Gov't cuts Japan's FY 2026 GDP growth outlook to 0.9% on higher oil price
Ideas
Japan is a very mature economy and is never going to see economic growth of 2 or 3 percent ever again as it takes more and more resources to grow an economy as an economy gets larger and Japan with projected growth of just 0.9 percent is still a lot of growth for a economy like Japans.
Japan's fiscal health, recently the last few decades, is always in question as Japan has one of the highest debt to GDP ratios among advanced nations but its true that there will be a surplus of 1.4 trillion yen, that is good for an Japan as it needs to reduce its debt if it can.
The Japanese Prime Minister is a fiscal dove which means she is using a lot of government spending to try and get the economy moving again, but there is a downside and it increases government debt which the financial markets don't like to see, knowing how much debt the government has now.
But at the same time, government may feel they have no choice but to spend and try and get the economy moving if other variables such as consumer spending or business investment/spending is not enough.
And then there is the idea of exports, which is a major economic driver for the Japanese economy but is always being subtracted due to Japan being a resource-poor country and has to import much of what is needs causing the affect of exports to be much less than needed for the economy.
Yes, it might seem the projected surplus is going to help reduce the existing government debt but there is so much debt now that will only help but not in a significant way to really reduce the debt, as the Japanese government just keeps spending with new program and budgets as they have always done.
And of course there are always, it seems, new supplementary budgets that might be needed in some cases but continue to increase the debt that Japan has now.
The weak Japanese yen is both a positive and a negative for the Japanese economy as it helps export companies but hurts importers and others as it drives up costs in the overall domestic economy in Japan.
Of course wage growth in Japan is long overdue and companies have kept a mindset of not increasing wages for a very long time as now company employees just might begin to feel like they can start spending their wage increase in the economy again, and yes, government subsidies do help with increasing the disposable income of Japanese households and helps them spend a little more in the economy.
Japan has always been vulnerable to an increase in global prices but what is a little strange is Japan only has a few free trade agreements that can help reduce global prices.
You would think Japan would try to get as many FTA's as possible to reduce import and global prices but unfortunately it seems there are many political roadblocks that have prevented them to do so.
And of course there is always the need to sound optimistic in order to keep the domestic and global financial markets happy even though a lot can change by next April.
The Japanese government is no exception as they are always coming up with new phrases and slogans that sound good but for the most part, don't really live up to what they were meant to do.
The investment allotment might be a very good idea but of course there could be many variables that might constrain the original idea as next year is still a long way off.
The investment allotment, again, sounds but at the same time, there might be too much political influence as to who gets chosen and who doesn't as usual politics might get in the way of a good idea.
There is a long time to go before the plan is implemented which means, as most political decisions go, there could be many changes before than and now.
Have a nice day!
Article source: https://mainichi.jp/english/articles/20260730/p2g/00m/0bu/013000c
