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Japan braces for worst postwar economic slump

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By Leika Kihara and Tetsushi Kajimoto

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It is dependent on trade with both China and the U.S., the country where the pandemic began and the country where it has hit hardest.

It is time to get rid of businesses with China and look for new options.

30 ( +40 / -10 )

It is time to get rid of businesses with China and look for new options.

There are no viable options that offer the same financially competitive advantage that China can.

What will motivate companies - profit driven capitalistic entities - to sacrifice profits in the name of politics?

I ask this as an honest question. While I want the world to transition away from giving China (and America) so much power, companies will not change without some kind of motivation given to them to do so.

5 ( +25 / -20 )

Actually Chinese goods have increased in prices significantly.

there are cheaper alternatives with less overhanging political burdens such as Vietnam, Thailand

31 ( +33 / -2 )

Actually Chinese goods have increased in prices significantly.

Not goods, manufacturing.

there are cheaper alternatives with less overhanging political burdens such as Vietnam, Thailand

That’s not entirely correct. While it is true for some industries at some volumes, the sheer volume of manufacturing capacity that China offers is not marched by any other country.

It’s like the difference between the American military and others. Sure other countries have militaries. But none of them even remotely compare to the US. Not even combined.

-3 ( +13 / -16 )

time to end this for good, enough damage has been done.

0 ( +15 / -15 )

Not often you see this sort of honesty from the government. We are in for some rough sledding.

“The economy entered the coronavirus shock in a very weak position,” said Izumi Devalier, chief Japan economist at Bank of America Merrill Lynch, but “the real big ugly stuff is going to happen in the April, June print. It’s going to be three quarters of very negative growth.”

Ms. Devalier added, “It’s not a very encouraging picture.”

Businesses had already been staggering before the coronavirus hit.

Days later, a typhoon slammed into the country’s main island, inflicting enormous damage and further driving down economic activity.

Even before that, Japanese export numbers had fallen steadily all last year on slowing global demand and the fallout from the U.S.-China trade war.

The situation has only worsened this year. The outbreak crushed Japan’s exports, forced it to postpone the Olympics and then put the country on a soft lockdown as it joined other nations scrambling to stop the coronavirus.

“The emergency declaration stopped people from going out, leading to a substantial decline in consumption,” said Kentaro Arita, a senior economist at the Mizuho Research Institute, a think tank in Tokyo. Now, he said, “it is going to be impossible to avoid an impact on the scale of the global financial crisis or even worse.”

Consumer spending dropped after the Japanese government in October increased a tax on consumption to 10 percent from 8 percent, a move that Prime Minister Shinzo Abe’s administration said would help pay down the national debt — the highest among developed nations — and fund the growing demand for social services as the country’s workers age." Invalid CSRF

https://www.nytimes.com/2020/05/17/business/japan-recession-coronavirus.html?action=click&module=Top%20Stories&pgtype=Homepage

8 ( +9 / -1 )

In the long run, we will need to build virus-proof society and economic foundations. Not merely for the sake of Covid-19. In urban downtown areas like Tokyo, social distancing should be more respected (over-crowds are inevitably formed, due to physical, structural reasons).

0 ( +5 / -5 )

Yeah, another recession! This always happens after Japan raises its consumption tax. You'd think they would have learned by now not to raise that damn tax while the economy is still vulnerable.

18 ( +26 / -8 )

@jefflee I totally agree with you. It seems to me that if you take anyone off the street in Japan and make them Prime Minister, he or she would do a much better job than Abe san. I mean, anyone. Raising the consumption tax before the economy is doing better is not smart. Also, with no increase in salary but an increase in tax is the thinking of snails or fish. Or, bugs.

15 ( +19 / -4 )

Even when everything opens up again, the mood is going to be pretty somber, not wahey, let's buy a new car! A lot of people will now be used to not consuming stuff. I'm now used to not watching sport,

All the more reason to get that 100,000 per head out there quickly to keep some money circulating. Unfortunately, the people responsible for distributing the 100,000 per head are completely isolated from whether money is circulating in the economy. They'll get their pay and bonuses regardless of when this money arrives in people's hands. There is no urgency for them.

15 ( +16 / -1 )

Abenomics - keeps on winning.

12 ( +14 / -2 )

The numbers talked about at the top of this seem likely to be low, hopefully I a wrong but I think the hit here in Japan & elsewhere is going to be much higher.

The article further down seems to indicate we are in for a major hit & from my own little world that HIT is already hitting damned hard, having to contemplate some very serious changes in life & work going forward not fun, hope to see everyone on the other side & start to see some recovery soon before too many lose their jobs, businesses etc

take care out there folks!

1 ( +4 / -3 )

The consumer has never benefited from “ made in China “. In the beginning quality of products B2B or B2C was very bad. It has gotten better but still not as good as in the ordering companies homelands. And one can never trust a Chinese supplier or maker. Ask the Chinese which came to raid shops in Japan, Hk, Korea for safe food and products.

lastly the price from a “ made in China “ Prada bag or Burberry knitter sweater never was reduced for The consumer.

The price difference between made in China or elsewhere was absorbed as profit by the companies, distributors and retailers. For years I have bought nothing made in China. Nothing means whenever I have an option. Often I just don’t buy if no option.

14 ( +18 / -4 )

Exports dived 21.8%. Private residential investments slipped nearly 17%, and household consumption edged down 3.1%. Analysts say things are expected to get worse

Um... time to reopen everything. Some are gonna get the virus and die either way. By reopening now while we still can, ( some businesses are already permanently closed ) we can avoid the terrible suffering and deaths from a great depression.

-5 ( +6 / -11 )

VULNERABLE is no more the word. It is in economic problems because of poor working attitudes from the Japanese and the Japanese still thinking everything can be taken forgranted just because they are Japanese.

5 ( +9 / -4 )

Here we go. The Western economies knew they were going to crash after decades of bad policies. They just needed cover so the people wouldn't wake up and demand change. Covid-19 provided just that cover. I hope someday the history books get this right, because it seems to me that the governments are going to get away with it once again.

2 ( +8 / -6 )

The shift away from China will be hard but it is necessary. Japan can do well by fostering trade and investment with other APAC countries such as Indonesia, Malaysia, Thailand, Philippines and Vietnam. This is a time of opportunity.

9 ( +11 / -2 )

The consumer has never benefited from “ made in China “. In the beginning quality of products B2B or B2C was very bad. It has gotten better but still not as good as in the ordering companies homelands. And one can never trust a Chinese supplier or maker. Ask the Chinese which came to raid shops in Japan, Hk, Korea for safe food and products.

robert maes - the consumer has benefited massively from Chinese manufacturing. The cost of electronic goods in particular have plunged as a result. The device on which you wrote this was probably largely manufactured in China.

It is wise to have a wider manufacturing base - such concentration in one country is not a good idea, but the shift in manufacturing to developing countries has had a massive benefit.

3 ( +5 / -2 )

The Chinese tourist will creep back and Japan will be at China's feet once again"

4 ( +7 / -3 )

Winter is coming!

-1 ( +1 / -2 )

...intensifying the challenge for policymakers battling a once-in-a-century pandemic.

can someone explain to me why this Is being viewed as a once-in-a-century pandemic? It’s clear it occurred because of our growing infringement upon nature and wildlife, so by that rationale, if we can carry on as we do, after this , Ebola, SARS etc. can’t we kind of expect it’s possible another virus will come even before this one is controlled?

4 ( +4 / -0 )

StrangerlandToday  10:54 am JST

Actually Chinese goods have increased in prices significantly.

Not goods, manufacturing.

there are cheaper alternatives with less overhanging political burdens such as Vietnam, Thailand

That’s not entirely correct. While it is true for some industries at some volumes, the sheer volume of manufacturing capacity that China offers is not marched by any other country.

The huge manufacturing capability of China is only of value when there is a huge demand. Watch what happens to that in the post COVID19 world.

5 ( +7 / -2 )

Quite a few shops closed up already for good, take a walk around some areas you will see completely empty stores and there are many for rent signs appearing, this is just the start.

Now is the right time to disengage from china, people are already mostly weened off their supply chain now so keep the tighteners on and the pain will be less in the long term.

There are other nations keen to step up and have a turn who also could benefit from some economic & industrial development and income, spread it around abit instead of having everything dependant on one nation who cannot be trusted.

8 ( +11 / -3 )

One of the reasons why this is getting so bad, and they don't want to talk about it, is the increasing delay in getting assistance to people, instead of the rush to bail out companies. If they had already given us the 100,000 yen earlier this month, as was promised, people could have used that on spending, to an extent. Instead, when we get it next month, it will go to increased debt, taxes, rent, backpay for staff, etc. NONE will go to spending at shops, supermarkets, or what have you (save unemployed people not paying taxes who will still receive the money). And the longer they delay, with some prefectures saying next month at the earliest -- the application isn't even out yet! -- the more is going to be needed.

I know for Japan "immediate" is the equivalent in speed to a dead snail running a marathon, but if they do, honestly, want to help people, and in turn the economy, they need to realize you start with the regular person, not the corporations and big business. If no one can go to them to purchase, the money you've given them to reopen means nothing.

-2 ( +5 / -7 )

In our city, the form for applying for the ¥100,000 isn't arriving until the end of the month. About two months since it was announced, and maybe even three months before we receive the cash.

Businesses needing finanical support are required to fill out a 90 page form.

6 ( +6 / -0 )

zichi

In our city, the form for applying for the ¥100,000 isn't arriving until the end of the month. About two months since it was announced, and maybe even three months before we receive the cash.

I think if you believe that you'll see that 10k before the summer, you're extremely optimistic. =/

6 ( +6 / -0 )

Stop viewing people out shopping, eating in restaurants, spending money and keeping the economy moving as criminals might help.

5 ( +6 / -1 )

"Analysts polled by Reuters estimate Japan's economy will shrink an annualized 22.0% in the current quarter, which would be a record decline"

This is truly eyewatering..

1 ( +1 / -0 )

half-hearted jumper

I think if you believe that you'll see that 10k before the summer, you're extremely optimistic.

Well, it's 100k, or ¥100,000 per person in a household. You can apply now, online with My Number but prefer to just wait for the form. We have already been informed by our city it will come and so payment will be made in June, which is summer.

But the process will have taken three months. There are about 70 million households.

3 ( +3 / -0 )

A great example of non-essential workers there in the picture.

"We can open the stores, but only if the girls squeak "irrashaimase" and bow at the correct angle."

2 ( +2 / -0 )

If they had already given us the 100,000 yen earlier this month, as was promised, people could have used that on spending, to an extent. 

No. It would help a lot of people, but either way will make little difference to the economy. You can't create consumer demand when everybody is afraid to spend - and I think people will be very careful with their money for years now. We are at a 100 year super-cycle of the economy, and Covid-19 has little to do with it. It was merely the spark.

Things are going to change massively in the coming 20 years - hang on and don't count on anything as you have in the past.

2 ( +3 / -1 )

So what are some things Japan can do to stimulate economic growth? Legalize marijuana? Lower the drinking age? Start the school year in September? Allow more immigration? Legalize gambling? Just some ideas. Perhaps too extreme for some, but just throwing it out there.

5 ( +5 / -0 )

What is crucially important, is a full independent investigation is undertaken into the origins of this COVID-19 epidemic and the step taken by the Government of China in the first 100 days to control the spread/transmission of this catastrophic pandemic.

Or else this horrendous loss of life will reoccur time and again.

This could entail a cessation of trading, and or punitive sanctions if the Government of China continues to engage in politically poisonous/toxic tactics aided by propaganda exercise to fend off, so to deflect blame by refusing to co-operate.  

The Global economic impact, could well be as devastating as the pandemic, affecting societies most venerable.

4 ( +6 / -2 )

itsonlyrocknroll: "What is crucially important, is a full independent investigation is undertaken into the origins of this COVID-19 epidemic and the step taken by the Government of China in the first 100 days to control the spread/transmission of this catastrophic pandemic."

No, all such an investigation does, as your comment attempts to do, is deflect. Now, I DO think an investigation is warranted in the future, and necessary, but to help the economy now we need to investigate China? Hogwash. We need to focus on the economy and helping people (after ensuring safety) before any such talk of investigation. This article is about the economy, not conspiracy theories as to the origin of the virus.

0 ( +3 / -3 )

Let's put the blame squarely where it belongs.

China didn't send ships full of goods built on spec to Japan or anywhere else, dump then at the docks and hope that someone would buy them. Japanese and US companies went to China to buy/produce products so they could make more money.

China has not taken any jobs from anyone. Companies shipped their jobs to China and other places in a race to the bottom of cost.

You can get good quality goods produced in China. Sometimes a factory produces good quality next to poor quality just to satisfy the different requirements of the buyers. Some buyers are more concerned about quality, while others couldn't care less about quality and only want the cheapest cost possible.

3 ( +5 / -2 )

Hopefully the sales tax goes into a permanent recession!

2 ( +2 / -0 )

So what are some things Japan can do to stimulate economic growth? 

Easy. Cut way back on taxes and regulation. But since that means reducing government and putting crooked politicians out of business, it will never happen barring near total collapse.

2 ( +2 / -0 )

China has been trying to avoid fallout from coronavirus. Now 100 countries are pushing for an investigation............

https://edition.cnn.com/2020/05/18/asia/china-world-health-assembly-investigation-intl-hnk/index.html

I am afraid that 100 countries and counting, are taking a more focused and aggressive approach. I guess we are going to disagree. smithinjapan.

A full and thorough independent investigation will put an end to these so called conspiracy theories,

3 ( +3 / -0 )

6.05 Kuma...

Allow ideas other than corporate..

0 ( +0 / -0 )

Recession turns into a depression after a couple of quarters slumping. Kinda scary.

2 ( +2 / -0 )

Well, the good news is, at least all of our globalist corporate manufacturing plants in China are ok and our foreign-run national bank is doing just fine. You commoners just need to suck it up and do without for a while.

-2 ( +1 / -3 )

The photo looks as if it was plucked right out of a Lady Gaga video!

1 ( +1 / -0 )

The investigation I am calling for should be carried out as soon as feasibly possible. The outlook for any sustained improvement to reverse or contain the what many economists see as a collapse as severe as the great depression depends on factory output recovering in 2021.

It could be wishful thinking, as the sector by sector across the board damage is compounded by fear of a second wave when attempting a return to work, as evident in Germany.

The political reality will manifest in a damaging and frankly destructive/dangerous blame game, as the ruinous economic damage takes effect. Europe is on the brink of a full blown financial crisis.

Both supply and demand have been locked down as Governments took such drastic steps to contain the spread of the pandemic.

The shock of coronavirus could split Europe – unless nations share the burden  

https://www.theguardian.com/commentisfree/2020/mar/25/shock-coronavirus-split-europe-nations-share-burden

Coronavirus: the world economy at risk

https://www.oecd.org/economic-outlook/

1 ( +1 / -0 )

Coronavirus: the world economy at risk interim report posted above, was for March…Just one month ago …….Now the Composite leading indicators (CLIs) as of 12th May suggest……

Unprecedented collapse in CLIs in most major economies

https://www.oecd.org/economy/unprecedented-collapse-in-clis-in-most-major-economies.htm

2 ( +2 / -0 )

Japan has been in Depression for decades. They never get out of it. Abe and Aso were betting on the Olympics and the sky-high stock markets to lure foreign investors and foreign workers bringing the sweet Dollars to Japan. The Covid Pandemic utterly bankrupted their ill-visioned plan.

6 ( +7 / -1 )

Abandon the ship, abandon the ship. Its time to guys to abandon the ship...

1 ( +2 / -1 )

Japan braces for worst postwar economic slump

No kidding. I am glad to hear that. It means that people are doing right things: Many businesses are closed and people are saying home. What's important is to save life; economy can be recovered, but human lives cannot.

0 ( +3 / -3 )

We have already been informed by our city it will come and so payment will be made in June, which is summer. But the process will have taken three months. There are about 70 million households."

The rollout of this is just so incredibly pathetic, one doesnt know whether to cry or laugh. This is worse than what one woyld expect from some third world backwater.....3 months fgs!!

1 ( +1 / -0 )

Take Japan’s ‘woe is me, the sky is falling’ song and dance with a huge dollop of salt. If they really believed their own Jeremiads, they’d be wasting no time at all dismantling the hidebound Black Ship repelling rigidities that are supposedly at the root of its crisis. Instead, there is an overwhelming determination for things not to change. Hardly anyone in authority here truly believes that Japan is in crisis, let alone that Japan’s exploitative business culture needs to change. The last thing these people want to hear is that Japan has a moral obligation to its own people and the rest of the world to promote a convergence of standards.

1 ( +1 / -0 )

Time for leadership in Japan to work to improve the quality of life of its citizens, which of course often requires money but not always, as the world economy will take years to recover.

0 ( +0 / -0 )

Lots of armchair quarterbacks here. Lmao

-1 ( +1 / -2 )

It doesn't have to be this way, if Abe adapted the reality 6 years ago to have a friend relationship with China, instead of hostile one.

China is the future, as simple as that. Chinese golden market is there, next door, you can take it, or you can reject it, that is your choice, that is your freedom, that is your decision, no matter what you do, do it the best way for you, not for your competitors.

-1 ( +0 / -1 )

Buy products from Indonesia Thailand Vietnam or Philippines otherwise China will take over the world.

1 ( +2 / -1 )

Buy products from Indonesia Thailand Vietnam or Philippines otherwise China will take over the world.

The problem is that the elites have like 95% of the resources, leaving us plebs scrambling over the rest. This means a significant portion of the consuming class cannot afford to be selective about where the goods they purchased were manufactured, as they don’t have the financial flexibility to be able to do so.

Then the ones who have been so unwilling to help the lower classes complain that people are buying from china, as buying from china doesn’t fit in with their political views. They are blind to the fact that they’ve played a major part in creating a world where people are dependent upon china through an inability to be able to afford an alternative.

1 ( +1 / -0 )

No one is going to shift away from China, pandoras box has been opened. Nothing except nuclear war can stop the Chinese from dominance.

-1 ( +0 / -1 )

No one is going to shift away from China

I certainly hope we do. Same as I hope we transition away from our dependence upon the USA. If the past 20 years have shown us anything, it's that our dependence on these two nations is like a drug addiction, that is feeding them and ruining us.

But, a shift away from China isn't going to happen without discussing strategies on how to actually make it happen. If we just say 'we shouldn't buy from China' and hope it will happen, it won't. As long as companies are beholden to maximum profits, and consumer wages are kept too low to afford anything beyond the cheapest everything, we'll continue to burn along as we always have.

A true cultural shift will require not just a problem to initiate it (aka Covid), but realistic ideas on how to motivate change to ensure we don't have to deal with the problem (the power of the elites) again as a species.

The race to the bottom has only created a ruling class of elites, and a mass of workers.

-1 ( +0 / -1 )

Do we want to be a communist society. There are pulses and minuses to that equation. Contemplate grasshopper.

1 ( +2 / -1 )

But how will Japan pay back the historiically largest debt ratio in the planet Earth ? Do I hear the great RESET at the door ? This is a BUY GOLD moment for all plain folks so pay attention

-1 ( +1 / -2 )

China locked down 108 million more people this weekend after 34 new coronavirus cases were found.

Meanwhile, the rest of the world is opening wide and saying “aaaaa”.

0 ( +1 / -1 )

These appalling numbers truly paint a heart-rending desolate picture………

With 36 million newly unemployed in the U.S. alone, economic pressures are building even as authorities acknowledge that reopening risks setting off new waves of infections and deaths.

Coronavirus has infected over 4.6 million people and killed more than 313,000 worldwide, according to a tally by Johns Hopkins University that experts say under counts the true toll of the pandemic. The U.S. has reported over 89,000 dead and Europe has seen at least 160,000 deaths…….

https://japantoday.com/category/world/U.S.-European-leaders-weigh-reopening-risks-without-a-vaccine

No matter what it takes, the global community must not leave any stone upturned.

Only a full independent investigation, without fear or favour, now, no more compromises, or appeasement or cowardly acquiescence, the families of 313,000 deserve to be fully aware of the origins of this devastating pandemic and capability.

An example of the lengths the Government of China will stoop to smother an investigation.  

China to impose 80 per cent tariff on Australian barley for the next five years amid global push for coronavirus investigation

https://www.abc.net.au/news/2020-05-18/china-to-impose-tariffs-on-australian-barley/12261108

An appeaser is one who feeds a crocodile — hoping it will eat him last……..W Churchill

-1 ( +0 / -1 )

But how will Japan pay back the historiically largest debt ratio in the planet Earth ? 

For every debt, there is an equivalent surplus somewhere else. So the obvious answer is drawn down the surpluses. But that's moot since Japan and its people own nearly all of it and it's denominated in a currency it issues.

-1 ( +0 / -1 )

The debt disaster warnings have been around for over a generation and the dire warnings of massive inflation from monetizing the debt have never materialized because the fundamentals of economics have changed. Instead, we have governments freaking out about deflation.

2 ( +2 / -0 )

@Peter Neil

China didn't send ships full of goods built on spec to Japan or anywhere else, dump then at the docks and hope that someone would buy them. 

Then how did my Huawei phone get here?

You can get good quality goods produced in China.

My Huawei handset was recalled after reports of overheating while charging.

China has not taken any jobs from anyone.

If VW, for example, were allowed to ship their completed cars from Germany directly to China, then more Germans and fewer Chinese would have decent jobs. But VW isn’t allowed do that. The Beijing government forces foreign makers to form JVs with state owned (communist owned) local firms to be allowed to sell there. That way, the Chinese have rigged the arrangement to capture not just technology, but jobs as well.

Japanese and US companies went to China to buy/produce products so they could make more money.

I doubt Japanese and European rail firms are making much money in China. They were compelled to hand over their technology to the Chinese in exchange for maintaining a presence there. The Chinese used that tech to create their own high-speed network, which is run by three 100% Chinese state-own firms. Such “technology transfers” are extensive and well documented.

-2 ( +0 / -2 )

Your phone was ordered by Japanese carriers and retailers. Huawei doesn't have retail stores to sell direct to consumer.

VW built factories in China to lower costs, since it always costs less to build locally than to ship and pay duties. Just like Japanese car makers built factories in the US.

Selling to China is unrelated to my point of companies buying from China. No one is forced to sell anything to China, and neither are they compelled to do anything. Don't sell. It's that simple.
0 ( +1 / -1 )

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