Japans economy is stumbling due to three big problems: poor trade terms, faulty inflation stats, and a weak yen.Since the third quarter of 2020, Japan has faced nine straight quarters of worsening trade.Import costs shot up by 60.7%, but exports only grew by 27.7%.
This shook Japans national income, causing a 4.6% drop.Two main reasons explain the trade woes.
First, global recovery from COVID-19 and Russias invasion of Ukraine spiked commodity prices.Second, the United States and Europe tightened their money policies, but Japan didnt, weakening the yen.Japans Search for a Stable Economy.
(Photo Internet reproduction)Still, higher interest rates abroad and a weaker yen slightly lifted Japans national income by 3%.But theres a catch.
Japans recovery is lagging behind other countries.
High inflation, peaking at 4.3% in January 2023, crushed consumer spending.To help, the government gave subsidies to oil and gas companies and even stepped into currency markets in late 2022 for the first time since 1998.Yet another issue exists.
Official inflation numbers dont seem accurate.
Alternative calculations suggest real inflation is higher.For example, a Bank of Japan survey showed people feel prices are rising much faster.
In June, the public perceived inflation at a startling 14.7%, way above the official rate.So whats the impact? Inaccurate inflation numbers confuse policymakers and businesses alike.This makes planning hard and raises doubts about the governments emergency steps.
As a result, much-needed, long-term economic reforms are still on hold.In simple terms, Japan faces a tough economic puzzle.It has to fix bad trade, get real about inflation, and stabilize its currency.
With the world changing fast, acting now is more important than ever.