Japan Govt. Economic View: Updated May 24, 2025.

Japan gov't maintains economic view for May despite GDP contraction

Article source: https://mainichi.jp/english/articles/20250522/p2g/00m/0bu/039000c

Ideas

All governments try to sound like their economy is not too bad and they use phrases like recovering moderately as a way to calm the markets and not sound too alarmist.

Indeed the Japanese economy is always in some kind of recovering moderately phase is seems like it can't get out of the recovery phase.

Most likely the new tariffs don't seem to be affecting any real important consumer products as has been suggested many Japanese companies or suppliers have an inventory already of two or three months supplies, what happens later this summer is still in question.

Japanese exports to the US and or Japanese companies in the US always seem to be in good shape as the challenge is the Japanese domestic economy and inflation and then of course consumer demand in Japan which is the real challenge.

Yes, there is definite uncertainty with what is going to happen in the US with more tariffs planned and it makes it very difficult for both US and Japanese companies to plan for the future.

Japan, if possible, needs to find a way to stay a step ahead of the negotiations and prove to the US delegation how important Japan is for the US economy and the idea of tariffs is going to hurt both economies equally.

Again, some other articles have suggested that Japanese car dealers have a two or three month supply on hand, which are not affected by the tariffs but after that its not quite sure how the US consumer is going to react to the increase prices of Japanese cars.

The Japanese domestic economy is always being challenged with sluggish private consumption or consumer spending as the Japanese economy just isn't a major consumer spending economy but has been more of a savings economy for a very long time.

Japan is a resource-poor country and has to import much of what it needs and imports into Japan are challenged if the Japanese yen is weak which means imports are higher than what they really should be which puts a lot stress on importers and Japanese households too.

The Japanese domestic economy needs to show more than just being in the recovery mode as it needs to break out of that phase with some real economic growth.

There needs to be a real paradigm shift in the Japanese economy, somehow, to get consumer spending to the level so that the Japanese economy can see some real significant growth.

Private consumption or consumer spending needs to be more than half of Japan's GDP as it needs to be around 60 percent for any real growth to take place.

But the structure of the Japanese population might not allow for that as Japan is an ageing society now and Japan needs some changes in immigration to increase their population as the birth rate is just too low for the economy.

The US economy might have contracted some but it's still the largest economy in the world and the most robust. But yes, the global economy might be in a lull at this time especially with China still not where it should be an the EU is like the sick child of the global economy as it can't seem to get out of its stagnant phase at this time.

Have a nice day!