Japan’s official 2015 final economic quarter and the Abenomics dance called “three arrow”

Production shrinking in JapanLet’s do the “Abenomics” dance called “three arrow”. It’s official. Japan’s economy shrunk by 1.3 percent during the last quarter of 2015. During this prolonged decline of Japan’s economy, living standards have also steadily eroded so that “per capita incomes today are 10% below the level of 1990. Worse, because of low productivity, massive government debt, a shrinking population and aging work force, Japan’s economy is so constrained that its growth potential is below 2% annually. The World Bank statistics suggest Japan’s 2014 GDP was at US$ 4.601 trillion with an official population of 127 million people.

Falling productivity also explains why Tokyo’s population has steadily been increasing for the past 20 years with no end in site. People from all over Japan are coming to Tokyo to find work while Japan’s farming capacity continues to dwindle with archaic farming laws and fewer Japanese who are farming. “Structural reform” Japan? Why not build huge incentives for Japanese to return to the countryside and make all that wasted land more productive? I guess Japan’s youth all want to come to Tokyo to become television talento and singers? Japan had no alternative than to go on a large public relations campaign known as “Visit Japan Campaign” spending millions of yen which was able to attract the highest number of tourists (1.6 million in 2015, a 41.0% increase from the previous year) to Japan in record numbers.

These tourists to Japan spent a combined 2 trillion yen ($16.9 billion), a 43 percent jump on the 2013 figures, according to government estimates. The Japanese government itself is heavily promoting tourism and is apparently on track to reach a target of  more than 20 million tourists by 2020, when the Tokyo Olympics will be held. The funny thing is, with so many Chinese tourists coming to Japan, Japanese in certain areas are starting to complain they can’t secure reservations at their favorite hot springs. However, despite all the money being spent on promoting tourism, it looks as though attracting all these tourists to Japan ultimately may not matter in the long run.

Source: Bloomberg Business

Japan’s Economy Contracted Again in Final Quarter of 2015

by Keiko Ujikane

February 15, 2016

Japan’s economy contracted in the final three months of 2015 as the nation struggles to break free of a cycle of expansion and contraction despite more than three years of the Abenomics program.

Gross domestic product shrank an annualized 1.4 percent in the three months ended Dec. 31, following a revised 1.3 percent gain in the third quarter, the Cabinet Office said on Monday in Tokyo. The median estimate of 33 economists surveyed by Bloomberg News was for a 0.8 percent decline.

Weakness in private consumption was the biggest contributor to the contraction, undermining Prime Minister Shinzo Abe’s policies to spur inflation and growth in the world’s third-largest economy. The yen appreciated 6.6 percent against the dollar this month even after increased monetary stimulus and attempts by government officials to quell its volatile rise.

“There are clouds on the horizon for Japan’s economy. With the strengthening yen, companies will become more cautious on spending and exports are looking subdued, while private consumption is already struggling to pick up,” Atsushi Takeda, an economist at Itochu Corp. in Tokyo said before the report. “The BOJ may have little choice but to ease further if the yen continues to rise.”

The economy’s performance has see-sawed over the past three years since Abe returned as prime minister, even as BOJ Governor Haruhiko Kuroda has ratcheted up monetary easing in concert with government efforts to spur higher wages, consumer spending and investment.

Monday’s report underscores the uneven progress Kuroda and Abe have made and adds to data showing 2015 ended with a bust, as everything from household spending to industrial production and exports tumbled in December.

And that was before this year’s global market rout. Since then, the Bank of Japan has added to its stimulus by introducing negative rates out of concern that market volatility and China’s slowdown have increased the risks of a delay in changing Japan’s “deflationary mindset.”

“There’s a high chance that the BOJ may take additional easing at the next meeting in March,” said Masamichi Adachi, an economist at JPMorgan Chase & Co. and a former central bank official. “With the yen’s gains and stocks’ declines, the downside risks to the BOJ’s outlook on growth and inflation are increasing.”

Today’s report shows that:

Business spending rose 1.4 percent in the fourth quarter from the previous three months.
Private consumption dropped 0.8 percent in the fourth quarter.
Private inventories subtracted 0.1 percentage point from the fourth-quarter GDP.
Net exports, or shipments less imports, added 0.1 percentage point to GDP.

The slowdown in China — Japan’s largest trading partner — and the sudden appreciation of the currency are concerns for companies and may erode their record profits. Panasonic Corp. cut its profit forecast for the year ending in March as sales of air conditioners and devices fell in China. Hitachi Ltd. slashed its full-year profit forecast on slower sales of construction machinery in China and reduced demand from oil-producing nations hurt by falling energy prices.

And now, a little Abenomics shuck & jive economic dancing…