Japan GDP Growth Outlook: Updated July 26, 2024.

 

Japan gov't cuts GDP growth outlook to 0.9% from 1.3% in FY 2024

Article Source:  https://mainichi.jp/english/articles/20240719/p2g/00m/0bu/030000c

Ideas:

There is nothing new related to the Japanese economy as 0.9 percent economic growth is about what the economy has done in recent years.

Private consumption or consumer spending has always been weak in Japan as Japanese consumers just don't spend like US consumers. And add in the continued inflation situation and it gets worse and add in the weak Japanese yen, with imports continuing to be high.

Consumer spending, as indicated might be 50 percent of GDP but the numbers don't show it as Japanese consumers don't seem to spend that much recently.

The Japanese auto industry situation might not be that bad as demand for Japanese cars in the US remains strong.

Economies always go through ups and downs and Japan is no different, but, recently, there seems to be more downs than ups. At the same time, an economy is very complex, as there are many sectors or industries in an economy, and they usually are not all positive at the same time, as some might show growth and some might show negative growth, while some might show no growth and just stagnant.

Domestic demand is always a challenge in the Japanese economy, as Japanese consumers, have been hit hard, recently, with increased inflation, which cuts into their extra income to be used in the Japanese economy.

Japanese auto production, even though there might be a controversy with improper data, US demand for Japanese cars is still very strong and most likely will remain strong through 2024.

To be fair, how can wage growth keep up with inflation and for the most part a 5% percent wage increase is good, but can't compete with inflation that increases almost every month in Japan.

Yes, a 5% wage increase is for every month, but add in inflation that keeps increasing every month, as the extra income from the wage increase is not that much or even disappears over time.

The weak yen makes is both a positive and negative for the Japanese economy, as it helps Japanese exporters get extra profits but it hurts Japanese importers, as imports prices are inflation, due to the weak Japanese yen.

The Japanese government can't do much but they can use price controls, as needed on some basic items to help Japanese households, by maybe putting a freeze on prices on some items in the Japanese economy. The price freeze doesn't need to be permanent, just a short-term freeze until inflation is under control and or the weak Japanese yen, gets a little stronger.

All of the above ideas related to energy subsidies are good and needed, but what about the basics related to food, and maybe there should be a freeze on prices related to food.

A government can't do everything, but like in the Northern European countries, they seem to have been able to meet the needs of most of their citizens. Japan maybe should be more like the Northern European countries and less like the US.

The Japanese yen situation is very complicated as a weak yen helps some in the Japanese economy but hurts some in the Japanese economy. The Bank of Japan has to manage both sides of the economy, as much as possible, to try and find a mid point that contributes to both sides of the economy.

Deflation might have been good for some in the Japanese economy, but not so good for some in the economy, as profits might have been too stagnant for too long.

And of course, for a very long time, it seemed like wage increases were not much, if even at all, might have been a challenge for Japanese households and spending in the Japanese economy, as there was very little or no extra income to use in the economy.

Forecasts are always needed and important, but rarely are they correct, due to many variables interacting at the same time in an economy. So if its 2.5 or 2.8, whichever, it might be good or it might be not so good.

But if its 2.8, for consumer price increases that means Japanese households have to deal with increased inflation, again, through 2024, and again, less extra income available to be used in the Japanese economy.

Nominal GDP is not the same as the real GDP, which should be the real target as nominal also includes inflation in the economy. 

The real GDP is what affects households more than nominal and it shows the real amount of economic activity in an economy, without inflation included.

Of course nominal shows how much inflation might be affecting households and so on, but the real GDP is what matter for Japanese households.

Have a nice day and be safe!

Japan Real Wages: Updated July 9, 2024.

 

Japan real wages down 1.4% in May, 26th monthly fall despite hikes

Article Source:  https://mainichi.jp/english/articles/20240708/p2g/00m/0bu/014000c

Ideas:

Japan's real wages are just wages against inflation, which it looks like wages are decreasing since inflation causes less purchasing power related to any extra income Japanese households have.

While wage growth is good, the challenge is wage increases only happy in April, for the most part, while inflation could be every month, which makes the wage increase difficult to keep up with inflation.

It could easily be thought that some price increase are not relevant to me, as I don't buy any of the products that have increased, but in a large economy like Japan, there have been increases in many different products and prices increases eventually will begin to affect everyone.

The average wage increase might have been 5.1 percent, but it must be remembered that most likely that was large Japanese company wage increases and not small and midsize companies, which might have given much smaller wage increases.

For example maybe some 70 percent of Japanese wage earners don't work for large name brand Japanese companies, which means up to 70 percent of Japanese wage earners are still feeling inflation more than the large company workers.

But that might be what a market economy is all about, the large companies have more resources, and the small and midsize companies have to make do with what they have.

A ripple affect might have begun, but will it become a positive factor in all of the Japanese economy.

But again, as the wage increases were not the same for all Japanese companies will wage earners working for the small and midsize companies begin to spend like the wage earners in the large companies, or will the Japanese economy remain an economy of haves and have nots.

It might be too early to tell, as even the May to July period might not see a lot of spending as wage earners/Japanese households might be waiting to see if inflation is really going to decrease in the coming months.

Until there is significant decreases in inflation, consumer spending in the Japanese economy might not be that much at this time, even though there were some good wage increases.

High utility and food costs are costs that might cut into a Japanese households discretionary income and most likely households might not reduce or cut their utility usage, most likely they might cut back on the type of food they buy especially higher priced fruit and vegetables.

And now, as hot weather has again returned to Japan, most households are probably going to run their air-conditioners a lot, and or, as needed, go to any mall type places where they can spend the day, especially on the weekends.

Again, wage increases were good and needed, but it still might not be enough to get Japanese households spending in the Japanese economy, just yet.

The Bank of Japan can use all the slogans they want but the real variance is what do Japanese households or Japanese consumers feel with the wage increases. Are they enough to get them out spending again.

The Bank of Japan and the US Federal Reserve have used different strategies to reduce inflation and get their respective economies moving again.

The US strategy seemed to work, for the most part, while the Bank of Japan's strategy might have been to just let inflation run its course and not do anything that might cause any real side-affects to the Japanese economy, or something like, "do no harm" to the Japanese economy with our strategies.

As in any market economy, there is a big difference between full-time wage earners and part-time wage earners, but the difference might be too much in Japan, as there are a lot of part-time wage earners, maybe more than other advanced economies. 

Many or most of the part-time wage earners in Japan might be woman and or women with children, who might need to work part-time and still take care of their children,

The challenge or problem is maybe many of these women might want to work full-time jobs but the Japanese work environment might not be good for them as women with children and full-time career track jobs are not easy to find or companies willing to accommodate women with children.

It seems the trend, globally, is not a reduction of work hours, but work hours might be trending upward due to complexities in work and work stress in today's global work world.

The construction industry might have needed to increase wages due to the labor shortage and to get good reliable workers they need to pay good salaries, as maybe young Japanese workers don't want to work in the construction industry these days.

While compound services might be related to transformations related to work and demand for their services, and as such they might not need as many workers.

Have a nice day and be safe!

Bank of Japan Meeting: Updated April 24, 2024

 

BOJ members more positive about policy normalization at Jan. meeting

Article Source:  https://mainichi.jp/english/articles/20240131/p2g/00m/0bu/029000c

Ideas:

Just what does normalizing its monetary policy mean exactly, other than maybe adjusting the policy as needed to meet the needs of the Japanese economic, with key interest rate increases or decreases, depending on the current state of the economy.

There are always going to be situations, both major and minor, that might cause some twerks in the monetary policy, such as the earthquake that hit central Japan recently,

Wage growth or wage increases might be the key to the Japanese economy moving out of its stagnation situation and moving out of its so-called deflation situation too.

Wage growth might allow Japanese households to be able to get past the household energy situation and they might feel good enough to begin to spend more and more consumer demand will be part of the Japanese economy again, 

But, as mentioned before, all companies, large, midsize, and small need to participate in wage increases for all in the economy to feel good about what is happening, and if not, then, again, there will an unbalance economy of haves and have nots.

The ultra-loose policy might change but don't expect major wholesale changes and the Bank of Japan is going to move very slowly, to make sure what they do doesn't cause any harm in the Japanese economy.

For example the key interest rate, while at zero or a negative rate, might go to a positive rate of 1, which is still way below the US rate of 5.3 points, but don't expect much more than this for awhile.

At the same time because the US rate and the Japanese rate are still too far apart the Japanese yen, will most likely remain weak, for the time, being, which will be good for foreign tourists who travel to Japan.

The 2 percent price stability target was/is always a goal, that hasn't been met in ten years, but the Bank of Japan keeps trying. The inflation target of 2 percent was always focused on consumer demand and consumer spending and not inflation related to companies passing-on their energy and materials costs to the next in the supply chain.

But most likely there is always going to be cost-push inflation and companies will always be passing-on their costs to the next in the supply chain including the final customer.

The key is to improve consumer demand and consumer spending in the Japanese economy, to where consumer spending it the key driver of economic growth.

There are both positives and negatives to the rates, as they are, but maybe the positive side of the rates, has run its course, and now the Japanese economy needs to see some higher rate to get the economy moving again, including more inflation, which in itself is not a bad thing.

Increased inflation, up to a point, is a good indicator or good economic activity, just like less inflation, such as at 1 percent or below it a good indicator of not so good economic activity, as maybe an economy is depressed or not operating at its normal level.

A 2 percent inflation rate, based on consumer demand and consumer spending, for the Japanese economy, is very good, and sometimes consumer demand and consumer spending is not where it should be.

Its important that all Japanese companies participate in increase wages for all in the Japanese economy, as some 70 percent of wage earners in Japan don't work for large Japanese companies, but work for small and midsize companies.

And while wage increases are important, for wage earners to feel good about their wages and, then maybe they will begin to spend more in the Japanese economy, which will increase consumer demand and consumer spending and then, companies might be able to naturally increase prices.

For the past few years,  maybe consumer demand and consumer spending has not been where it should have been in the Japanese economy along with Japanese companies passing-on their costs even though consumer demand and consumer spending was not where it should have been, as it made an un-natural situation of increased costs and not so good consumer demand in the Japanese economy.

Have a nice day and be safe!

BOJ Economic View: Updated April 3, 2024.

 

BOJ lifts economic views on 2 regions, impact of quake uncertain

Article Source: https://mainichi.jp/english/articles/20240111/p2g/00m/0bu/039000c

Ideas:

Japan is no better or no worse than other economies globally, but Japan has been stuck in a stagnation situation for a long time, and needs more time to move out of the inflation situation too.

Like a market economy, there are always positives and negatives, some companies doing better than other companies, some sectors doing better than other sectors, and its the same with Japanese prefectures, like US states, there are some doing better than others.

Of course the earthquake on the western central part of Japan has affected all of the provinces in the area, and probably has caused major damage to the supply lines in and out of the prefectures.

The key to wage increases might be the smaller companies, as it seems most if not all of the larger companies are going to increase wages in April 2024. So that leaves the smaller companies as the key to wage growth.

If smaller companies and companies in the regional areas don't come through it could be another year of inflation concerns for smaller companies especially those in the rural areas.

If some smaller companies begin to signal/communicate that they are going to increase wages, its quite possible other smaller companies will begin to increase wages too.

Of course the earthquake situation could delay or stop completely any wage increases that some or many small companies had planned.

The Bank of Japan has indicated already that its going in end the negative interest rate policy, but how they do it exactly is still unknown at this time and by how much is in question.

Recovering moderately and recovering steadily are some ambiguous terms as they are of course meant to be positive signs the economies in all prefectures are recovering or improving.

Because many of the respective province economies are concerned by what happens in overseas economies is a good indication that many exports companies are located in many of the Japanese provinces.

The Toyota group and Daihatsu were hit with quality control challenges which halted production in many plants in the Tokai region related to Toyota, but now it seems maybe production is back to normal.

Most likely the Kyushu-Okinawa area had/has a boost in capital investment due to TSMC from Taiwan, with collaboration with the Japanese government, building semiconductor plants in Japan to maybe avoid the impending China/Taiwan war situation in the future.

Japan needs to be very careful, but at the same time its only natural, that when tourism increases as much as it has in Japan, its easy to think it will be that way a long time, but the pandemic in 2020, greatly affected tourism in Japan even though 2019 was a record year for tourism.

Its only natural, that as prices increases, consumers will begin to cutback on buying some things or many things. Consumer spending in the Japanese economy is never that great and is always a challenge for the Bank of Japan.

It seems the Bank of Japan is relying on wage increases as a way to get back out of its inflation situation. The Bank of Japan 2 percent inflation target is related to consumer demand and consumer spending, but consumer spending and consumer demand never seems to be enough in Japan.

The trade union might want a 5 percent increase in wages, but companies never actually give what unions want or need, and maybe this time its the same with maybe 4.0 to 4.5 percent might be the limit for companies, if that.

Again, all Japanese companies need to increase wages and not just large companies, but small and midsize companies too. But the challenge is many small and midsize companies might have profit margin challenges that prevent them from matching what big companies will do in April of 2024.

Have a nice day and be safe!