Despite the Asian market showing promising comebacks, Japan’s Q4 report fell below economist expectations. Disappointing growth figures from Japan’s report showed that GDP only rose 1% as opposed to its anticipated 2.8%. For a country in need of fiscal strengthening and economic growth after years of deflation, this was not the news some hoped for.
Though despite some optimism from economists on Japan’s situation, an increase in the country’s sales tax this coming April from 5% to 8% will further hurt the numbers by contracting spending. So why is Japan increasing their sales tax? They hope that this will cut the nations debt down to size, a priority that the administration put ahead of economic growth. To counteract short run price contraction, Prime Minsiter Shinzo Abe promises more economic stimulus for citizens and businesses. Even with his adminstration’s efforts, economic growth isn’t looking as impressive for a country that has historically been growing very quickly since the 1960s.
“We need to understand that my administration’s top priority of putting an end to 15 years of deflation is no easy task,” Mr. Abe said earlier on Tuesday. “Furthermore, it’s important to strike a balance between economic recovery and fiscal soundness.” [WSJ]
“This weak export performance gives us a sense of risk that the Japanese economy may significantly stall after April,” Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo, told Bloomberg Television. “Prime Minister Abe really needs to be quick in showing to the market that he can deliver reform.” [Bloomberg]
Japan has low unemployment and is the 3rd largest country in terms of nominal GDP. It’s a leading nation in technological research and has had its economy long driven by exports. Though exports did edge up this past quarter, they were not enough to make up for previous losses. Companies like Nintendo Co., which has not been performing very well with its latest generation console, Wii U. The system has struggled to sell as much as its predecessors hurting exports a bit I presume.
In 2011, the Tohoku earthquake/tsunami and brought Japan to its knees in trouble. Mass casualties and economic crippling it has been referred to as the toughest, most difficult crisis in Japan since WWII. This was followed by the Fukushima Daiichi nuclear disaster which worried its citizens about their health and safety and is still in the process of reaching full recovery to this day.
I think Japan deserves to make a turn around here. They have faced devastating hurdles such as when the country was hit by tragedy back in 2011. As the largest patent filing, a lot of technological innovation namely with robotics/automobiles/etc come out of Japan. I would look to see Japanese ingenuity and confidence thrive and continue.