Japan’s economy relies heavily on trade and the amount of goods that the country exports. With China’s economy going through a contraction period and the demand for Japanese exports decreasing, there is fear that Japan’s economy is now going through a contractionary period. This past March, exports fell 2.4% following a 1.2% drop in February. As companies’ profits are being hindered, businesses will not be able to invest in themselves as much, workers’ wages will drop, and consumer spending will slow. With the Japanese economy contracting, Prime Minister Shinzo Abe will have to delay a planned sales tax hike that is needed in order to fix Japan’s public debt burden. This plan will have to be pushed off as it is considered a contractionary policy and would hurt the economy even further. The Bank of Japan Governor Kuroda believes that the economy would quickly recover as global growth grows although there are remaining risks. The United States and China trade war as well as Brexit still need to be resolved and could potentially have a negative effect on Japan’s exports once again.
I was surprised to see that a decline in China’s economy and imports had this negative of an effect on Japan’s economy. I think given the tensions with the US and China trade talks, Japan’s economy will remain a little rocky, especially when including the impending Brexit decision. It will be interesting to hear more about how Japan handles this export issue and what they decide to do about their planned sales tax hike. Hopefully, this contractionary period does not last too long.
1 comment:
Many countries trade a lot with China for various items, so for me it is not too surprising the Japanese economy is being affected by the Chinese economic decline. Especially a lot of the East Asian countries rely heavily on trades, the impact of each country's economic situations are more macro. I'm sure countries such as South Korea is also being influenced by this. The concern I have right now is the overall decline in the entire world economy. One economic crisis in one region may not end up as a problem of one nation, but could be a macroeconomic disaster.
Post a Comment