BOJ Concerns About Trade Talks: Updated June 19, 2025.

Downside risks exceed upside risks for both economy, prices: BOJ head

Article source:  https://mainichi.jp/english/articles/20250617/p2g/00m/0bu/049000c

Ideas

The Bank of Japan, like most central banks, are very conservative and they don't make a move unless they think its in the best interest of their country.

Japan is entering uncharted territory, like other countries so they really don't know what to do  related to the tariff situation and how to overcome or compensate for it.

With relation to prices, US prices, Japanese companies might have to increases to compensate for the increased tariffs, but of course that might reduce demand for Japanese products in the US.

There are always going to be risks related to increasing interest rates, such as a decreases in the loans at banks, a decreases in credit card purchases, and the decreases of housing loans, not to mention companies not taking out loans for the whatever they need.

Trade policies might be the deciding factor for the Bank of Japan if they feel the US tariff situation is just too much for the Japanese economy.

Its really too early to see the full effect of the tariffs at this time, as maybe by the end of the summer there will be more data available about how the US tariffs have affected Japanese companies in Japan and in the US.

The Bank of Japan has usually been the largest purchaser of Japanese government bonds as a way to keep the economy moving but recently reduced their buying of bonds.

But at the Japanese economy is slowing down and the potential effects of the tariff situation is beginning to set in the BOJ might be increasing its bond buying again.

The BOJ buying Japanese government bonds increases the debt to GDP ratio in Japan which is one of the highest in the world, which means the Japanese government owns a lot of debt.

The US admin. doesn't seem to care about absolute advantage or anything related to the principles of international trade as they seem to be just throwing away 50 plus years of positive international trade ideas.

Japanese cars has been a significant growth engine for Japan and its been a solid growth engine in the US too related to the many Japanese car dealerships along all the related products for Japanese cars sold in the US.

There are going to be many jobs affected in the US as potentially higher prices might begin to decrease sales which means jobs in the US could be lost, not to mention all the jobs being affected in Japan too.

When there is a lot of uncertainty many companies don't know what to do so they wait and see which could put them at risk to a lot of different factors.

What is really unfortunate here is the US admin. is causing a lot of stress for many of its closest allies such as Mexico, Canada, Japan, South Korea, not to mention many or all of the countries in the EU.

Japan has been dealing with a lot of inflation since the pandemic as it looked like they were just beginning to move out it the inflation situation.

But with the Israel and Iran situation that could increase global oil prices which means again, higher oil prices for all in Japan.

Consumer sentiment in Japan is always a challenge as Japanese consumers just don't spend like they do in the US or even the EU, as they are more savers than spenders as they just don't spend enough to help the Japanese economy grow.

And when Japanese consumer sentiment is less than good or not not where it should be it makes the situation even worse.

The major challenge in Japan is Japanese consumers, Japanese households have had their income decrease for decades and now they are one of the lowest if not the lowest income producing country among advanced economies.

For example when all that Japanese consumers or Japanese households see is increased prices they and they hear about it constantly on the news they become very unhappy and their sentiment decreases and they only spend on the everyday basics that they need.

The rice situation in Japan is a significant collapse of the rice market in Japan as it should never have happened as some actors in the rice market have or are acting only in their best interest and not in the best interest of Japanese society or Japanese households.

Have a nice day!

Japan Economic View: Updated Jan. 31, 2025

Japan retains economic view in Jan., optimistic on business climate

 Article Source:  https://mainichi.jp/english/articles/20250123/p2g/00m/0bu/053000c 

Ideas:

Overall, the Japanese government doesn't want to sound too optimistic or sound too pessimistic and it doesn't want to upset the financial markets or cause harm to businesses. 

So it always uses the phrase recovering moderately but uses pausing as a way to say its improving but not completely.

If the Japanese government or any government said what it really thinks the financial markets could react in a not so good way or even businesses would not invest in the economy,

As an example, corporate bankruptcies, unfortunately, are increasing in Japan, and if the Japanese government said what it really thinks the Japanese economy and the mood of the country could be in a not so good situation.

So it uses, again, almost flat, which is a polite way to say they are there but don't want to say just how bad it is.

However, its quite possible, that the Japanese economy has reached its lowest level and just possible its beginning to come back slowly after being stagnant for a very long time.

Many governments tried to help businesses hit hard by the pandemic and its sad that there might be some or many that are having challenges repaying the loans that governments provided them.

Hopefully, the Japanese government tried to help those businesses that had challenges since the pandemic with whatever they needed to keep going.

But at the same time, in a market economy, unfortunately there are always going to be business and succeed and those that don't do so good.

The global economy is always picking up and always showing signs of pausing as the global economy is like a microcosm of an economy made up of many different sectors and not all sectors are going be growing at the same time as some sectors might be deceasing or pausing at the same time.

For example the US is the envy of the rest of the world at the present time, while the EU might still might be in a stagnant phase as Germany is not doing good at this time.

 While China seems to be moving in the right direction with  GDP growth of 5 percent for 2024.

Have a nice day!

Japan Economic View: Update September 21, 2024

 

Japan retains economic view in Sept., optimistic for corporate sector

https://mainichi.jp/english/articles/20240918/p2g/00m/0bu/055000c

Ideas:

The Japanese economy might be improving with the corporate sector showing improvement, but again, as always, the weak link of the Japanese economy is consumer spending, and yes, the hot summer weather might weaken spending during the hot summer months.

And of course the typhoon/hurricane season in Japan, prevents consumers/people from traveling, which the summer months are prime travel time.

Consumer spending has always been the weak link for the Japanese economy, as Japanese consumers/households just don't spend that much as they are mostly savers and not spenders like in the US.

For the most part, like any economy, there regions with strong economic activities and those less economic activities. For example spending in the Tokyo is always going to be good but for the rural areas maybe not so good.

Real wage growth might have improved the overall economy, but it must be remembered, that not all wage earners in Japan got the wage increases that large Japanese company workers got.

There might have been a modest rebound, but again, if all Japanese workers could have gotten the 5 plus increase of large company workers,  consumer spending might have been even more.

Not all sectors are the same, as some improve while some slow down, and some decrease, depending on economic conditions.

Unfortunately, bankruptcies might continue in Japan as there are continued labor shortages and inflation, which makes materials prices too much for some and some companies unable to hire new workers, and or they can't afford to pay for wage increases, which means workers will leave and find new work with higher wages.

But unfortunately that is the nature of a market economy, with some companies doing good, but some companies not able to do much, and eventually have to leave the market.

Have a nice day

Bank of Japan Governor Ideas: Updated Aug. 2, 2024.

 

Bank of Japan chief denies rate hike would seriously damage Japan economy

Article Source:  https://mainichi.jp/english/articles/20240731/p2g/00m/0bu/051000c

Ideas:

There are always positives and negatives related to key interest rate hikes and decreases, depending on the sector or industry, and even households might react differently to rate increases.

The key interest rate increase will reduce the difference between the US rate and the Japanese rate, which has been a major reason for the weak Japanese yen.

But the Bank of Japan needs to be careful, and make sure the rate doesn't get too strong, as it might cause foreign visitors from not coming to Japan, as foreign tourism is now a major economic driver for the Japanese economy.

But its going to take many more Japanese key rate increases and or many US key rate decreases for the US rate and the Japanese rate to be near equal which makes the US dollar and the Japanese yen somewhat equal, which will help the Japanese yen to be less weak and stronger.

The 2 percent target might not be achieved anytime soon, but its still a good target to strive for as a 2 percent inflation rate is maybe a good number for the Japanese economy, as there are many senior citizens who live on fixed incomes and anytime there is an inflation increase it could significantly affect them, and of course all in the Japanese economy.

Japanese banks might feel as sense of relief as now they might be able to have higher interest rates for their borrowing situation, which means they now can make more profits instead of the zero rate that they to have for many years.

The need may exist for another rate increase sometime in the fall, but its going to depend on what happens with consumer spending and business investment spending in the future months.

If the April wage increases don't begin to affect the Japanese economy with Japanese households spending more in the summer the Bank of Japan might delay the rate increase until sometime in 2025.

The Japanese economy, while a very stable economy, with few shocks, its a very stagnant economy and doesn't really grow that much which puts a lot of pressure on the Bank of Japan, to rely on exports and foreign tourism to grow the economy, as domestic consumer spending doesn't seem to be much or not as good as it should or could be compared to the US and the EU.

Have a nice day and be safe!