Japan GDP: Updated May 21, 2025.

Japan Jan.-March GDP shrinks for 1st time in 1 yr amid weak spending

Article source: https://mainichi.jp/english/articles/20250516/p2g/00m/0bu/020000c

Ideas
Japan's economy has been in a stagnant phase for a very long time and it hardly ever grows that much. It might have a quarter of positive growth and then a quarter of not so positive growth or like now a Jan. to March periods of not so good. 

An annualized decrease of 0.7 percent just shows what would happen if the economy performed exactly the same way as the Jan. or March quarter.

And yes, because of inflation domestic spending has been constrained with Japanese households and businesses not interested in spending that much right now.

The Japanese economy seems to be stuck in a downward spiral related to continued inflation, weak consumer spending, and increased import cost due to the weak Japanese yen.

Again, Japan's gross domestic product just can't seem to move forward as its always stuck at or near the recession grey area.

This is not to say that the Japanese economy is all bad as its a very stable economy as it doesn't shrink that much each quarter or year, but also doesn't grow that much, when it does show some growth.

All the supposed tariffs are really going to do is maybe decrease demand for Japanese products as the real losers in the tariff situation are US consumers and US companies that need Japanese products.

But there are no winners in a supposed tariffs war and both the suppliers and the buyers of the products will lose out with decreased demand of Japanese products and increased prices on Japanese products which will only dampen demand for the products in the US.

It's easy to say Japan should not give in to the demands of the US administration, as many Japanese exports companies are not worried about what is going to happen in the future with their products in the US.

An annualized decline of 0.19 is not that much to emphasize again the Japanese economy doesn't decrease all that much but again doesn't grow all that much too.

Now, if you were to ask the average Japanese consumer about the GDP they would probably not know much about it as they are just thinking day to day trying to survive and trying to make ends meet each week each day.

And even globally, GDP is not in the minds of the average person in each country and they are just trying to make it from day to day and they aren't really into GDP stats or information that much.

The last few Prime Ministers in Japan has tried to help or improve the Japanese economy without much success, as they too tried economic packages but the packages didn't do much to help Japanese households.

What hasn't really been tried, which the EU and the US have done is increase the key interest rate, but the Bank of Japan, in past years, has suggested the Japanese economy is/was just too weak for a key rate increase, as it would have too many negative side-affects.

An increase of 0.04 percent in private consumption or consumer spending is an improvement but its not the same to get the Japanese economy moving again.

And yes, if inflation continues to grow faster than wage increases then Japanese households and or Japanese consumers' disposable income will be less than needed to spend in the economy and the Japanese economy will continue to be stuck in a stagnant phase.

The Japanese economy was built on exporting which has been its main economic driver for a very long time, and at the same time Japan's domestic economy is not that strong.

If Japan's domestic economy was much stronger Japan wouldn't have to depend so much on exporting or even foreign tourists spending in Japan to help as again the overall domestic economy just isn't that strong at this time.

The GDP formula is something like this; Consumer spending + business investment spending+ government spending + exports - imports to get the final value for GDP.

So imports do affect GDP growth but unfortunately Japan has to import much of what it needs which can have an effect on Japan's GDP and Japan's GDP growth.

Japan shouldn't expect too much in the negotiations as it seems China, Japan, and South Korea are not looking too good as all three are major exporters to the US and for whatever reason the US admin. doesn't seem to know anything about comparative or absolute advantage related to international trade.

You would think after all these years, that Japan might have transformed itself into a real consumer spending economy but it hasn't reached that level yet as consumer spending is only about 50 percent of Japan's GDP while other major economies consumer spending is over 60 percent maybe even reaching 65 percent.

Consumer  spending might have increased but not because of real consumer demand which is what is really important. The only thing that changed was Japanese households had to spend more on daily necessities but not on other things in the economy.

Capital investments might have increased 1.4 percent but that too is very weak and capital investments need to be more as a way to make up for the weak consumer spending in the Japanese economy.

The problem with the Japanese economy is not all of its growth engines are firing at the same time, as one area might improve but another area might not and it goes on this every quarter or some sectors growing but some sectors decreasing at the same time.

Have a nice day!