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Economic skepticism in Japan

Most of the CEOs of Japan’s companies doubt that the country can engage in a substantial economic recovery before the next two years. The newspaper “Nikkei” writes, which consulted 145 companies in the context of a new telephone survey. Almost all of the companies consulted have resorted at least in part to teleworking, and 40% are considering reducing office space, or even resorting to share-office solutions. 38 per cent of the companies consulted believe that they will not be able to return to pre-pandemic activity levels before two years, but the percentage rises to 55.8 per cent if even the most pessimistic opinions are included, of those who expect even more stagnation prolonged, or who do not see any prospect of recovery. The percentage of entrepreneurs who expect a period of economic stagnation of at least two years has increased by 12.4 percent compared to the previous similar survey carried out by Nikkei last May.

Japan’s exports plummeted 26.2 percent year on year in June. This is the fourth double-digit monthly drop recorded by the Asian country, and the worst year-on-year contraction in Japanese exports since September 2209. In June, Japanese imports fell by 14.4 percent. The Japanese Ministry of Finance has also published the aggregate figure for the first half of 2020: between January and June of this year Japan’s exports suffered a drop of 15.4 percent on an annual basis to 32.360 billion yen (approximately $ 300 billion). The half-year financial statements are the worst in percentage terms since the 22.8 percent drop in the second half of 2009, following the global financial crisis.

Among the items of Japanese exports most affected by the global fallout of the coronavirus pandemic are cars (minus 30.9 percent year-on-year in the first half of 2020), and automotive components (minus 29 percent). Japan’s commercial assets vis-à-vis the United States declined 49.3 percent year-on-year, while exports to China fell 3.6 percent year-on-year.

The Bank of Japan (Boj) published its updated forecasts regarding the trend of Japan’s gross domestic product in fiscal 2020 on 15 July. The central bank expects a contraction of 4.7 percent, despite some signs of gradual recovery of the economy. The forecast, contained in the bank’s latest quarterly forecast report, represents the average of the forecasts made by the members of the BoJ’s board of directors. The figure represents a downward revision compared to the previous central bank projections, which justified the new figure by highlighting “the slower recovery in expectations both in Japan and abroad”. According to the Bank of Japan, the contraction of the economy in the current year could follow an expansion of 3.3 percent in the fiscal year 2021, and 1.5 percent in 2022.

Japan registered as many as 780 bankruptcies of companies and businesses in June, a figure that marks an absolute monthly record for that country. Most of the closures involved hotels or restaurants, among the activities most affected by the coronavirus pandemic, and the consequent arrest of tourist flows. According to data published by Tokyo Shoko Research, the number of companies that filed for bankruptcy in June increased 6.3 percent year-on-year. 743 companies had become insolvent in April, and 314 in May, which had hit a low since June 1964, the effect of the slowdown in bankruptcy court operations due to the coronavirus.

Loan issuance by Japanese banks and credit unions increased 6.2 percent in June compared to the same month last year, hitting a record 570.1 trillion yen ($ 5.3 billion). This is confirmed by the data published today, July 8, by the Bank of Japan. In May, the issuance of credit had already increased by 4.8 percent per year. Japanese companies continue to accumulate capital to guard against the effects of the coronavirus pandemic: total deposits, including certificates of deposit, increased by 8 percent year-on-year to 786.100 billion yen, precisely due to the increase in deposits by companies, families and public entities.

The confidence of Japan’s large manufacturing companies has plummeted to a minimum for over a decade, due to the economic fallout from the coronavirus pandemic. Small business owners also seem to be skeptical about Japan’s economic recovery. The Tokyo government must plan an economic restructuring that can give confidence to the entire Japanese community.
By Domenico Greco

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