Share of firms seeing Japan growth in 2026 slips to 70% amid US tariffs
Ideas
It's not uncommon for businesses to be pessimistic about the future if they don't see much that can benefit them and Japanese businesses are no different and they especially, the last decade, haven't had much to be positive about.
Even with 70 percent thinking the Japanese economy will grow that still leaves 30 percent that are still pessimistic about economic growth.
The challenge is how much is the Japanese economy going to grow, as over the last decade the the economy has only grown 0.6 to 1.0 percent at the most.
And yes, the US tariff situation is going to continue to impact the economy and will probably negate and wage increases that might help the economy and any increase in consumer spending that might help the economy too.
Moderate growth is probably a phrase used to tamper down any negative ideas that companies might have as whomever didn't want to upset the financial markets too much with too much negative news.
And yes, it's hard to see any companies really thinking or seeing any real expansion in the Japanese economy, as again the economy hasn't grown much above 1 percent over the last decade.
Yes, all things equal, if the Japanese economy can have sustained and improved personal consumption or consumer spending then the economy has a chance to improve, but that is taking a limited positive idea, as consumer spending in Japan, recently, has not been that great.
And again, if wage hikes for not only large Japanese companies but mid-size and small companies too can see significant wage hikes from companies then again, there is a chance, a limited chance for better economic growth.
It must be remembered that 70 percent of the Japanese workforce doesn't work for the large name-brand companies, but small and mid-size companies who may or may not have the needed resources to increase wages that is needed for the economy, even though they might want to.
And yes, its a real possibility that the economy is going to remain flat or even stagnant in 2026, as the Japanese economy is a mature economy now and it takes more and more resources to grow the economy and recently those resources are not being utilized correctly to help the economy grow.
And again, inflation is going to be a major challenge for the Japanese economy as the powers to be, including the BOJ, haven't been able slow down inflation much less reduce it, and a contraction in the economy is always a possibility as the economic drivers of and for the economy, besides export are few these days.
Yes, there are still a significant number of tariffs on autos and auto parts, steel and aluminum, pharmaceuticals, and civil aircraft products which will affect thousands of Japanese companies, which means those companies are potentially not going to absorb the tariffs but pass them on to the next in the supply chain, and most likely companies and consumers in the US if not in Japan too.
So, despite the Japanese negotiators doing an excellent job or reducing auto export tariffs down to 15 percent there is still much work to be done in negotiations with the US to reduce or even eliminate tariffs on many other Japanese export products.
There is always the potential for additional concessions by either side in the negotiations but Japan, historically, have been excellent negotiators and know how to find ways to make sure things, for the Japanese side look positive.
And it must be remembered, form April of last year, the tariff situation for Japan and all countries looked bleak, but many countries have been able to bring down the tariffs from their original amount which means there is potentially still room for movement in reducing the tariffs in the future.
Here is the thing or idea about Japanese businesses investing in the US even before the T tariff situation, there might have been discussions or talks with US companies and Japanese companies related to investing in the US.
As a result, potentially, the US might not have gained anything in that many or some Japanese companies have already been planning to invest in the US as it was considered a good investment as a way to offset the weak Japanese yen which have been hurting the Japanese economy for a very long time.
Japanese companies are always looking for ways to invest in the largest consumer driven economy, outside of China, as even some manufacturing companies in Japan see it as a way to offset the weak Japanese yen, and or offset the high cost of shipping and logistics that is now a global challenge.
While the Japanese yen is weak it is a benefit for Japanese investors and investing in the US is a good deal and maybe a good way to offset any negative from the T side of the equation.
Japanese investors in the US can expect to see higher than normal returns on their investments as again the weak Japanese yen helps Japanese investors and help again to stave on any negative side affects from the T administration.
Yes consumer prices continue to increase which may or may not be a negative depending on the income level of Japanese households. For the upper-income groups and some middle-income groups there might not be that much of a problem for them but for the most middle-income and the lower-income groups 3 percent increase in consumer prices including food and be a significant amount.
And then there is the fixed income group where a 3 percent increase might be too significant for them and they might have to reduce their food purchases and or try to find substitutes for what they normally buy.
Not too long ago, many Japanese companies were reluctant to increase prices or pass-on prices to the next in the supply chain, including the final retail customer as they felt it was be a negative for their business.
But these days Japanese companies have no choice as their profits margins are either compromised and or they get a lot of stress from shareholders to meet certain expectations, so some companies have to increase prices.
Yes, wage growth is a key but not the only key as there are many variables that could impact the Japanese economy, but again its a major variable. But at the same time, at only 46 percent of companies considering or planning wage increases is a little depressing as only 46 percent is not to going to have a large enough effect on the economy to make it grow.
And to be remembered 70 percent of the Japanese workforce doesn't work for large Japanese companies and most work for small and mid-size companies who may or may not have the needed resources to increase wages for their employees or be able to hire new employees as there is a supposed labor shortage in Japan.
Yes, there are many uncertainties these days in the global economy from political situations to raw materials costs affecting most if not all economies globally.
For example basic commodities such as coffee and chocolate seen huge price increases in the US and globally and countries like Brazil and Vietnam are facing severe challenges due weather problems and global shipping challenges.
And then there is the African countries facing challenges related to chocolate production and of course the continued logistics challenges that have affected most countries since the pandemic continues on.
And finally, as Japan is a resource-poor country, they have to import much of what they need which means the increase in raw material costs continue to increase and then add in the weak Japanese yen which makes import prices even higher than normal for Japanese import companies which means potentially they might pass-on their increased costs to the next in the Japan supply chain including the final retail customer.
Have a nice day!
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