Japanese GDP Exceeds 600 Trillion Yen

The Cabinet Office released National Accounts of Japan on February 17th. According to the statistics, the nominal gross domestic products (GDP), which represents size of the economy, in 2024 was 609.3 trillion yen, exceeding 600 trillion yen for the first time. The new record was mainly supported by consumers’ price inflation. The real GDP, which excludes impact of the price hike, remained 557 trillion yen, showing still slow growth of Japanese economy. 

The nominal GDP exceeded 100 trillion yen for the first time in 1973, and increased by 100 trillion yen almost every five years. It marked 500 trillion yen in 1992 just before when the bubble economy led by price inflation of real estate burst. The growth slowed down after 1990s and declined under 500 trillion yen at the time of Lehman shock and East Japan Great Earthquake.

 

600 trillion of GDP was the target upheld by Shinzo Abe administration, which sought strong economy with a slogan called Abenomics, which was based on mobilizing fiscal policy, monetary policy driven by depreciation of Japanese yen and growth-oriented economic policies. However, his economic policy did not reach the goal set at 2020 with slow progress for achieving 2 percent of inflation target.

 

According to the survey of the Cabinet Office, nominal GDP of Japan grew 2.9 percent in 2024, while real GDP remained in 0.1 percent of growth. The main reason was price inflation brought by foreign factors. The War in Ukraine raised food prices in the world. The low-interest policy taken by the Bank of Japan caused cheap yen against US dollar, causing price hike of goods or raw materials imported from foreign countries.

 

Although individual consumption marked 0.1 percentage point of increase in the fourth quarter of 2024, helped by the subsidy of Tokyo Metropolitan Government for some family appliances such as refrigerators or air conditioners, consumption of foods, including rice and vegetables, declined with apparent price hike.

 

Capital investment of companies increased by 0.5 percent in the fourth quarter, led by increasing demands in chip businesses. Foreign visitors raised sales of hotels and restaurants. The government of Japan expects 2.8 percent of growth in annual real GDP, based on the result of the fourth quarter of 2024.

 

However, Japanese economy is exposed to negative impacts coming from foreign countries. US President Donald Trump announced his intention to impose 25 percent of tariffs on foreign cars including those made in Japan. A slowdown in Chinese economy may cause decline of Japan’s exports to China. Although China still is restricting import of Japanese food, the policy which is related to discharge of processed water from Fukushima Daiichi Nuclear Power Plant, China is still the biggest recipient of Japan’s exports.

 

Persistent price hike in Japan can further affect Japanese economy, imposing downward pressure on individual consumption in Japan and negative impact on exporters.

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