Japan economy grows 1.0% in April-June, inflation weighs on spending
Ideas
An economy is a complex organism and it has many different parts or sectors which some see growth and some see less growth. All sectors in an economy are never linear as there are periods of growth and less growth in each.
The Japanese economy rarely see growth beyond 1 percent but even at 1 percent growth that is significant growth for an economy the size of Japan's.
Capital investments are always an important economic indicator for what is going on in an economy as it shows businesses might see the economy improving over time.
But again the major challenge for the Japanese economy is consumer spending as inflation continues to be a major constraint for consumers in Japan.
Yes, the tariff situation might not have been in full effect yet so Japanese exports to the US remained robust for now, but the future might be a little more challenging as Japanese companies might have to start absorbing the tariffs.
Japan might need to re-think its entire strategy with exports as the profits and sales from exports could see significant decreases in the coming months.
Japan is now a mature economy and advanced economy which usually means less economic growth as it takes more resources to grow a mature economy compared to an emerging economy.
As a result even 0.3 percent growth, for Japan, might be considered acceptable as some growth is still better than no growth or negative growth.
Economic data is always being revised as new data become available and all economies always revise their data as needed.
Data should never be taken as complete or static as it's always being looked at again and again to make sure that it's relevant for the situation and always being revised as needed.
Capital expenditures are important for an economy as it shows how much businesses spend just like consumer spending is important for an economy too which of course shows how much consumers spend in an economy.
The fact that software investment might have driven the increase in capital investments might indicate that Japanese companies are finally beginning to take seriously the need to innovate and bring their companies into the 21st century.
And it looks like Japan is becoming, again finally, a semiconductor focused country after losing a lot of market share to Taiwan an South Korea.
Exports in Japan are a major economic driver, which means its contributes a lot to the economic growth of the Japanese economy.
But the future of exports in Japan are clouded as the tariff situation with the US is still very unclear as to what is going to happen exactly.
Japan car companies are now using different strategies to overcome the tariff situation such a reducing prices on cars to the US, offering different models than before as a way to stimulate sales and try to keep profits high.
Many years ago the strategy of Japanese export companies to the US were always focused on improving market share and always offered low product prices.
But those days are long gone as Japanese companies can't afford to keep prices low for too long without compromising their profit margins.
Japanese car companies, along with all of the smaller car-parts companies in Japan employ a lot of workers and if profits are decreased too much then yes, salaries and employment will be effected along with consumer spending from those who who work for car related companies.
The GDP formula is consumer spending + business investment spending+ government spending + exports -imports, which means imports actually decreases what the initial GDP might have been with just exports.
Imports reduce an economies current account, which is like an economies bank account, and in Japan's case as it its a resource-poor country has to import much of what it needs which means it can have a significant effect on Japan's GDP growth.
And yes, the tariff agreement might not be as bad as first expected but its still not going exactly in Japan's favor and will affect the amount of exports from Japan to the US.
Yes, the July-September period potentially could see negative growth as maybe Japan is too reliant on exports as it really doesn't have any other economic drivers at this time.
Private consumption, or consumer spending, which is about 50 percent of Japan's GDP is not up to the task of helping the economy or overcoming the drop in exports as inflation continues to effect Japanese consumers.
And then add it the low wages for workers in Japan and they really don't have enough disposable income to spend like US consumers do, which makes up about 60 percent of the US GDP.
The Japanese economy is dealing with many years of Japanese companies not giving adequate pay increases to their employees and now the economy is suffering from low consumer spending due the fact that Japanese consumers just don't have the disposable income they need as they haven't had adequate pay increases for many many years.
Its might take a few more years with increased pay wage increases for Japanese consumers to finally feel good enough to really start spending again, but again it's going to take several years for the pay increases to have some kind of effect on the Japanese economy.
Nominal GPD is not really important as what is important is real GDP as real GDP shows what the consumers purchasing power really is in an economy, meaning how much money does a consume really have to spend and more important how much disposable income do they have to use in the economy.
Have a nice day!
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