possible the Bank of Japan prefers a weak Japanese yen, as long as it stays within a range that the BOJ feels is acceptable.

Anytime the Japanese yen begins to grow stronger against the US dollar Japanese export companies loose millions of dollars as the weak yen is favorable to them.

At the same time, the BOJ is aware that the weak Japanese yen is not good for the domestic economy as it increases imports prices which hurts Japanese import companies.

From 142 to 156 is significant difference that can help many Japanese export companies but also hurt many Japanese import companies too. 

Japan is a resource poor country so it has to import much of what it needs and its also a major exporting country and the Japanese currency is watched a lot by both groups as to how it can affect their companies.

Small and midsize Japanese companies have been having significant challenges recently related to the weak Japanese yen, the increase in material costs, and having to increase wages for their workers to either keep them or attract new workers.

The US economy seems to be the most stable and reliable economy in the work at this time, but there are challenges with the Chinese economy as they are going through a transition period and who knows when it will turn around.

The EU, as usual, is stuck or stagnant and who knows when it finally going to get moving again.

South Korea, has been having is own domestic challenges and its economy is stuck in the advanced economy syndrome of not growing that much these days.

Have a nice day!