Japan's economic growth revised up to 2.2% in April-June on consumption
Ideas
The major challenge, for the Japanese economy, for many years, has been less than optimal private consumption or private spending for any real economic growth.
While 2.2 percent annualized growth is a step in the right direction, it must be remembered that annualized growth is just an estimate of growth if the same amount of growth occurred all year.
Inventories is a tricky situation as it can be both a positive and a negative at the same time. For example if inventories are too much and stay in warehouses too long it could be mean either estimated demand was not what expect and or it could mean demand was better than expected.
And it must be remember too, that the April-June period was/is the one of the periods in Japan for bonuses as maybe consumers or families who got bonuses spent more than usual and then there was also the Golden Week period, the first week in May, where families might travel and might spend more than usual.
And yes, rising prices are a major challenges for Japanese consumers and especially for those in the lower-income brackets which seems to be getting larger every year.
The US tariff situation might not be in full effect during the April-June period but maybe some some Japanese companies might be feeling the affect of it even now as the psychological effect might actually be more stressful the the actual tariffs, for some Japanese companies.
An expansion of 0.5 percent over 0.3 percent doesn't sound like much but for a large economy like Japan, which is either 4th or 5th now is GDP size, depending on what stats you read, is still a lot of growth, and very much needed in Japan.
Japan is now a mature economy and mature economies don't grow that much without substantial resources added to the economy which at this time Japan has not been doing very good at as it relies on one major economic drivers meaning exports.
For decades Japan has been riding the export train to improve economic growth but with the US tariff situation its going to run out of significant steam and desperately needs new economic drivers to keep its economy growing.
Yes exports will continue to be a strong growth engines but not as significant as before the US tariff situation
Private consumption or private spending while it might be around 50 percent in Japan in the US its around 60 percent and around 50 percent in the EU. Both the EU and Japan have low economic growth rates which might be attributed to low consumer spending compared to the US.
For the Japanese economy go grow significantly it needs to increase its consumer spending to maybe 55 or even 60 percent and that is going to take some needed wage increases for Japanese workers, and not just large company workers but also small and mid-size companies workers which usually lower wage increases in Japan.
In this case inventories are a negative for the Japanese economy as any inventories produced but not sold is like an investment that is dormant or not moving which reduces a economies'GDP.
While 0,04 is not that bad it might be something to watch in the future and especially if it continues to trend upward, which might indicate less sales for Japanese products and especially in the global market.
Capital investment is very much dependent on business sentiment or how companies feel about the future of an economy. If they feel good they might increase investments if they don't feel good they might wait until the economy is looking better.
Japan is a major export country and relies heavily on exports to grow its economy. So much so that, unfortunately, it has very few other economic drivers to grow its economy.
At this present time Japan doesn't seem to have any new up and coming economic drivers which might help overcome the US tariff situation which potentially could decrease Japanese exports to the US.
While the reduction of the tariffs from 27.5 percent to 15 percent is better than nothing, which potentially it could still reduce Japanese exports to the US and hamper economic growth in Japan.
And again, Japan doesn't seem to have any other economic driver to overcome the US tariff situation and it has continued to rely on exports to the US for decades to grow its economy.
Consumes in any country don't like price increases and as prices continue to be high in the US an increase in car prices might be cause significant sales decreases in the future in the US.
Japan companies, including large car companies, can only absorb the increased tariffs for so long before they have to increase prices to maintain there profit margins, which these days have become even more important due to stockholder and what they want out of a company.
As long as prices continue to increase in Japan it might cause Japanese consumers to skimp on spending and only spend what they need and forget spending on things they want but really don't need.
Once again, as mentioned before Japan doesn't seem to have any other real economic drivers to grow the economy except exports, which it has relied on for too long and haven't found any other economic drivers need to offset the potential decrease in exports in the future.
At one time the Japanese semiconductor industry was a potential growth engine but fizzled out and lost market share to Taiwan and South Korea, but it just beginning to come back to life and its too early to say what going to happen in that industry.
Another growth engine in the past was ship building but has lost significant market share to China and South Korea in the past few decades.
Japan desperately needs new innovation in its companies and products as Japan has lost market share in much of its key signature companies for many decades with nothing new significantly happening that can be a true economic driver for the Japanese economy.
Nominal GDP is not a true indicator of an economy as it only indicates the level of inflation that is taking place. Real GDP is the true indicator as it shows the level of possible purchasing power of consumes in an economy.
Have a nice day!
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