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As the third-largest economy body in theworld following US. as rank 1 and China rank 2, Japan still struggle against globaleconomy slow down.
Actually since 1990s bubbles burst forJapan economy attributed to real estate skyrocketing, Japan not yet recover fromrecession because economy growth rate flat in recent 20 years. Did you stillremember famous saying by Japan company that “Japan is rich, the Tokyo couldbuy half a America” which supported by the extremely high home price and landprice in Tokyo zone caused by hot money flushing into. Till now some homebuyers undertake the heavy burden of mortgage before price crashing.
The retail data of Japan was gloomy. So Japanwent out where its electronic product absolutely dominated international market20 years ago. Countering fierce competition from China where lead the advantageof low cost and abundant human labor, Japan was forced to be turn to productwith high add value. But walkman made by Sonic was not performing for too longbefore MP3 innovated by Apple which crack down laser industry. Recently breakingnews emerging as sharp’s two-thirds stake was invested 3.5 billion by Taiwan’sFoxconn which want to enhance its core technology and build to strengthen pricepower with major client Apple. Sharp is not “sharp” any more like 20 years agowhen Japan brand flamed the world.
The Japan government take some rounds stimulusmeasure to boost economy involving delaying its scheduled sales tax hike with concernsthat would hurt retail which was planned to handle high debt of government.Except for tax hiking delay, Japan narrows its primary budget deficit to 5.5trillion yen ($55.17 billion ) in fiscal 2020 from earlier expectation 6.5trillion facing sluggish inflation outlook.
Actually Bank of Japan has taken somerounds stimulus measure to boost economy under Abe government who impresspeople as his Abenomics in which ambitious currency policy taken and devaluedJapanese Yen to boost exportation. Unlike American’s monthly job reportindicating good and health economy, Abenomic is negative method to be implementedto handle low inflation. The following data proved that helicopter money doesnot have its effect which was supposed to be meeting 2% rate of inflation setby government. For digging down the root cause of failure, Japan is not absolutelyisolated with international market. Although BOJ has cut the interest rate to negativeterritory, the Yen still strongly stands over the main currency of the worldbecause investor concerns that uncertainty environment and they prefer to putmoney into safe heaven triggered by the terrorist attack, disputing in bordersespecially UK’s referendum to leave EU, left biggest black swan to Japan whichpush Yen skyrocketing against US dollar.
Recently BOJ toned down on the helicoptermoney policy acclaiming “ruling out”. Per BOJ governor Kuroda announced thatthere are 3 options in the so called powerful framework: quantitative, qualitativeeasing and negative interesting rates which all possible to-do –list in thenear term. Based on the current situation, he still worry about thelow-interest rate and bond-purchasing program would cause overheating markets becausefree capital want to beat market.
In summary the basic frame of Japan economyis not good which need stimulus to boost it. But the confidence is not strongin Japan domestic market, the reaction to easy money policy(in the negative rateterritory, borrow money is cheap, of course deposit making nothing profitable)is lucrative for Japan investor who concerns economy overlook and preferred toput money in to safe heaven which push Yen increase value which would hurtJapan’s export. In the same time, black swan issue would strengthen this trend becauseinternational investor have the same appetite for anti-risk.
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