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Cars for export are loaded onto a cargo ship at a port in Yokohama. Image: AP file
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Japan's economy shrinking, although slightly less than previously thought

21 Comments
By YURI KAGEYAMA

The Japanese economy shrank at an annual rate of 1.8% in the first quarter of this year, slightly better than the initial estimate at a 2.0% contraction, according to revised government data Monday.

The revision was due to private sector investments, at minus 0.4%, up from the previous minus 0.5%.

Seasonally adjusted real gross domestic product, or GDP, a measure of the value of a nation’s products and services, remained in negative territory, as exports and consumption declined from the previous quarter.

Quarter-to-quarter, the economy slipped 0.5% in the January-March period, according to the Cabinet Office, unchanged from last month’s results.

The annual rate measures what would have happened if the quarterly rate lasted a year.

Wage growth has been slow, and prices on imports have risen amid a decline in the Japanese yen against the U.S. dollar. The dollar is trading at nearly 157 yen lately, up from about 140 yen a year ago.

The weak yen has tourism booming. But it makes imports more expensive, a sore point for a nation that imports almost all its energy. Sluggish consumer spending has also been a drag on the economy. Private consumption accounts for half of Japanese economic activity.

Another negative is the ongoing scandal involving improper vehicle model tests at several major automakers, including Toyota Motor Corp., which form the pillars of Japan’s brand power. Production was halted on some models.

Government officials raided the Tokyo headquarters of Honda Motor Co. Monday. Japanese media reports said a raid was coming soon on Mazda Motor Corp. Toyota and Suzuki Motor Corp. have already been raided.

Last week, Toyota Chairman Akio Toyoda apologized for the wide-ranging fraudulent testing involving the use of inadequate or outdated data in collision tests, incorrect testing of airbag inflation, rear-seat damage in crashes and engine power.

The safety of the vehicles aren’t affected, but the companies apparently wanted to speed up the testing process.

Investors are also watching closely for the next action from the Bank of Japan, whose monetary policy board meets later this week. The central bank raised interest rates earlier this year for the first time since 2007, but only to a range of zero to 0.1% from minus 0.1%.

“The Japanese central bank’s stance will similarly be eyed closely, especially with the domestic currency weakness prevailing. Japanese manufacturers are facing the fastest rise in input costs,” S&P Global Market Intelligence said in a report.

Unemployment has stayed relatively low in the world’s fourth largest economy at about 2.6%. Japan suffers a serious labor shortage, as its birth rate continues to drop, hitting a record low last year. The number of marriages have also fallen.

Such demographic trends could prove more dangerous in the long run, according to some analysts, who worry Japan is especially weak in per capita output, and its dimming clout on the global stage might even lead to security risks.

Japan’s GDP is expected to slip to No. 5 in magnitude after the U.S., China, Germany and India next year, according to the IMF.

© Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

©2024 GPlusMedia Inc.


21 Comments
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Tell us something we don’t know.

What are the steps being taken to arrest this chronic decline?

-2 ( +10 / -12 )

No amount of fiscal nor monetary spending can fix the structural issues. Time to wake up

10 ( +12 / -2 )

It's just funny to me the way this is being treated.

Well akchyhually, the Japanese economy only shrank 1.8% as opposed to 2%.

Like, hello? Japan should be absolutely BOOMING post-Covid and with tourism pumping a lot of fresh money into the economy.

It's true that most countries in general are not exactly experiencing economic miracles right.

But for Japan this is just sad and pathetic. You basically have stagflation. Low wages, zero innovation, recession, and inflation. Disastrous. The government needs to deregulate the economy asap. Nobody can come here to do business due to insane barriers to entry, high taxes, ineffecient regulatory framework/nanny state, as well as corporate welfare for domestic entities.

Japan is going to collapse if the oyajis are not kicked out of power. Deal with the problem now before it gets worse.

-13 ( +13 / -26 )

What are the steps being taken to arrest this chronic decline?

Ask the corporations. They're the ones raking in record-high profits yet refusing to give substantive wages to their workers. Consumption is cited as a big factor. When people aren't paid well, they tend to consume less.

No amount of fiscal nor monetary spending can fix the structural issues. 

Maybe not, but that's not the issue. The main reason for the higher energy and other import costs is the cheap yen, which is directly due to the interest rate difference between Japan and the US, which is a direct result of, yes, monetary policy.

15 ( +18 / -3 )

Hard to beat demographics. Japan isn't doing so poorly in terms of per capita GDP.

It looks bad in dollar terms right now, but if the Fed cuts rates and Japan lifts rates, the yen will advance again.

11 ( +13 / -2 )

As ever Japan is unique among developed nations in that the government can apparently create as much debt as it likes without protest from the public (or any mention of it on prime time TV). If any European nation tried to paper over its problems with debt on such a scale, the markets would be spooked, there'd be riots in the streets.

Still, the men in power have been able to delay the inevitable, but only for about the length of their lifespans. Far as I can tell it's a stark choice between immigration or becoming much poorer. At least, you'd have to be wildly optimistic about the ability of the government to affect birth rates, and the use of robots and AI, to suggest otherwise.

2 ( +4 / -2 )

With how many years of interest rates at zero, I fear that raising interest rates even a little bit will have a profound effect and could lead to a crisis like the Lehman Shock. My acquaintance in recruiting is seeing a real slowdown and no movement in wages upward.

-1 ( +3 / -4 )

Shrinking is shrinking, well don JGovt.

-11 ( +4 / -15 )

Shrinkage wages ...workforce and new ideas ! Out with the LDP oyaji.

-8 ( +6 / -14 )

With population shrinking, why would it be a surprise that the economy is shrinking?

Ignoring the eco of competing on the global league table of country's economic size, per capita measurements should be the most important measures.

In addition, the purely monetary value of 'development' should not be GDP, but instead measures that take into account quality of life issues - equality etc.

5 ( +7 / -2 )

This is the consequence when you have a country ruled by a de facto one party state with no innovation, misogyny and xenophobia.

Each country deserve what people voted.

-13 ( +8 / -21 )

It should be pointed out with heavy irony, that the photograph accompanying this story appears to show USED, not new vehicles loading onto a cargo ship in Yokohama Port. I can see at least one Volkswagen and two BMW which certainly were not manufactured in Japan...

4 ( +6 / -2 )

Damn, after reading all of this article I feel like Dooms Day is just around the corner or already here.

-6 ( +4 / -10 )

We all know the meaning of "Wagamama" this is what a happens when you bury your head in the sand and think things will work out.

-3 ( +5 / -8 )

As long as it is shrinking at a slower pace than the populations, people should feel wealthier.

-2 ( +2 / -4 )

For anyone who has worked in a large Japanese corporation the problem is abundantly clear, low worker productivity. Japanese economists have recognized this for decades but very little has been done to address this problem leading to the current situation.

-3 ( +4 / -7 )

The harsh reality.

It's good to see the tourism boom as it undoubtedly generates value, but a mature economy cannot rely on a single sector (or few of them) for its economic growth.

A recent NHK documentary showed how China is pouring a lot of investments in sectors like equipment and machinery, which so far have been dominated by Japanese companies.

What will happen if/when Chinese companies will overtake Japan also in those sectors?

Japan really needs to address such issues as soon as possible

5 ( +6 / -1 )

@JL

Ask the corporations. They're the ones raking in record-high profits yet refusing to give substantive wages to their workers. Consumption is cited as a big factor. When people aren't paid well, they tend to consume less.

.

Asking corporations in Japan won’t have any effect.

Laws need to be modified or new laws introduced and ratified which Japanese politicians are responsible for.

If Japanese corporations won’t raise wages then raise corporation taxes or institute new taxes (Japanese politicians and government are adept at this)

Of course, there are many solutions but no political will in the Gikai.

If that is the case then Japan’s system needs to be comprehensively reformed so that the people of Japan are able to reap the benefits of true democracy.

1 ( +2 / -1 )

It is my humble understanding that Japanese multinationals are doing well thanks to overseas sales. Thus, they invest in those markets and have no reason to pay employees in Japan more since they are not doing anything to justify it. The way to increase wages is to stimulate foreign direct investment which may bring its own problems such as restructuring and higher rents and so on.

1 ( +1 / -0 )

Funny how the big companies have their biggest profit in their history, while the salaries are at 25 months low, and they refuse to raise them. 2% raise doesn't count, is peanuts money. Picture this:

In 2020, 1$=100¥, in 2024, 1$=160¥.

How much your salary devalued again in 4 years?

0 ( +2 / -2 )

3RENSHO

It should be pointed out with heavy irony, that the photograph accompanying this story appears to show USED, not new vehicles loading onto a cargo ship in Yokohama Port. I can see at least one Volkswagen and two BMW which certainly were not manufactured in Japan...

A few Volvos, as well.

1 ( +1 / -0 )

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