The Japanese economy is undergoing a transitional period, and the outcome is unclear. Due to a recent resurgent of the COVID-19 virus, lack of a coherent stimulus package from the national government, and an expected decline in consumer consumption, 2021 could turn out to be one of the worst years for Japan since the nation was struck by a catastrophic nuclear accident in Fukushima in 2011. For ten years, the Japanese government has struggled to recoup from the huge monetary and reputational loss associated with the nuclear meltdown, and now, with the reappearance of widespread COVID infections, is again face-to-face with a major political and economic challenge.
Machine Orders Up in Spite of Problems
In the face of all the bad news, there are some rays of light for a country that was once called the miracle of Asia. One of those rays is the fact that Japanese trading activity with long-time partners is as high as it has ever been. Machine orders, in particular, were a recent surprise for many who combed through the government’s export report for even a small sign of potential recovery.
It’s apparent, as 2021 enters its third quarter, that there are some strong sectors of the nation’s economy. One was increasing domestic consumption, which had fallen sharply during the spread of the COVID pandemic last year. Unfortunately, now that infections and deaths due to the virus have taking an unexpected turn for the worse, what was looking to be a positive economic statistic for the latter half of 2021 is now just a dream.
Last week, government ministers issued a new round of lockdown orders, business closures, and even a state of emergency in Japan’s largest city, Tokyo. Adding insult to injury, a befuddled administrator recently instructed wholesalers to withhold alcohol deliveries from sellers who had violated any of the strict COVID regulations. But, after uproar from citizen groups, the media, and conservative political parties, the minister who issued the unwise edict backed off. It’s no secret that alcohol sales are one of the few remaining positive components of a domestic retail sector that has been hit hard by business closures and stay-at-home orders.
Possible Stimulus Package
Much of the bad news is behind a recent government proposal to inject a huge amount of stimulus money into the economy before the year is out. The reason for last-ditch efforts is two-fold. One, monetary stimulus might be the only thing that can keep the nation’s economy afloat between now and Q1 of 2022. Second, the ruling political coalition is facing a fresh round of elections by year end and need at least one positive, popular agenda item to tout during the campaign season. One consequence of this stimulus package could be increased trading on financial markets, as investors may seek higher returns than holding cash deposits.
The First Closed Olympic Games in History
With the Olympic Games looking to be a centerpiece of international attention through the remaining days of summer, Japan’s ailing economy will be front and center on TV screens and digital monitors around the world. No matter how good a job the Japanese do as hosts, billions of viewers will be watching the first Olympic Games whose events all feature empty seats. That’s because Japan’s government ministers have banned spectators from all contests.
Sources: easymarkets.com / cbsnews.com