The latest second statistical report released by the Japanese Cabinet Office has slightly increased the month on month growth rate of Japan's real gross domestic product (GDP) in the fourth quarter of 2023 to 0.1%, with an annual growth rate of 0.4%. Preliminary statistics from early February showed that Japan's real GDP decreased by 0.1% month on month and 0.4% at an annual rate in the fourth quarter of last year. In the third quarter of last year, Japan's real GDP growth also recorded a negative value, with a month on month decrease of 0.8%.
The revised data has barely avoided a "technical recession" for the Japanese economy. Will this give the Bank of Japan more confidence to bid farewell to negative interest rates as soon as possible?
Will it continue to grow in the first quarter of this year?
Based on the specific values in the secondary statistical report, the equipment investment of enterprises has been revised from a 0.1% month on month decrease to a 2% month on month increase, which has become the main reason for the upward adjustment of Japan's economic growth rate.
However, personal consumption, which accounts for over 50% of the Japanese economy, is not optimistic and has been further reduced from a month on month decrease of 0.2% to a decrease of 0.3%. In addition, private inventory, government consumption, and public investment have all slightly decreased. The preliminary statistical results of Japan's real GDP growth of 1.9% in 2023 will remain unchanged in the report.
The analysis sent by S&P Global Market Intelligence to First Financial reporters shows that the above data adjustment is in line with the agency's expectations. "The upward adjustment reflects an improvement in corporate equipment spending, offsetting a mild decline in private consumption, investment, and public demand." The agency believes that the improvement in corporate equipment investment indicates that companies have a robust fixed investment plan in the fiscal year ending March 2024. "With the recovery of global demand for electronic equipment and support for supply chain improvement, the strengthening of investment in electronic component production systems and telecommunications infrastructure will further support companies' fixed investment in equipment in the short term."
However, in the view of Chen Zilei, director of the Japan Economic Research Center at Shanghai University of International Business and Economics, personal consumption is a more critical economic indicator, which is related to whether the Japanese economy will recover and whether the Bank of Japan's policies will be further adjusted in the future. "The continued weakness of personal consumption indicates that there is still uncertainty in the recovery of the Japanese economy."
For the economic situation in the first quarter of this year, S&P's global market intelligence analysis is not optimistic. "Under the negative impact of long-term production line shutdowns by some automakers, Japan's real GDP may shrink in the first quarter of this year, which will continue to suppress private consumption, fixed investment, and exports."
The Daiwa Institute of Research is slightly optimistic, predicting that Japan's GDP growth rate in the first quarter of this year may be around 0.5% month on month. On the one hand, the shutdown of automobile factories will suppress some production activities, but the consumption and capital expenditure brought by overseas tourists will increase. The impact of the earthquake on GDP may be limited in early January. "Of course, we also need to pay attention to risk factors such as export downturn caused by changes in overseas markets."
"Spring Battle" to be Revealed
The Bank of Japan is about to hold its March interest rate meeting, and an analysis by S&P Global Market Intelligence suggests that the specific situation of real GDP growth will not actually affect the Bank of Japan's policy changes. "Wage increases are still the main factor for the Bank of Japan to decide whether to end its negative interest rate policy."
In last spring's labor negotiations, Japanese companies achieved the highest increase in salary in nearly 30 years since the data was first compiled, with a median salary increase of 3.8%. It is still worth paying attention to whether this year's spring battle will break records. Previously, the latest survey on this year's "Spring Dou" showed that compared to last year, more Japanese companies are planning to increase their basic wages this year, and the salary growth rate may also be higher than last year. Nomura Securities even predicts that the Chundou salary increase for this year will be 3.9%, which is expected to reach between 4% and 4.5%.
Although the preliminary statistical results of the "Spring Dou" negotiations by Japan's largest trade union, the Rengo, will be released on the 15th, many companies that have a benchmark significance for the results of the "Spring Dou" negotiations have gradually announced the results of the labor management negotiations. For example, Toyota was the first to announce its agreement to the largest salary increase in 25 years. Panasonic, Nippon Steel, Nissan, and others, who are also representatives of large Japanese companies, have also stated that they will meet the wage increase requirements proposed by the labor union. Even the Japanese industry union JAM, which mainly focuses on small and medium-sized manufacturing enterprises, has achieved a salary increase that exceeds expectations.
However, Chen Zilei believes that negotiating a salary increase is one thing, and the actual salary increase is another. There is a time window between the two, so it remains to be seen whether personal consumption can support economic growth before the actual salary increase.
The preliminary statistical results released by the Japanese Ministry of Health, Labour and Welfare on the 7th showed that after deducting the factor of rising prices, Japan's actual wage income in January decreased by 0.6% year-on-year, marking the 22nd consecutive month of year-on-year decline. Meanwhile, the actual wage income of Japanese workers in 2023 decreased by 2.5% compared to 2022, and has been declining for two consecutive years.