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Nikkei: Japan at less than 10% of Global GDP for first time since 1982

December 27, 2007
By Ken Worsley


That headline is only the beginning of the bad news in Thursday’s edition of the Nikkei, though it may be indicative of what 2008 has in store for the economy. Essentially, the Nikkei is reporting that in 2006, Japan’s share of global GDP stood at 9.1 percent, which is the first time in 26 years that Japan as accounted for less than 10 percent of global GDP. According to revised figures published Wednesday by the Cabinet Office, Japan’s GDP grew 2.4% in real terms, but fell 4% in nominal terms in 2006. The global economy grew at about an 8% pace in that year.

In another story, we learn that Japan’s IPO market is shrinking, and the blame is placed on…you guessed it: A lack of auditors and stricter regulations. As the Nikkei put it:

Before listing on the Mothers market [for startups] of the Tokyo Stock Exchange earlier this year, a manufacturer asked about 200 business partners to submit reports confirming that it has “no relations whatsoever with crime syndicates and other antisocial forces.”

The Nikkei also points out that the Tokyo Stock Exchange currently has no way to verify the veracity of a given firm’s claim to have no ties to “antisocial forces.”

Then, we see that according to a Nikkei survey, the percentage of CEOs who feel that Japan’s economy is expanding has fallen from 79% in October to 64% in December. 96% of the 134 CEOs surveyed said that the fall in housing starts is hurting the economy.

Finally, two stories we haven’t seen in English yet:

1) In fiscal 2006, Japan’s personal savings rate fell to 3.2 percent of income, and now stands at an historical low. The Cabinet Office asserts that wages increased 1.8% that year. Japan’s savings level peaked at 11.4% of income back in fiscal 1997.

2) The Japan Travel Board announced that in 2007, the number of Japanese traveling overseas decreased by 1.1 percent, showing the first fall in 4 years. This is something we will probably have to get back to, but what stands out to us in the report is JTB saying that fears over food safety in China have put negative pressure on the number of people willing to travel there.

However, there was no word on how fears over food safety have affected tourism to Hokkaido…

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Comments

15 Responses to “Nikkei: Japan at less than 10% of Global GDP for first time since 1982”

  1. Crippled on December 27th, 2007 10:22 am

    In 1997 the savings rate was high and the travelers abroad was low due to the Asian currency problem and Yamaichii Shoken going bankrupt. In addition, the sales tax was raised to 5%. I remember that time, people were very nervous so they probably stashed away more money and stayed home more.

  2. John S on December 27th, 2007 3:34 pm

    JTB saying that fears over food safety in China have put negative pressure on the number of people willing to travel there.

    How did they discover this? Ask all the people who didn’t show up at their office to not travel abroad? I don’t buy it for a second. Even if people gave this reason on surveys (which were probably multiple choice), it was just tatemae. No one says, “I’m broke” as a reason, they make up something else.

    JTB probably gave them a survey like this:

    If you didn’t travel abroad this year, why?
    A) Concerns over food safety in China
    B) Concerns over food safety in China
    C) Concerns over food safety in China
    D) Concerns over food safety in China
    E) Other: Please specify with at least three paragraphs of information.

  3. WG on December 28th, 2007 3:57 am

    John S,

    Obviously these surveys are false. There’s no way to ask everyone who didn’t travel abroad why they decided not to. But they try to get some sense of the general feeling. I doubt JTB comes up with this data on their own - ahem - look into who they hire to conduct their market research and that might give you a clue as to why they get certain results - which always get published. Then ask yourself whether or not those results are in their best interest to get. After all, supposed ‘food safety’ sounds a lot better than SARS or terrorism, which led to the last drops in tourist numbers. And with the strong yen, we’ll see more Japanese heading to the US/Canada in the next few months.

  4. BillyBuck on December 28th, 2007 5:40 am

    “And with the strong yen, we’ll see more Japanese heading to the US/Canada in the next few months.” ….. strong yen? Where do you get your information from.. Japanse news papers/TV..?
    The yen is at least 35 - 40% underwalued against the Euro and as much as 20% to the USD.
    The Japanese economy and the whole Japanese society is falling apart. Heading for third world standard in less than 30 years.

  5. WG on December 28th, 2007 8:28 pm

    Whoa there! The yen is certainly stronger than last year, and thus buys more dollars. The demographic of people who will be making decisions on traveling do in fact read Japanese newspapers and watch Japanese TV.

    You don’t think the average person making purchasing decisions thinks the yen is 20% undervalued against the dollar, do you? Do you think they’ve ever even considered such a thing? It’s cheaper than last year, China seems dangerous…decision made.

    I’d love to see the data on this ‘third world standard.’

  6. BillyBuck on December 28th, 2007 8:59 pm

    third world standard:

    “So far, 278 municipalities in cold areas such as Hokkaido, Iwate, Niigata and Nagano have already offered or are planning to provide 5,000 to 10,000 yen per household as subsidies for the poor to purchase kerosene for heating, government officials said.”

    http://www.japantoday.com/jp/news/423609

    Need more?

  7. WG on December 28th, 2007 9:07 pm

    A kerosene subsidy is a mark of a third world country? I was waiting to hear news of dirt roads, no internet infrastructure, starvation, mass inflation and currency devaluation, dictators, civil war…that would seem ‘third world’-ish to me.

  8. Ken Worsley on December 29th, 2007 4:30 am

    WG: I find it difficult to believe that the number of Japanese traveling to the US will increase anytime soon, given the higher fuel surcharges, negative growth in wages, and drop in the number of Japanese traveling abroad last year. I also don’t see the yen staying at its current level against the dollar.

    BillyBuck: I think ‘third world’ is a bit extreme, though Japan is certainly headed towards some kind of fiscal and demographic crisis that will lead to declines in standard of living. Nevertheless, it will remain a global technology leader for some time. The key issue will be whether domestically-oriented firms will be able to take the lead of Toyota, Canon et al and make their move overseas. History says this will be difficult, at best. I am not optimistic given what we’ve seen thus far.

  9. BillyBuck on December 29th, 2007 5:54 am

    Ken, I ‘am absoulutly in the same boat as you. I think we are thinking the same but we are using different kind of words about the same problem. People do not understand, nor do they belive what is happening or what kind of huge transformation Japan is going thrue last decade and the next one to come.
    Peoples wealth, workers rights and everything else what influence peoples life, will be something no other country in modern times have been true.
    The “master plan” to save and solve Japans industry was to tranform the wealt from ordynary Mr Watanabe to the extraordynary Mr Watanabe…. from people to industry. Weak yen is the answer.
    If the yen was 100 to USD and 100 to Euro, do you think it would be necessary to subsidy cerosine? Never!
    Japan is the mother to the great imballance the world have today. Exporting the Japanese peoples wealth abroad together with zero interest rate (now 0,5) fueling every buble around the globe, and leaving its own people with zero to modest buying power and cold homes.
    It is in fact the same thing Robert Mugabe dos in Zimbawe. Even if inflation is in the other end of the universe, how many people put their money in a Zimbawe bank?…. The same goes for Japan.. the money go abroad, seeking higer return (interest rate) and in the same action.. protect their money from devaluating purchasing power.
    The many and different Japanese governments should be questioned whos interest they have been fighting for the last 17 years. It is shure not Mr (litle) Watanabe.

    And one more thing: Thanks for a wery interesting service and readable site.

  10. Ken Worsley on December 29th, 2007 6:08 am

    Billy, Thanks for the compliment. The whole point here is to have a space where the news is not just news - since we can get that anywhere - but that the news can be discussed and we can share what we’re thinking on the economy.

    I basically started this whole thing because the supposed ‘recovery’ was false and the media refused to discuss that 18 months ago. As you hint, there has been negative gain for the average Japanese consumer. Why are several consecutive years of economic expansion referred to as a ‘recovery’? Something doesn’t add up - four years of ‘recovery’ and consumer confidence is back down to where it was when it started? Something is rotten in the state of Japan.

    Now, we finally see the media catching on. There is little room for them to ignore the data, and the government’s growth projections can no longer be taken seriously. But they could not take the contrarian position when it would have meant something. The media refused to acknowledge that wages were not increasing, that consumer spending would not pick up, and that the increase in contract workers coupled with ridiculous GDP to debt ratios spell doom for the nation.

    Those Japanese who wish to invest have little choice but to ship their money abroad. The Nikkei’s rally fell flat, as expected, and we finally saw it close lower this year than last, as we predicted. Sure, there will be places to make money investing in Japan, but overall, the rot in the system is starting to take over. It is crashing down.

    Of course Mr Watanabe’s interests have not been addressed - he really doesn’t matter. The powerful lobbies do matter, and they will try to do what they can to patch things together as long as possible.

    The myth of everyone being middle class in Japan was a lie from day one and has now hopefully been recognized as such. The myth that Japan has a high savings rate is still talked about in some circles, but is known not to be true. There is too much tatemae and not enough facing up to the realities of what’s going on. If this does not change, the nation is headed for some serious, accelerated trouble.

  11. BillyBuck on December 29th, 2007 7:17 am

    Thanks for a late friday responce and answer.

    I am sorry about the comercial in front (and after) of the report from CNN but it higlights even more the meaning of my comment. Who is the buyer?… falang dlivels :)
    But right on spot!

    http://edition.cnn.com/video/#/video/business/2007/12/27/lah.japan.kimono.fx.traders.cnn

  12. WG on December 29th, 2007 3:37 pm

    Ken:

    I find it difficult to believe that the number of Japanese traveling to the US will increase anytime soon, given the higher fuel surcharges, negative growth in wages, and drop in the number of Japanese traveling abroad last year. I also don’t see the yen staying at its current level against the dollar.

    Toss out the last one - there’s no way for us to predict the future and no real point in speculating where the yen will go against the dollar.

    The others are based on data trends, though there is a chance that we will see higher wages in th next few months. I believe we saw higher scheduled pay in November than last year? we also continue to see all time high bonuses, which is a good sign. People tend to splurge that money, it seems.

    I would say the drop in people traveling abroad last year will make them hungrier to go sometime this year. I don’t have the numbers, but when we saw drops in the past, say with SARS or 9/11, I seem to remember them being one year lulls in the numbers.

  13. John S on December 30th, 2007 4:10 am

    Fact is, Japan is becoming less relevant. It’s not just that other nations are becoming more relevant. Decades of bad policy and closed markets are going to come back to bite Japan in the ass.

    Japan is behind China in terms of getting resources from Africa, and only seems to benefit from Asian ties through bullying smaller nations like Vietnam.

    I don’t think Japan will become irrelevant quickly, but it will be more and more so over time. Go Nintendo, Toyota and Canon. I don’t see any other global brands developing.

  14. Yao on January 9th, 2008 6:09 am

    Japan is becoming less relevant. It’s not just that other nations are becoming more relevant.

    Puhleeze. Who is poised to take over as world technology leader? Japan lacks in people who will do factory work, which can be outsourced, and natural resources, which it can pay for.

  15. John S on January 11th, 2008 3:11 pm

    Japan wasn’t always a global technology leader and there’s no rule saying it always will be. Empires come and go. Tides turn. Paying for those natural resources won’t be cheap. Sounds like Rome.

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