Japan GDP Growth: Updated March 14, 2025.

Japan's Oct.-Dec. GDP growth revised down to annualized real 2.2%

Article Source: https://mainichi.jp/english/articles/20250311/p2g/00m/0bu/011000c

Ideas:

An annualized percent is what the final GDP growth would be if an economy grew the same in every quarter. But in reality an economy is like a living organism and can easily go up or  go down in the following quarters and is never a stagnant situation.

Consumer spending in Japan has always bee the weak link of Japan's GDP as consumers in Japan just don't spend like they do in the US. Japanese consumers, traditionally have been savers while US consumers traditionally have been spenders.

It is estimated that consumer spending in Japan is about 50 percent of Japan's GDP while in the US its more like 60 percent or more.

These days, or anytime in any decade maybe GDP growth is just not that important to the average person on the street, as they are just trying to live their lives and trying to survive. 

What does matter to average person, in most countries, is the cost of living and when they go to the supermarket and the food they need keeps going up then they get concerned with what is going on in the economy.

At the same time, maybe GDP growth, like the stock market growth, just doesn't reflect what is happening to the average Japanese household these days. Maybe GDP growth show some significant growth, but does the average Japanese household fee the growth, are the things they need to buy going up or down in price.

Private consumption or consumer spending has been decreasing since the pandemic and has not been able to gain any kind of traction to improve. Consumers in Japan, of course are cutting back on things they feel they don't need such as dining out and then services too.

Inventories are a trickly situation as sometimes it depends on demand and supply, such as if companies projected there is was going to be strong demand for their products, then they would produce more.

However if the demand projection was not correct a company could be sitting with a lot of inventory in their warehouses. The same is true if a company had the opposite demand projection and demand was much better than expected, the company warehouse inventories would be less and almost empty.

Japan has always been export oriented economy, as there just hasn't been the needed demand from the Japanese consumers to meet all of the demand needed for Japanese companies to grow, so they export a lot of products globally.

At the same time, global demand has not been what is should be so many Japanese companies are weary these days about their export products. For example demand in China just hasn't been the same since the pandemic an China seems to be going through a transition period with no real end to China's challenges at this time.

Capital investment is another situation that can be both up and down depending on the mood and sentiment of Japanese companies. If companies are feeling good about the Japanese economy and the global economy they might increase their investments, but if they less than happy with what they see in both they might wait and invest much or not at all.

With all due respect to those in this article, consumers can see and feel things are not so good in Japan and it doesn't take an economist to see that, as they are, yes, keeping their purse string tight and probably will continue to so for the time being.

As other articles have suggested prices keep going up and some articles have suggested many more companies are increasing the prices on their products.

In times past, many companies were reluctant to increase prices and or pass-on their raw material, energy, or labor costs the next in the supply chain, but it seems those days are long gone, as the profit margins of many companies have eroded significantly since the pandemic.

It seems the Bank of Japan is beginning to act like other central banks and beginning to take inflation more seriously, as before it seemed they just let inflation run its course hoping it would go down naturally and they wouldn't need to do much.

Many central banks use phrase "do no harm" which means don't do anything that might interrupt the flow of an economy, but sometimes central banks, like Bank of Japan, actually do need to step in and try to help the economy.

The Bank of Japan is hoping that many Japanese companies will increase wages do the level above what inflation is and again hoping they will be a motivator for Japanese consumers to start to spend in the economy again.

But its important to remember that up to 70 percent of Japanese workers don't work for the large name brand companies as most work for small and midsize companies in 2024 didn't come close to increasing wages at the same rate as large companies, which means up to 70 percent of the Japanese work force might not have gotten the needed wage increase that was above the current inflation level.

Not to get into anything political, but the situation in the US has affected stock markets in the US and globally, which could be a concern for the Bank of Japan as they might put-off any potential rate hikes until the summer.

Again, not get into anything political but the current situation, with a real potential trade war could be damaging to the global economy as there hasn't been this much concern since before or during the great depression of the late 1920's.

All thing being equal, if the Japanese economy can remain stable and not go into any major slump in the next few months the BOJ might just increase the rate to try and combat the inflation situation.

The Japanese economy might grow in the January-March period, as the Japanese economy is still stuck in a stagnant period or beginning to come out of it ever so slowly, which again, might be enough to sway the BOJ to increase it key rate.

And yes, its prudent to be cautious as the Japanese economy seems to always be up one quarter, down slightly in another quarter, and then up again, as its like a constant roller coaster and recently never seems to get any kind of upward momentum going. 

So the economy Japanese economy never really has a chance to gain any momentum which economies need to grow. Economies need momentum to grow, as maybe one sector begins to grow and then another and then another and then all cylinders are running and an economy now has enough energy to keep growing.

But for Japan, that never seem to happen or hasn't happened for a very long time.

Have a nice day!