This article is the author's 195th original article, the 25th article in 2024, and the 19th article on financial hot topics.
Synchronized statistics from the Cabinet Office of Japan: Japan's nominal GDP in 2023 will be 421 trillion US dollars, a year-on-year increase of 57%, which was surpassed by Germany for the first time, ranking fourth in the world.
You know, the last time was in 2010, my country surpassed Japan to rank second in the world, and the United States and Japan firmly sat in the top three chairs for 13 years.
When it comes to GDP, we have to remember that GDP is composed of four parts, namely consumption, investment, net public spending, and net exports. These four factors affect different types of countries, and for developed countries, consumption is very important; And for developing countries, investment and exports are important. Obviously, Japan should apply to the former.
(1) Sluggish consumption: Deflation remains after a long period of quantitative easing
After 2012, under the influence of economics, Japan used three arrows, namely monetary easing, fiscal expansion, and revitalization of private investment. In essence, it is to release water to stimulate the economy, but the effect does not seem to be very good, and in recent years, Japan's inflation rate has been very low, and even in a state of deflation for several months.
We know that consumption is the biggest fundamental, and behind the long-term low inflation and even deflation is the sluggish desire and ability to consume, so the downturn in Japan's GDP is also predictable.
(2) Industrial loss: Affected by the impact of developing countries, the share of manufacturing industry has been lost
Japan is very prosperous in industries such as automobiles, robotics, and semiconductors, and these industries once accounted for a major part of the share of exports. But now, those advantages are fading.
Take the automotive industry as an example: According to the data released by the Japan Association on January 31, Japan's automobile exports in 2023 will be 4.42 million units, which is already lower than China's 4.91 million units.
(3) Population decline: Population is the basic plate, and long-term population decline affects potential economic growth.
Population is fundamental, and according to the Solow model of macroeconomics, a long-term population decline will affect the potential growth rate of the economy (for specific arguments, please see my article: "What is the "golden rule" of China's interest rate setting?). How do you understand that real interest rates should be slightly lower than the potential rate of economic growth? 》）
The decline in population has made Japan's labor costs very high, which has raised the cost of enterprises, suppressed the process of expanding the capacity of entrepreneurs, and further affected consumption.
After "losing" the status of the world's third-largest economy, the Japanese authorities want to catch up and propose two solutions.
(1) Wage increases drive consumption and expand investment in equipment
Kishida said that he will position the next three years as a "period of change" and said that he will focus on achieving consecutive salary increases and expanding capital investment.
(2) Reduce taxes and fees to increase disposable income
In addition, Kishida said that it will be supplemented by preferential tax policies for specific industries to reduce the burden on people and enterprises, increase people's disposable income and corporate net profits.
To sum up, the core of the Japanese authorities' approach is to raise incomes, increase consumption, and promote growth, and the idea is consumerist. I just don't know if it will work?
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