Despite growing external trade pressure, the Japanese economy is now experiencing an expansion driven by, among other factors, a business spending that rose from January to March of 2019. Finance Ministry data out on Monday showed that the economy was benefiting from a 6.1% increase in capital expenditures, or investments, led by chemicals, production machinery and leasing goods. The last quarter showed a 5.7% increase in spending, so the patten that has arisen is the Japanese investment in Japan – the economy is moving to a more self-sustained and self-reliant economy.
The most recent GDP report (this is from the Japan Times and Reuters – Tuesday 4, June), that is annualized at 2.1 percent is strong given the weakness in household spending. The strong GDP number does lend support to PM Abe and his effort to raise taxes – the consumption tax – to be specific. But we must keep in mind that the US-China trade war is likely to have some impact on the Japanese economy in terms of growth as it may act as a drag to the overall system. Japan has, like most big trading countries, to find solutions to trade and supply chains, as exports will surely be impacted. The next major issue to focus on in Japan will be the consumption tax hike. We will be updating along the way.