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Nominal GDP+0.6% for 1st quarter 2005,
Real GDP+1.3% |
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Good news is the positive
growth in GDP which is much better than expected. Bad news is teh
persistent deflation with a deflator of 0.7%. We believe that Japanese
economy is flat with a slight downtrend despite the fact that there may
be some spike of growth in some quarters |
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March 29 figures confirm the weak economy:
Unemployment up to 4.7% in February, personal consumption fall 3.8% |
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Government data, released
before the market opened, showed Japan's unemployment rate rose
unexpectedly to 4.7 percent in February from 4.5 percent a month before.
Average spending by wage earner households, a key gauge of personal
consumption, fell a real 3.8 percent from a year earlier and 4.1 percent
from January. This caused a sell off on Tokyo stock market. This
confirms our outlook that Japan economy is at best in a
stagnation. |
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Nominal GDP flat for 4th quarter 2004,
Real GDP -0.1% |
Real GDP was slightly
negative for the 3rd quarter in a row which usually signals a recession
as we announced since the beginning of 2004. For the coming quarters, we
see the weakness in the economy persisting and even aggravating
following the massive retirement of the baby boom generation in 2006 and
2 TY raise in taxes forecast this year and the 2 next years.
Short term figures are still very dependent on exports and situation of
global economy. |
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Nominal GDP flat for 3rd quarter |
Confirming our previous
analysis of Japanese economy, current recovery is very dependent on
outside demand since weak fundamentals prevent self sustained growth for
Japanese economy.
We expect the situation of stagnation to persist in the short term and
even worsen if global demand weaken, oil prices rise. In the medium term,
forecast tax increase may lead to economic contraction. |
Tankan
surveys shows optimism but also clouds for the future
(Oct 1st)
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Latest Tankan survey
published October 1st shows the highest level of optimism the economic
diffusion index for big manufacturers being at 26 its highest level
since 1991, however the same index shows a decline of 5 for the
expectation for future situation. This again reinforce our assessment
that Japan economy will slow down soon and that the current improvement
is only temporary. |
Nominal GDP falls 0.3% in 2nd
quarter (Apr-Jun)
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This, unfortunately, tends to
confirm JMC analysis that the current improvement in the economy is only
temporary as fundamentals will remain weak as long as there is no change
in Japan government policy.
This confirm our July assessment (see below) |
The current economic improvement
is still probably temporary (July 2004)
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This is the third time since
Japan bubble collapse in 1990 that the Japanese economy tries to
recover. We continue to believe that unfortunately, the current
improvement in Japanese economy is probably only temporary (July 2004). |
Japanese economy has improved
since last year with latest as shown in the recent published figures:
- GDP growth of 1.5% (6.1% annualized) for Q1 2004
- reduced May unemployment at 4.6% with 63.9 millions jobholders.
- Raise of 4.8% in May in real terms for households consumption over
last year
- price decrease of only 0.3% in May for CPI at 97.9 |
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However we believe that this improvement was again mostly due to the
improvement in the global situation and especially the US economy and
the Chinese economy which plays an increasing part in Japan.
Domestically, points of brightness have been real estate (see our real
estate page) and consumer electronics with household purchases of DVD-HDD
recorders and flat screens TV. |
We believe that 4 major
structural factors are preventing Japanese economy to recover:
- Few good opportunities for business development in Japan. Japan is an
extremely regulated country where development of new business is
hampered by tight regulations. One illustration is the impact that such
a small regulation change such as loosening the rules limiting height of
buildings had on the real estate market.
- Debt trap. Official figure for Public deficit represents 160% of GDP.
Government budget deficit is around 35B$ representing 8% of Japan GDP.
Primary deficit is 6%.
- Aging of population. Birth rate is 1.29 per women and less than 1 in
Tokyo. (2.1 is necessary to ensure long term population stability).
Japanese population is expected to start decreasing from 2006. Massive
retirement of baby boom generation will also start in 2006 This will
induce shrinking markets for most products and also heavy burden on
public finance reinforcing the debt trap.
- High marginal personal tax rates (over 50%) create disincentive for
work. Raise in tax rates further aggravates the situation |
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Note:
This overall negative assessment for the Japanese economy does not
prevent good investment opportunities to exist for investors. |