Japan Current Account: Updated January 16, 2025.

 

Japan's current account surplus jumps 54.5% in Nov. as trade rebounds

Article Source:  https://mainichi.jp/english/articles/20250114/p2g/00m/0bu/006000c

Ideas:

Because Japan manufactures a lot of goods related to trade, Japan seems to always be concerned about its current account balance. Usually small geographic countries like Japan and the Northern European countries focus a lot on trade and exporting.

A countries current account is like a country's bank account as exports bring money into the the account while imports take money out of the account.

The current account, if used wisely can help Japan with its debt to GDP ratio which at the moment is the highest among OECD countries. 

Even though there was a record surplus Japan still has to make up for the losses from the previous years, but its a good start to having a real trade surplus in the current account.

As global oil prices continue to decrease that will be a good situation for Japan, as Japan is a resource poor country and has to import much of what it needs and then there is the Japanese yen, which at the moment is weak, which means it increases the price of imports to Japan.

Chip making equipment is now at an all time high and Japan is smart to invest in Japan making along with producing chips themselves but at the moment they are way behind Taiwan and South Korea in producing chips.

Japan has more than just the goods trade to think about for the current account as there is also overseas production plants which make products overseas and then there is Japanese investments related to dividends and interest earnings which help the current account in Japan.

And as the same time there is foreign tourists who go to Japan and spend a lot due to the weak Japanese yen, which puts a lot of money into the Japanese economy with hotels, restaurants, shopping at stores, and then tourist areas too.

An idea that maybe the Bank of Japan has been thinking about it to keep the Japanese yen relatively weak as it bring in record numbers of foreign tourists, which helps significantly the somewhat stagnant Japanese economy.

Its not a surprise that the trade balance was a surplus as the weak Japanese yen helps foreign tourists but hurts Japanese tourists who want to travel overseas especially to the US and the EU as those currencies are strong compared to the Japanese yen.

There has been talk that the city of Kyoto, a major tourist area for foreign tourists, is struggling with over-tourism now and might impost a tourist tax on hotel stays of maybe 10,000 yen per night or $100 dollars per visit as a way to reduce the waste and other littering related to too many tourists in Kyoto.

Of course what Japan doesn't want is to have tourists thinking that Japan is not foreigner friendly as they need the money that foreign tourists spend in Japan to help the Japanese economy.

Have a nice day!

Japan Ramen Shops: Updated January 15, 2025..

 

Record number of Japan ramen eateries went bankrupt in 2024

Article source:  https://mainichi.jp/english/articles/20250111/p2g/00m/0bu/026000c

Ideas:

Ramen has always been considered a non-expensive food and not using the phrase cheap. as globally it is/was eaten my many people such as college students, people on limited budgets, and or course the average salary man in Japan for lunch, as the price usually was not very expensive.

But unfortunately, as utility prices increased and ramen ingredients have increased, ramen shops might have wanted to increase their prices, but whomever, didn't like the idea of ramen prices increasing and maybe the normal customer had no choice but to forgo their favorite lunch meal, and probably headed to the nearest convenience store for something less expensive.

Unfortunately, in a market economy there are going to be those who succeed and those who don't. Again, even though the ramen shops might have wanted to pass-on their increased costs to the retail customers, maybe some or many customers didn't like it and didn't go back.

Perhaps increased ramen prices have become very elastic meaning when the average customer sees a price that they feel is now too high they think twice about it or they don't go there anymore.

The problem or challenge seems to be that even though ramen prices are still relatively low, the average Japanese person's disposable income might be too little to even consider the increased ramen prices.

Its like a multiplier affect that begins to affect all purchases in Japan and not ramen shops and their increased prices.

Yes, maybe many ramen had to do the same thing but maybe the price increase was too much for some or many of the customers and they voted with their feet and didn't go back to the ramen shop, again looking for a substitute and maybe a convenience store.

Unfortunately inflation has not stopped in Japan and raw material and utility prices keep going up and has hurts many businesses in Japan along with stressing out Japanese families.

Ramen maybe should be considered a staple for the Japanese and maybe the Japanese government could temporarily place ramen prices at ramen shops on the price control list, meaning shops can't increase prices beyond as certain prices, and then compensate ramen shops with some kind of subsidy to help them survive.

Even though there are 34 percent running at a loss, it could be much worse, but at the same time, again. in a market economy there are going to be those who are successful and those that aren't.

A few years ago, as I was having a conversation with a venture capitalist in Tokyo, he said his company specialized in helping restaurants and supermarkets that were having financial problems and tried to help them survive.

But probably not all venture capital companies are that considerate and they might want to take them over, sell them or something like that.

Sometimes consumers/customers adapt to the change in prices and don't think much about it. But if their disposable income is already much less than normal they might have an imaginary price line that they think they can't afford even though they might want it or think they need it.

Yes, small and midsize shops with less resources and not a lot of extra funds  might think twice about increasing prices, while the larger firms might have no problem increasing prices and they feel they and withstand the loss of some customers and the price increase along with the customers they retain will still be enough to stay the black.

The smaller firms with less resources might not have a choice and might increase prices anyway hoping that they can still attract enough customers to ride out the current challenges.

Have a nice day!

Japan's Household Spending: Updated January 11, 2025.

 

Japan's household spending falls 0.4% in Nov., down 4th month in row

Article Source:   https://mainichi.jp/english/articles/20250110/p2g/00m/0bu/003000c

Ideas:

Normally home appliances are not an everyday purchase as its more of a yearly purchase as consumers don't go appliance shopping like they do for everyday groceries.

The increase in food prices as been going on for a very long time, and maybe Japanese households continue to cutback and or find substitutes for what they usually buy.

Japanese consumer spending is about 50 percent of Japan's GDP, and if Japanese consumers continue to reduce their spending the Japanese economy most likely is going to remain stagnant for the time being.

Again, washing machines and most electric appliances are not a weekly or even a monthly purchase as they are more a yearly purchase for most consumers.

Clothing and footwear might be considered as a needs basis meaning the are bought when needed and or they are a seasonal purchase as consumers buy them depending on their seasonal weather needs.

Weather definitely has a role to play as if the weather remains of hot like it has in Japan the last few years, it could affect the buying habits of Japanese consumers like not buying winter clothes until late November or early December.

All consumers need to buy food but a 0.6% decrease might not be that noticeable there might have been a significant drop for the low-income groups who might have reduced their spending even more or looked for substitutes to buy.

Decreasing spending on recreation such as golf and even reducing spending on trips and accommodations is not a surprise as inflation continues on in Japan. 

Most likely, as inflation has continued in Japan since the pandemic period Japanese households might have been delaying repair and maintenance and waiting for repair prices to go down, but many many households decided they can't wait any longer and need to repair some things.

Japanese workers get bonuses twice a year, once in May around the Golden Week period and once at the end of December during the year-end week long holiday period.

The bonuses might be considered income to makeup for the lower salaries in Japan compared to most OECD countries. Japan has some of the lowest salaries among the G7 countries or OECD countries. 

At one time Japan has some of the highest salaries but salaries have no kept up with inflation in Japan as companies for a long time were reluctant to increase wages.

The reasons why they were reluctant to increase wages was to compete with China which at the time had much lower wages. But today the wage variance between China and Japan is much less. 

Have a nice day!

BOJ Economic View: Updated January 13, 2025.

 

BOJ ups economic views for 2 regions on quake recovery, auto output

Article Source:   https://mainichi.jp/english/articles/20250109/p2g/00m/0bu/024000c

Ideas:

The Bank of Japan usually doesn't want to say anything too negative about any region and they don't want to cause harm to the region and or upset the markets and any companies in that region.

The recovery of the region that had the massive earthquake, as suggested, is not recovering very fast or slower than expected.

The production of cars might have slowed due to the Toyota group testing irregularities as they shutdown production in some plants in Japan, and only recently getting back to normal production.

At the same time the car industry in Japan, like maybe everywhere, was hit with semiconductor shortages due to supply chain challenges related to the pandemic.

Again, the Bank of Japan doesn't want to give any real negative reports so using the phrase "recovering moderately" might be a positive or just a hopeful positive.

The question remains as it been a year since the earthquake and why has it taken a year to get the recovery going as has been suggested there are still some people in earthquake shelters.

It highly unlikely that most likely there are not that many tourists visiting the earthquake hit area, and especially foreign tourists.

The Tohoku region is probably the least populated region in Japan and most as with many things in Japan, companies would invest in the region to help the region so the region for having some car manufacturing plants in the Tohoku region.

Chip manufacturing is now a major industry and Japan, as needed, has increased its production of chip manufacturing equipment but its way behind Taiwan and South Korea at this time.

Wage increases are now very important despite not being a priority for many years, as Japan is experiencing a labor shortage and companies need to increase wages in order to get workers or retain workers and workers can pick and choose from many jobs now.

Wages in Japan are some of the lowest among OECD countries and Japan used to have some of the highest wages but companies neglected to increase wages for a very long time.

Japan's GDP might be increasing yearly, but wages have not gone up the same as GDP, which has decreased the standard of living for many Japanese.

Now Japan is playing catchup with other OECD countries and may never get back to it status as a higher level economic country.

Usually if an country's economy continues to improve and or inflation continues to go down, central banks will begin to lower the key rate, but Japan is the opposite because its key rate as been almost zero for a very long time and they can only increase the as needed.

The BOJ governor has been saying the same thing about he needs to see more data and or is waiting to see what is going to happen related to wage increases in April of 2025. 

If the wage increases are not to his liking and or if all companies including small and midsize companies don't increase wages enough, he might not increase the key rate in the spring.

Again, the BOJ is very cautious and might not increase the rate but if they do it will not be that much for example maybe only 0.5 at the most as they don't want to upset the financial markers and or stress out the Japanese economy too much.

Yes, the US economy could change a lot or not that much depending on what the next administration does and what the US congress allow the new administration to do, so its good that the BOJ might be taking a wait and see approach as to what is going to happen in the US.

At the present time, the US economy is riding high with low unemployment, many jobs being added in December and inflation is trending down.

But all could change soon. 

Have a nice day!

Japan Real Wages: Updated January 8, 2025

 

Japan's real wages fall 0.3% in Nov., down for 4th straight month

Article Source: https://mainichi.jp/english/articles/20250109/p2g/00m/0bu/004000

Ideas:
Wage increases in Japan usually only occurs during the beginning of the new fiscal year which is April in Japan. So wage increases might only happen one time a year, but inflation might happen every week, every month which naturally wage increases are not going to keep up with rising prices.

A decrease of 0.3 percent in real wages might not even be noticeable for many wage earners but for the low-income groups, including contract workers and part-time workers it could be a significant decrease in wages.

Nominal wages are wages including inflation so they really don't mean much as real wages are wages adjusted for inflation so they are a better indicator of an economy.

Inflation in Japan seems to keep increasing and or maintaining a high level which of course is causing a lot of stress for Japanese households and their disposable income to use after the bills are paid including food.

While subsidies for utility bills were good and of course needed for many in Japan, maybe the Japanese government decided it can't afford to subsidize everything in Japan.

Continuous increases in food prices in Japan seems to be a constant since the pandemic and or a constant since the US dollar and Japanese yen variance became so wide the the Japanese yen has remained very weak which of course hurts Japanese importers and many Japanese households.

The real wage increase in May might have happened because of the wage increases in April, but as inflation continues on, real wages haven't kept up with inflation increases.

Usually Japanese companies only increase wages in April, the beginning of the new fiscal year in Japan, so while the government might call for wage increases workers will not see them until of each new April.

The Bank of Japan has not used the traditional strategy of reducing inflation, which is/was related to increasing the key rate, suggesting the Japanese economy was/is too weak and instead seems to be using the strategy of just letting inflation run its course thinking/hoping that it will eventually begin to decrease.

An increase of real wages to 0.2 percent is not really that significant but it could be for the low-income groups, but in reality most workers probably didn't even notice or feel the 0.2 percent increase which means inflation must have decreased some.

It might have been the sharpest increase in 32 years, but in reality its been that long since Japan has seen real wages grow to the point that consumers or Japanese workers could maybe feel good about their wages.

Companies always give or usually always give summer and winter bonuses which can help the Japanese economy and especially maybe it helps for Golden Week in May and for the end of the year week long vacation, as maybe consumers use it on their trips.

The real problem might be as suggested before, up to 70 percent of the Japanese workforce don't work for large name-brand Japanese companies but small and midsize companies which might not give the same amount for bonuses that large Japanese companies do.

Japanese prices seems to keep going up and or not really deceasing as they are still quite high for Japan and Japanese households.

Among OECD economies Japan has some of the lowest wages while at one time had some of the highest. Japan basically has not kept up with what is happening with wages globally as even up and coming South Korea has surpassed Japan's wages.

Some might say the cost of living in Japan seems low but for many in Japan its is stress and struggle and their wages can't kept up globally and inflation continues to go up or remain very high.

Have a nice day!

Japan Small and Midsize Business and Wage Increases: Updated January 8, 2025.

 

Small, midsize firms crucial for Japan's wage hikes: business chief

Article Source:  https://mainichi.jp/english/articles/20250107/p2g/00m/0bu/028000c

Ideas:

Small and midsize firms, which employ about 70 percent of Japan's workforce might be suppliers to larger Japanese companies and as suggested they fear they might lose customers or contracts as the larger firms might not like smaller suppliers passing-on their costs to the larger firms.

Japan has a labor shortage now, and small and midsize firms might not have the resources to pay the wage increases needed to keep workers or even higher new workers.

Part of the problem might be the market power of larger firms that might keep the profit margins of small firms too small to change anything in the small firms favor, including again increasing wages.

Maybe most of the small and midsize firms would like to increase their wages to their workers but again, they might not have the resources or their profit margins are so thin, they might only be able to offer as much smaller wage increase compared to what the larger firms offer.

If the larger firms with their possible huge sums of money in the Japanese banks were to offer some of it to the small firms, which might be their suppliers, that would go a long way to helping the smaller firms and also help stimulate the Japanese economy at the same time.

If not the possibility of a two-tiered society of haves and have nots as maybe small and midsize employees won't have enough disposable income to spend in the Japanese economy.

It has been suggested that Japanese wage are some of the lowest among OECD countries and even up and coming South Korea has surpassed Japan in wages.

The real question is how did Japan get in this situation when at one time it was one of the richest nations among OECD countries.

Part of the problem might do back to the early 2000's when the Toyota group and its chairman said no wage increases this year, and as Toyota was the market leader and maybe the defacto leader in Japan among large companies so all large Japanese companies did the same thing and didn't increase wages and its been like that ever since.

The Japanese economy might have reached the so-called virtuous cycle level, but at the same time maybe not all Japanese companies or Japanese workers feel that their wages have improved enough to have enough disposable income to freely spend in the Japanese economy which is what is needed right now.

Its going to take more than just one large company to increase wages but a large number or small and midsize companies too to reach the level of wage increases so that their workers too can feel good enough about their wage increases to freely spend in the Japanese economy and get the economy back on track again.

If not, again, while the large company workers might feel good about their wage increases the small and midsize workers, again, are going to feel left-out and not spend as needed in the Japanese economy.

What is the answer to help the small and midsize companies? The answer is very complicated as government subsidies for small companies might help some but does the Japanese government have enough money to support 70 percent of the Japanese workforce.

At the same time, does Japan want to follow the Northern European model of socialism or remain a true market economy.

Have a nice day!

Japan's Labor Productivity: Updated Jan. 1, 2025.

 

Japan's labor productivity ranks 29th among 38 OECD members in 2023

Article Source:  https://mainichi.jp/english/articles/20241228/p2g/00m/0bu/016000c

Ideas:

One reason for the low productivity in Japan might be the long hours that workers at large Japanese companies work. If they maybe worked less hours their productivity might improve.

Output maybe doesn't need to improve as working less hours will lead to a higher output ratio. Most of the G7 countries work less hours but Japan works longer hours which could result in a skewed productivity response.

At the same time, if Japan had a better work-life balance that too might improve productivity of Japanese companies, as maybe Japanese workers wouldn't be so stressed out everyday from working long hours.

Many of the European countries, and especially the northern European counties have better working conditions, better working hours and better work-life situations compared to Japan, and they have higher productivity levels too.

Unfortunately not all large Japanese companies are moving into the 21st century as some companies seem to be stuck in their traditional Japanese ways and not modernizing that much. For example it wasn't until a few years ago that many Japanese companies were still using fax machines and not using email that much.

For example some or many Japanese universities for professor jobs still require candidates to mail their resume and other documents instead of sending them by email.

While customer service at Japanese service companies is some of the best in the world, Japan is still stuck with a lot of red tape and procedural nonsense, which slows down customer service and unfortunately there is a lot paperwork involved in many Japanese situations. 

For example when in Japan and buying some duty free items there is a lot of paperwork to fill out which makes the entire process less than desirable for tourists.

And its even worse for Japanese citizens as Japan seems to like paperwork for many menial situations.

Japanese companies are a little behind related to technology innovation, as again, they just recently just got rid of using their fax machines at many Japanese offices.

Reskilling sounds good and many Japanese companies are considering it but its expensive too, which might cause some companies to think twice about reskilling. 

While there is a labor shortage in Japan, and probably some companies are considering AI in the workplace not all companies can afford to do it, as it too might be expensive.

Japan is a society of person to person relationships including service workers at department stores or other places where human contact is needed and important. It will be hard to change Japanese societies minds about using AI technology in service dependent businesses. 

Have a nice day!