Japan Contraction: Updated July 4, 2024.

 

Japan Jan.-March economic contraction revised to annualized real 2.9%

Article Source:  https://mainichi.jp/english/articles/20240701/p2g/00m/0bu/006000c

Ideas:

Economic data is always being reviewed and if needed revised upwardly or downward, depending on new information.

An annualized estimation is if the economy did the same thing for at least a year, but an economy never is the same from month to month or eve quarter to quarter.

Its not easy to see what is true or not true, but sometimes, whether intentional or a mistake, the numbers can look more positive after a review or more data is found. Such as a 0.1 percent growth, might not sound like much, but it gives the Japanese government more breathing room to talk about how the Japanese economy didn't contract for three consecutive quarters.

The Japanese economy always seems to be fragile related to economic growth. But at the same time, its a very stable economy, and there no real sudden shocks related to the Japanese economy.

Consumer spending in Japan is never where is should be as inflation and maybe the overall Japanese character is not to spend but save most of the time.

The Japanese car industry, which is a major economic driver in for the Japanese economy, has had some challenges the past few months with the quality testing situation and fake test results.

The Japan GDP is never where is should be, like consumer spending as it never seems to get past the 1 percent growth, if even that.

Again, as new information or data is found, many times there are going to be upward or downward changes in the initial information. That doesn't mean there is any negative or manipulation of data, as all governments revise their data depending on what new data they find later.

Public investments is related to government investments, and sometimes the Japanese government does a lot of investments depending on the political situation and the mood of the public. Public investments, for the most part increases the government debt.

Private residential investments might have been lessoned due to higher raw material costs and or an increase in land prices and or even due to the Bank of Japan increasing the key interest rate recently.

Private consumption or consumer spending is always the main challenge for the Japanese economy, as consumer spending is never where it should be, due to the Japanese consumer mostly being savers and not spenders.

But a decrease of 0.7 percent is really not that much of a decrease as consumer spending basically stayed the same from the pervious quarter.

The Japanese economy and the US economy are not really interconnected that much as the US economy seems to be doing very good while the Japanese economy is still stuck in its deflation situation while its stable its not growing that much.

Nominal GDP is not the real economy as real wages determine what is really happening in the Japanese economy.

Real GDP is more important than nominal GDP as the real GDP affects Japanese households the most and not nominal GDP.

The Japanese economy seems to always be falling into a technical recession, but again, the Japanese economy is a very stable economy, and as the 3rd or 4th largest economy in the world continues to move forward, but a a very slow pace.

The Japanese economy, is something of a mystery sometimes, as it just keeps going but at the same time is always contracting but still a very stable economy, and there are never any real major shocks with the Japanese economy, overall.

Have a nice day and be safe!

Japan Economy Averts Recession: Updated March 15, 2024.

 

Japan averts recession in Oct.-Dec. with 0.4% economic growth

Article Source:  https://mainichi.jp/english/articles/20240311/p2g/00m/0bu/011000c

Note: It was suggest that Japan had entered a recession after initial data was released, but after the revision, it looks like Japan didn't enter a recession.

Ideas:

Many times government stats agencies will give an initial report about the economy, and then later revise it as new data becomes available and or new stats have shown different results.

It is hoped that the new data is not a political idea to make the Japanese economy look better than what it really is.

Japan's fall from number 3 has been a long time coming, as Japan has been in deflation mindset for a very long time.

Most Japanese probably don't even know or feel anything from 3 to 4 in world rankings, as it doesn't really affect their daily lives.

There is a catch 22 situation here. For example the government is worried about inflation and the lack of vigor related to consumer spending. But at the same time, when wages do increase, and companies have to pay for the wage increases by increasing prices, what are consumers going to do then.

And then if and when consumer demand and consumer spending increases, maybe, what are consumers going to do when companies begin to increase prices because of increased demand and increased consumer spending.

Will consumer spending increase, decrease, or lack vigor and that is the question as the Japanese economy comes out of the stagnation and deflation mindset.

Private consumption or consumer spending has never been a strong economic driver in the Japanese economy, as consumer spending just isn't where it should be for a economy of 125 million people.

Japan just doesn't spend as much compared to the US due to maybe a large number of elderly, and it just hasn't been in the nature to spend like US consumers., as Japanese are, or used to be more savers than spenders.

At the same time, because of inflation, more married women, have taken jobs to help families survive in Japan. 

But the jobs women get in Japan are low-level service jobs and not management level jobs, as Japan is one of the worst work environments in advanced countries.

Japan is in the middle of a sever labor shortage and innovation and new technologies are needed to help overcome the shortage.

Also companies are and need to increase wages to attract more workers for their companies, but they also need to provide better benefits and better work/life experiences, that younger workers want these days.

If there is significant wage growth in April of 2024, how much will companies increase prices. to cover the wage increases, or will they use their huge sums of cash they are sitting on for wage increases only.

The challenge is up to 70 percent of the Japanese workers don't work for large Japanese companies, which in April of 2023, gave more of the significant wage increases.

So what is going to happen in 2024, are just large companies, again only, going to give wage increases or all or most companies give wage increases.

If not, there is going to have two-tiered economy of haves and have nots and consumer spending among all income groups is not going to be balanced.

Have a nice day and be safe!

Japan GDP: Updated Feb. 14, 2024.

 

Japan's GDP revised down to 2.9% fall in July-Sept., inflation bites

Article Source: https://mainichi.jp/english/articles/20231208/p2g/00m/0bu/016000c

Article:

TOKYO (Kyodo) -- Japan's economy shrank an annualized real 2.9 percent in July-September, sharper than the previously reported 2.1 percent, hurt by weaker-than-expected private consumption and slowing growth of exports, government data showed Friday.

Real gross domestic product, adjusted for inflation, declined 0.7 percent from the previous quarter, against its earlier reading of a 0.5 percent contraction.

The world's third-largest economy marked its first negative growth in four quarters. GDP is the total value of goods and services produced in a country.

Ideas:

It seems that the idea that the Japanese economy shrank an annualized 2.9 percent appears to be somewhat misleading. Maybe it better to say the Japanese economy only grew 2.9 percent annualized which means if all conditions were exactly the same GPD growth would be 2.9 percent for the year.

A decline from the previous quarter of 0.7 percent is not that much but if annualized out for a year GDP growth would be 2.8 percent. 

Weak private consumption, or consumer spending, is always a challenge as Japan is more of a savers society and not a spender society like the US.

At the same time, of course, add in inflation and maybe some or many consumers are spending less than normal.

Article:

Private consumption, which makes up over half of GDP, dropped 0.2 percent, rather than a 0.04 percent fall, as rising prices of everyday goods dented household sentiment.

Capital investment, another key gauge of domestic demand, was revised up to a 0.4 percent decrease from its earlier reading of a 0.6 percent drop.

"While the underlying recovery trend is not yet over, both private consumption and capital spending in the GDP data were weak. Caution is warranted," said Yoshimasa Maruyama, chief economist at SMBC Nikko Securities.
Ideas:

A decrease of 0.2 percent is not that much as maybe its the range of error related to statistics.

But no doubt the increase in prices of everyday good has hurt consumer sentiment, which is consumer feeling about the economy and prices.

Economic data, statistics are always being reviewed and revised as new information is made available. Many times, in all countries data examiners always revise and change the economic data.

We need to distinguish weak from deceasing, as data that might be weak is still economic growth. But yes, caution is needed as the Japanese economy is never on solid ground or solid economic growth.

Article:

"For households, inflation is working as a negative because wage growth is more than offset by rising prices. It will take some time for (inflation-adjusted) wage growth to turn positive," Maruyama said

Weakening domestic demand poses a challenge to the government when it is seeking to ease the pain on consumers due to the double whammy of pricier everyday goods and falling wages.

The slowdown in the economy gives the Bank of Japan reason to persist with ultralow rates, but with headline inflation sitting above the central bank's long-term target of 2 percent for more than a year it is becoming increasingly difficult for the public to accept the view that the inflation goal has not yet been achieved stably through wage growth.

Ideas:

The idea for wage increases is to offset inflation but it says the wage increases in April of 2023 was not enough as inflation was higher than the wage increases.

Actually 70 percent of the Japanese workforce doesn't work for large Japanese companies, which gave most of the wage increases in 2023.

The Bank of Japan, in the past, as suggested the Japanese economy is not strong enough for EU or US style inflation strategies such as increasing the key rate.

If the Bank of Japan were to change its current policy and increase the key rate, there might be more economic stress related to the increased key rate, and some side affects which might affect some companies and consumers.

Its like taking medicine which is good for you, but there might be some unwanted did effects related to the medicine.

Article;

Exports grew 0.4 percent, slightly slower than 0.5 percent in the preliminary data, while imports increased 0.8 percent, a downward revision from 1.0 percent.

Nominal GDP was slightly revised upward to an annualized 0.05 percent fall from a 0.2 percent decline.

Robust exports had supported the economy in previous quarters despite aggressive rate hikes in major economies calling into question the sustainability of strong export growth. China's slowdown has become another source of concern.

While BOJ Governor Kazuo Ueda has underscored the need to maintain monetary easing, his remarks on Thursday that it will become all the more "challenging" from the end of the year into 2024 fueled market speculation that an exit will come sooner than expected. The yen subsequently surged relative to the U.S. dollar.

Ideas:

Exports in Japan, especially Japanese auto exports, are a major economic driver, meaning it has the potential to increase economic growth in Japan.

 Nominal GDP is just GDP and inflation together while real GDP is GDP without inflation. A slight increase means that maybe inflation had increased slightly.

Rate hikes or increases in the US has not happened for a few quarters, as the US economy is now stronger and the US Federal Reserve, the US central bank, has not seen the need to increase rates and the US economy appears strong now.

China, of course is a different situation. Ever since the pandemic, and after, the Chinese economy has been in limbo somewhat and not growing like it did before.

Of course Japanese companies that do business in China and with China, are not happy with the situation in China, which doesn't seem to change anytime soon.

The Bank of Japan since the end of the pandemic, as been under pressure to change its current low policy strategy, but other bond rates, not much as changed.

At the same time, any quick change by the Bank of Japan might disrupt the financial markets and or cause undo stress and maybe society and businesses need time to adjust to any real changes made by the Bank of Japan.

Article:

SMBC's Maruyama expects the economy to rebound in the October-December quarter but the BOJ will take a wait-and-see stance ahead of annual wage negotiations between labor unions and management next spring.

Prime Minister Fumio Kishida has pointed to the risk of Japan slipping back into deflation, or prices continuously falling, without sustained wage growth.

Later this month, the government will draw up a budget plan for the next fiscal year from April, on top of the recently-enacted 13.20 trillion yen ($92 billion) extra budget for fiscal 2023 to implement inflation-relief steps, such as subsidies to lower fuel costs and payouts of 70,000 yen to low-income households.
Ideas:

The Japanese economy might rebound in the October-December quarter, but normally, the Japanese economy doesn't grow that much.

Once again, the Bank of Japan is hooping that companies will increase wages enough for them to justify and change in policy.

Japan is always at risk of slipping back into deflation, which is decreases in overall prices for the economy. But there are positives and negatives deflation. Such as lower prices for consumers, but also negatives such as lower wage increases too.

Budget plans are good but they need to reach society or Japanese households without a lot of unneeded paperwork. If the subsidies and payouts are too hard to get, many households are going to be under more stress related to inflation.

Have a nice day and be safe!