Japan has unveiled one of its biggest economic transformation plans in decades, announcing a massive 370 trillion yen ($2.5 trillion) investment strategy through 2040. Prime Minister Sanae Takaichi's government aims to strengthen Japan's leadership in artificial intelligence, semiconductors, biotechnology, defense, clean energy, and shipbuilding while boosting long-term economic growth.

The ambitious blueprint is designed to improve productivity, reduce dependence on China, and keep Japan competitive in the global AI race. However, economists and investors are raising concerns over how the government plans to finance the enormous spending package, especially with Japan already carrying one of the world's highest public debt burdens.

Japan Unveils $2.3 Trillion Economic Plan | AI, Semiconductors & Defense Push | Wion News 

Japan's workplace culture is making headlines again as a Tokyo-based company revives old-school corporate traditions. Employees begin each day with motivational chants, energetic speeches, and strict discipline an approach that many young Gen Z workers say helps them grow professionally. While supporters argue that tougher workplaces improve accountability, resilience, and productivity, critics warn the trend could revive unhealthy work practices Japan has spent years trying to leave behind.

Japan revives old-school corporate culture | gen z says strict bosses help them succeed

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Stay updated with today's biggest international headlines:

A. US-Iran Conflict

US Central Command releases footage of fresh strikes near Bandar Abbas and Qeshm Island.
Fourth consecutive day of military operations targets Iranian positions.
US reinforces naval blockade to protect shipping in the Strait of Hormuz.

B. India Responds

India launches a seafarer-first emergency response system.
New vessel-tracking mechanism introduced after attacks on merchant ships.
Measures aim to safeguard Indian sailors in conflict zones.

C. Iran's Warning

IRGC says the Strait of Hormuz will remain closed until US military actions stop.
Iran warns additional regional oil and gas export routes could also become targets.

D. Gulf Tensions

Iran claims it struck facilities linked to the US Fifth Fleet in Bahrain.
Command centers, fuel depots, and military infrastructure reportedly targeted.

E. Russia-Ukraine

Russia accuses Ukraine of attacking commercial ships in the Sea of Azov and Black Sea.
Moscow says it will continue food exports and humanitarian commitments.

F. Australia

Prime Minister Anthony Albanese announces plans to regulate AI data centers.
New rules will address electricity, water usage, and copyright protection.

G. Japan Economy

Manufacturers remain optimistic due to strong semiconductor demand.
Services sector struggles with rising operating costs.

H. FIFA World Cup

Spain defeat France 2-0 to qualify for the FIFA World Cup Final.
Mikel Oyarzabal and Pedro Porro score.
Spain will face either England or Argentina in the final.
Watch the full report for complete global updates.

Iran threatens Strait of Hormuz closure | India protects seafarers | Russia blames Ukraine 

India has overtaken Japan to become the fourth-largest economy globally, as confirmed by the Indian government's year-end economic review. According to the projections, India is on track to surpass Germany in the next few years and become the third-largest economy by 2028.<h2>What is India's GDP?</h2>India’s gross domestic product (GDP) has reached approximately $4.18 trillion, with forecasts suggesting it will grow to $7.3 trillion by 2030. On its current trajectory, India will only be behind the United States and China in terms of economic size. The country's GDP grew by 8.2% in the second quarter of the 2025–26 fiscal year, up from 7.8% in the previous quarter, marking the highest growth in six quarters.&nbsp;&nbsp;Additionally, India’s export sector is performing well, with merchandise exports hitting $38.13 billion in November 2025, a rise from $36.43 billion in January. This boost is driven by growth in engineering goods, electronics, pharmaceuticals, and petroleum products. However, the official confirmation of these figures will only be available in 2026 when the final annual GDP numbers are published. The International Monetary Fund (IMF) has indicated that India is likely to surpass Japan in the coming year.&nbsp;Also Read: <a href="https://www.wionews.com/business-economy/is-gold-still-the-ultimate-safe-haven-in-2026-here-s-what-banks-and-analysts-forecast-1767102492267">Is gold still the ultimate safe haven in 2026? Here’s what banks and analysts forecast</a><h2>What is driving the Indian economy?</h2>The country's growth has largely been driven by domestic demand, especially robust private consumption, despite global trade challenges and policy uncertainty. The government described the current phase as a rare "Goldilocks" moment, combining high growth with low inflation. Strong corporate finances, steady credit flow, and ongoing reforms have set India on a path to sustained growth. With ambitions to reach high middle-income status by 2047, the centenary of its independence, India is building on solid foundations for both economic expansion and social progress.<h2>What are the challenges for India's economy going forward?</h2>Despite impressive growth, India’s income gap with advanced economies remains significant. In 2024, India’s GDP per capita stood at $2,694, which is about 12 times lower than Japan’s and 20 times less than Germany’s. As India’s population grew to 1.4 billion, it overtook China as the most populous nation in 2023. A major challenge lies ahead in creating enough well-paid jobs for millions of young graduates. However, the report remains optimistic, noting that India's demographic advantage, its young population, could fuel future growth if quality employment opportunities can be created.&nbsp;This year, Prime Minister Narendra Modi introduced large-scale consumption tax cuts and labor law reforms to boost the economy, following a slowdown to a four-year low. However, the rupee faced challenges, hitting an all-time low against the dollar in December 2025, partly due to concerns about trade relations with the U.S. and the effects of higher tariffs on Indian goods. India surpassed the UK to become the world's fifth-largest economy in 2022, and now, with its rapidly expanding economy, it’s set to move into third place soon.

India surpasses Japan to become world's fourth-largest economy, poised to overtake Germany soon: Report

India has overtaken Japan to become the fourth-largest economy globally, as confirmed by the Indian government's year-end economic review. According to the projections, India is on track to surpass Germany in the next few years and become the third-largest economy by 2028. What is India's GDP? India’s gross domestic product (GDP) has reached approximately $4.18 trillion, with forecasts suggesting it will grow to $7.3 trillion by 2030. On its current trajectory, India will only be behind the United States and China in terms of economic size. The country's GDP grew by 8.2% in the second quarter of the 2025–26 fiscal year, up from 7.8% in the previous quarter, marking the highest growth in six quarters. Additionally, India’s export sector is performing well, with merchandise exports hitting $38.13 billion in November 2025, a rise from $36.43 billion in January. This boost is driven by growth in engineering goods, electronics, pharmaceuticals, and petroleum products. However, the official confirmation of these figures will only be available in 2026 when the final annual GDP numbers are published. The International Monetary Fund (IMF) has indicated that India is likely to surpass Japan in the coming year. Also Read: Is gold still the ultimate safe haven in 2026? Here’s what banks and analysts forecast What is driving the Indian economy? The country's growth has largely been driven by domestic demand, especially robust private consumption, despite global trade challenges and policy uncertainty. The government described the current phase as a rare "Goldilocks" moment, combining high growth with low inflation. Strong corporate finances, steady credit flow, and ongoing reforms have set India on a path to sustained growth. With ambitions to reach high middle-income status by 2047, the centenary of its independence, India is building on solid foundations for both economic expansion and social progress. What are the challenges for India's economy going forward? Despite impressive growth, India’s income gap with advanced economies remains significant. In 2024, India’s GDP per capita stood at $2,694, which is about 12 times lower than Japan’s and 20 times less than Germany’s. As India’s population grew to 1.4 billion, it overtook China as the most populous nation in 2023. A major challenge lies ahead in creating enough well-paid jobs for millions of young graduates. However, the report remains optimistic, noting that India's demographic advantage, its young population, could fuel future growth if quality employment opportunities can be created. This year, Prime Minister Narendra Modi introduced large-scale consumption tax cuts and labor law reforms to boost the economy, following a slowdown to a four-year low. However, the rupee faced challenges, hitting an all-time low against the dollar in December 2025, partly due to concerns about trade relations with the U.S. and the effects of higher tariffs on Indian goods. India surpassed the UK to become the world's fifth-largest economy in 2022, and now, with its rapidly expanding economy, it’s set to move into third place soon.

India’s GDP has reached $4.18 trillion, overtaking Japan as the fourth-largest economy. It’s on track to surpass Germany by 2028 with rapid growth and reforms

Births in Japan for 2025 are set to fall below 670,000, the lowest number since national records began in 1899, and worse than the most pessimistic government projections. This fast population decline is raising a troubling question: Can Japan sustain its economy and society with so few young people? Here is an analysis of the symptoms and prognosis of this demographic time bomb.<h2>Japan’s population has been shrinking steadily since 2011</h2>In 2024 alone, deaths in Japan exceeded births by close to one million people. That was the first time that births fell below 700,000 for the first time since records began. Down 5.7 per cent from the previous year, this was the sharpest annual natural population decline for the Asian economic giant. The population, once 128 million, is now around 123 million and falling further.<h2>Core of the crisis: Extremely low fertility rate</h2>The Japanese fertility rate is around 1.14 children per woman, far below the replacement level of about 2.1, which is needed to maintain population stability.Economic insecurity is the main reason for women having fewer children. Stagnant wages, rising living costs, and expensive childcare are discouraging young adults from marrying or starting families. Marriage rates have fallen sharply in recent decades. Childbirth outside marriage remains socially uncommon, meaning lesser marriages directly lead to fewer births.&nbsp;<a href="https://www.wionews.com/videos/japan-pm-takaichi-sees-budget-surplus-despite-record-budget-1766814534095/embed">https://www.wionews.com/videos/japan-pm-takaichi-sees-budget-surplus-despite-record-budget-1766814534095/embed</a><h2>Stressful life in Japan adding to low birth numbers</h2>Japan’s gruelling work culture of long hours and limited work-life balance are making parenting difficult. Gender inequality puts the childcare burden almost entirely on women. But more women are opting for education, careers, and independence. This leads to delays or rejections of traditional family models.<h2>Labour shortages hit Japan economy</h2>With lesser young people adding to the workforce every year, sectors such as manufacturing, construction, agriculture, caregiving, and services are seeing labour shortages. Production capacity is going down. Supply chains are strained. Costs for businesses are increasing.Also read: <a href="https://www.wionews.com/world/faced-with-an-ageing-population-japan-to-open-doors-to-1-2m-foreign-workers-1766477397006">Faced with an ageing population, Japan to open doors to 1.2M+ foreign workers</a><h2>A rapidly ageing population puts pressure on public finances</h2>As of 2025, Japanese aged above 65 accounted for nearly 29 per cent of the total population. The fewer people in the workforce are support rising pension, healthcare, and eldercare expenses of the government. &nbsp;Domestic consumption is weak,as &nbsp;there are fewer young families. Long-term economic growth and innovation could be dampened by these factors.Also read: <a href="https://www.wionews.com/trending/elon-musk-predicts-this-country-will-lose-1-million-people-in-2025-claims-ai-is-the-only-hope-netizens-slam-his-ad-1754898547397">Elon Musk predicts THIS country will lose 1 million people in 2025, claims 'AI is the only hope,' netizens slam his 'ad'</a><h2>Immigration: A cautious approach for replacement population</h2>Japan is making cautious steps towards immigration as a possible population replacement mechanism.Foreign workers are at a record high in Japan. Visa programmes for skilled and semi-skilled workers have been expanded, in industries with acute labour shortages. For instance, the government recently proposed accepting up to 1.23 million foreign workers by fiscal 2028 under a new Employment for Skill Development system and other programmes.Immigration is framed as a labour solution rather than a path to large-scale permanent settlement, meaning, foreigners can work but not necessarily start families.&nbsp; This is due to cultural concerns, language barriers, and political sensitivities. There are fears that the gradual replacement migration could alter the cultural fabric of a society long defined by homogeneity.Also read: <a href="https://www.wionews.com/business-economy/japan-confronts-labor-shortages-as-elderly-population-reaches-record-high-760057">Japan confronts labor shortages as elderly population reaches record high</a><h2>Will Japan economy fail without enough people to run its future economy?</h2>A total economic collapse is unlikely, but Japan faces the real risk of stagnation. The country is a technological powerhouse, leading in automation and robotics.&nbsp;This can partially compensate for labour shortages. &nbsp;But machines cannot fully replace human workers, especially in sectors like healthcare, education, and service industries that rely on human interaction and connection.Japan’s population crisis is no longer a distant problem but clear and present danger. How the country balances automation, social reform, and immigration will determine whether this population timebomb leads to managed adaptation or economic gloom.

Japan births for the year 2025 are reported to have fallen below 670,000, setting a new record. This is straining the economy, forcing reliance on automation and immigration.


Births in Japan for 2025 are set to fall below 670,000, the lowest number since national records began in 1899, and worse than the most pessimistic government projections. This fast population decline is raising a troubling question: Can Japan sustain its economy and society with so few young people? Here is an analysis of the symptoms and prognosis of this demographic time bomb. Japan’s population has been shrinking steadily since 2011 In 2024 alone, deaths in Japan exceeded births by close to one million people. That was the first time that births fell below 700,000 for the first time since records began. Down 5.7 per cent from the previous year, this was the sharpest annual natural population decline for the Asian economic giant. The population, once 128 million, is now around 123 million and falling further. Core of the crisis: Extremely low fertility rate The Japanese fertility rate is around 1.14 children per woman, far below the replacement level of about 2.1, which is needed to maintain population stability. Economic insecurity is the main reason for women having fewer children. Stagnant wages, rising living costs, and expensive childcare are discouraging young adults from marrying or starting families. Marriage rates have fallen sharply in recent decades. Childbirth outside marriage remains socially uncommon, meaning lesser marriages directly lead to fewer births. https://www.wionews.com/videos/japan-pm-takaichi-sees-budget-surplus-despite-record-budget-1766814534095/embed Stressful life in Japan adding to low birth numbers Japan’s gruelling work culture of long hours and limited work-life balance are making parenting difficult. Gender inequality puts the childcare burden almost entirely on women. But more women are opting for education, careers, and independence. This leads to delays or rejections of traditional family models. Labour shortages hit Japan economy With lesser young people adding to the workforce every year, sectors such as manufacturing, construction, agriculture, caregiving, and services are seeing labour shortages. Production capacity is going down. Supply chains are strained. Costs for businesses are increasing. Also read: Faced with an ageing population, Japan to open doors to 1.2M+ foreign workers A rapidly ageing population puts pressure on public finances As of 2025, Japanese aged above 65 accounted for nearly 29 per cent of the total population. The fewer people in the workforce are support rising pension, healthcare, and eldercare expenses of the government. Domestic consumption is weak,as there are fewer young families. Long-term economic growth and innovation could be dampened by these factors. Also read: Elon Musk predicts THIS country will lose 1 million people in 2025, claims 'AI is the only hope,' netizens slam his 'ad' Immigration: A cautious approach for replacement population Japan is making cautious steps towards immigration as a possible population replacement mechanism. Foreign workers are at a record high in Japan. Visa programmes for skilled and semi-skilled workers have been expanded, in industries with acute labour shortages. For instance, the government recently proposed accepting up to 1.23 million foreign workers by fiscal 2028 under a new Employment for Skill Development system and other programmes. Immigration is framed as a labour solution rather than a path to large-scale permanent settlement, meaning, foreigners can work but not necessarily start families. This is due to cultural concerns, language barriers, and political sensitivities. There are fears that the gradual replacement migration could alter the cultural fabric of a society long defined by homogeneity. Also read: Japan confronts labor shortages as elderly population reaches record high Will Japan economy fail without enough people to run its future economy? A total economic collapse is unlikely, but Japan faces the real risk of stagnation. The country is a technological powerhouse, leading in automation and robotics. This can partially compensate for labour shortages. But machines cannot fully replace human workers, especially in sectors like healthcare, education, and service industries that rely on human interaction and connection. Japan’s population crisis is no longer a distant problem but clear and present danger. How the country balances automation, social reform, and immigration will determine whether this population timebomb leads to managed adaptation or economic gloom.

Japan births for the year 2025 are reported to have fallen below 670,000, setting a new record. This is straining the economy, forcing reliance on automation and immigration. &nbsp;

Japan births fell lowest on record in 2025: Won't it have enough people to run its future economy?

Japan’s fragile recovery has hit another roadblock. The country’s exports fell for the first time in eight months in May 2025, raising fears of a technical recession amid a widening trade deficit, falling auto shipments, and escalating US tariff pressure.&nbsp;Official data from Japan’s Ministry of Finance, as reported by Reuters, shows that merchandise exports shrank 1.7 per cent year-on-year in May, missing market expectations of a steeper 3.7 per cent decline. The contraction was led by a slump in car, steel, and mineral fuel shipments.&nbsp;At the same time, imports dropped 7.7 per cent, primarily due to lower crude oil and coal purchases, resulting in a trade deficit of ¥637.6 billion ($4.4 billion), the second consecutive monthly shortfall.<h2>US tariffs rattle Japan’s top export sectors</h2>The latest export slowdown comes just weeks after US President Donald Trump doubled down on a protectionist trade agenda, imposing a 25 per cent tariff on Japanese car and auto part imports and raising the levy on steel and aluminium to 50 per cent.&nbsp;The Trump administration also announced a baseline 10 per cent tariff on all Japanese goods, which is set to rise to 24 per cent on July 9 unless a deal is reached. Negotiations between Trump and Japanese Prime Minister Shigeru Ishiba during the G7 summit failed to produce a breakthrough.&nbsp;As a result, exports to the United States plunged 11.1 per cent in May, with car shipments alone falling 24.7 per cent year-on-year. Japan’s trade surplus with the US narrowed to ¥451.7 billion, making it a likely target in Trump’s “reciprocal trade” policy push.&nbsp;“The tariff hit could shave nearly 1 percentage point off Japan’s GDP if all proposed duties take effect,” warned the Japan Research Institute, as quoted by Reuters.<h2>Trade data at a glance</h2>Below is a monthly breakdown of Japan’s year-on-year export growth from January 2023 to May 2025, based on Ministry of Finance data visualised by Bloomberg.&nbsp;&nbsp;The chart illustrates a clear trajectory in Japan’s export performance over the past two years. From late 2023 to mid-2024, exports showed strong year-on-year growth, peaking notably in November–December 2023 and again in May 2024.&nbsp;&nbsp;Economists suggest this surge was likely driven by Japanese firms front-loading shipments in anticipation of looming US tariffs. However, the momentum began to fade in the second half of 2024, with exports slipping into negative territory in September 2024.&nbsp;&nbsp;Although there was a brief recovery in the months that followed, the trend reversed once again by May 2025. That month marked a 1.7 per cent decline in exports, ending an eight-month stretch of expansion and confirming that the impact of US tariffs—previously obscured by early stockpiling—has started to bite into Japan’s trade flows. &nbsp;

Japan Export - Data compiled from Bloomberg chart sourced via Japan Ministry of Finance

<h2>China, Europe, and global trade shifts</h2>Japan’s export troubles aren’t confined to the US. Shipments to China, the country’s largest trading partner, fell 8.8 per cent in May, as demand for industrial goods and electronic components weakened. Exports to Europe, however, rose 4.9 per cent.&nbsp;According to Reuters, the earlier spike in US-bound shipments this year was partly driven by firms rushing to beat Trump’s tariff deadlines. But with that buffer now fading, Japan’s trade numbers are showing the full impact of US duties.<h2>Recession fears return</h2>With exports falling, a wide trade deficit, and consumption still weak, Japan risks slipping into a technical recession defined as two straight quarters of negative growth. The economy had already contracted in Q1 2025 due to sluggish domestic demand.&nbsp;The outlook complicates the Bank of Japan’s cautious policy pivot. On Tuesday, the BoJ held interest rates steady at 0.5 per cent, its highest level since 2007, but slowed its pace of bond tapering, citing global risks including Middle East conflict and trade uncertainty.&nbsp;Economists say rising tariffs and falling exports could force policymakers to delay further tightening, with the BoJ’s ultra-loose decade-long policy still casting a long shadow.<h2>What’s at stake</h2>Japan exported ¥21 trillion worth of goods to the United States in 2024, with automobiles accounting for 28 per cent of that total.&nbsp;&nbsp;With Trump’s reciprocal tariff deadline looming, Tokyo faces mounting pressure to protect its flagship industries—or risk deeper economic fallout in the second half of 2025.&nbsp;(With inputs from the agencies) &nbsp;

Japan imports decreased by 7.7%, leading to a trade deficit of ¥637.6 billion. US tariffs, recently intensified by President Trump, caused exports to the US to fall 11.1%, suggesting potential GDP impacts from proposed duties, as negotiations yielded no resolutions.

Japan’s fragile recovery has hit another roadblock. The country’s exports fell for the first time in eight months in May 2025, raising fears of a technical recession amid a widening trade deficit, falling auto shipments, and escalating US tariff pressure. Official data from Japan’s Ministry of Finance, as reported by Reuters, shows that merchandise exports shrank 1.7 per cent year-on-year in May, missing market expectations of a steeper 3.7 per cent decline. The contraction was led by a slump in car, steel, and mineral fuel shipments. At the same time, imports dropped 7.7 per cent, primarily due to lower crude oil and coal purchases, resulting in a trade deficit of ¥637.6 billion ($4.4 billion), the second consecutive monthly shortfall. US tariffs rattle Japan’s top export sectors The latest export slowdown comes just weeks after US President Donald Trump doubled down on a protectionist trade agenda, imposing a 25 per cent tariff on Japanese car and auto part imports and raising the levy on steel and aluminium to 50 per cent. The Trump administration also announced a baseline 10 per cent tariff on all Japanese goods, which is set to rise to 24 per cent on July 9 unless a deal is reached. Negotiations between Trump and Japanese Prime Minister Shigeru Ishiba during the G7 summit failed to produce a breakthrough. As a result, exports to the United States plunged 11.1 per cent in May, with car shipments alone falling 24.7 per cent year-on-year. Japan’s trade surplus with the US narrowed to ¥451.7 billion, making it a likely target in Trump’s “reciprocal trade” policy push. “The tariff hit could shave nearly 1 percentage point off Japan’s GDP if all proposed duties take effect,” warned the Japan Research Institute, as quoted by Reuters. Trade data at a glance Below is a monthly breakdown of Japan’s year-on-year export growth from January 2023 to May 2025, based on Ministry of Finance data visualised by Bloomberg. The chart illustrates a clear trajectory in Japan’s export performance over the past two years. From late 2023 to mid-2024, exports showed strong year-on-year growth, peaking notably in November–December 2023 and again in May 2024. Economists suggest this surge was likely driven by Japanese firms front-loading shipments in anticipation of looming US tariffs. However, the momentum began to fade in the second half of 2024, with exports slipping into negative territory in September 2024. Although there was a brief recovery in the months that followed, the trend reversed once again by May 2025. That month marked a 1.7 per cent decline in exports, ending an eight-month stretch of expansion and confirming that the impact of US tariffs—previously obscured by early stockpiling—has started to bite into Japan’s trade flows.

Japan's recovery faces setbacks as exports declined 1.7% year-on-year in May 2025, the first drop in eight months, spurred by falling shipments of cars, steel, and fuels.

Japan’s exports fall for first time in 8 months as US tariffs bite into recovery

The Bank of Japan (BOJ) is pressing pause on the pace of its balance sheet drawdown, signalling a cautious turn in its policy normalisation journey amid rising global uncertainty.&nbsp;On Tuesday, the central bank held interest rates steady at 0.5 per cent, its highest level since 2007, but announced that it would reduce its purchases of Japanese Government Bonds (JGBs) at a slower pace beginning next year, as reported by Reuters.<h2>What exactly did the BOJ decide?</h2>Since ending its yield curve control and negative interest rate policy, the BOJ has been gradually scaling back its massive JGB holdings in a bid to exit its decade-long ultra-loose monetary regime. Under the previous plan, the bank was reducing bond purchases by around 400 billion yen (approximately $2.8 billion) per quarter.&nbsp;Now, starting April 2026, the pace will be halved to 200 billion yen per quarter, effectively delaying the target of tapering bond purchases to 2 trillion yen per month until March 2027, as quoted by Reuters.&nbsp;The move marks a significant shift in tone, especially as inflation in Japan remains above the BOJ’s 2 per cent target. Consumer prices rose 3.5 per cent year-on-year in April, driven by surging food costs and sustained wage pressures, Reuters reported.<h2>Why slow down now?</h2>Two words: global risk.&nbsp;The BOJ’s revised taper plan comes as storm clouds gather over the global economy. An escalating Iran–Israel conflict has triggered fears of energy price shocks, while fresh US trade tariffs on Japanese goods — imposed under President Donald Trump’s new “reciprocal” policy, threaten to derail Japan’s export recovery.&nbsp;In a statement, the BOJ said it would act “nimbly” if long-term interest rates spiked, hinting at readiness to buy more bonds again if market volatility resurfaces, as per Reuters.&nbsp;As Lee Hardman of MUFG noted before the meeting, “The recent softening of the yen could already partly reflect expectations for a cautious policy update from the BOJ… alongside negative spillovers for Japan from the Middle East conflict,” as quoted by Reuters.<h2>Bond market turmoil prompts caution</h2>The BOJ’s decision follows weeks of volatility in the JGB market. Last month, a weak auction of 20-year bonds sent yields soaring across maturities, with the 40-year JGB yield hitting a record 3.675 per cent. Demand from traditional buyers like insurers has waned, adding to market instability, according to Reuters.&nbsp;With Japan’s debt burden standing at a staggering 250 per cent of GDP, the highest in the developed world — any spike in yields poses significant fiscal risks. Finance Minister Katsunobu Kato warned that higher borrowing costs “could further imperil Japan’s finances,” as per Reuters.&nbsp;To calm nerves, the finance ministry is reportedly planning to cut issuance of super-long bonds and may even launch buybacks to contain borrowing costs, Reuters has reported.<h2>Domestic pressure vs external shocks</h2>While Japan’s economy is seeing inflation, the BOJ is walking a tightrope. On the one hand, persistent cost pressures and labour shortages are prompting firms to raise wages, a potential sign of sustainable inflation.&nbsp;But on the other hand, sluggish exports, Trump’s tariff threats, and war-driven oil volatility threaten to choke off growth. Prime Minister Shigeru Ishiba has admitted that trade talks with the US have not produced a breakthrough, as quoted by Reuters.&nbsp;Carol Kong of the Commonwealth Bank of Australia told AFP that “slowing the bond taper will help keep interest rates lower than otherwise, providing support to the economy amid heightened trade uncertainty.”<h2>What’s next?</h2>The BOJ said it will conduct an interim review of its fiscal 2026 taper strategy at its policy meeting in June next year. Analysts believe the bank could resume rate hikes later in 2025, if inflation remains sticky and economic growth holds.&nbsp;But until then, the message from Tokyo is clear: caution first.&nbsp;As the world’s third-largest economy battles both internal and external headwinds, the BOJ is in no rush to tighten the screws, especially with a volatile bond market and geopolitical turmoil at its doorstep.&nbsp;(With inputs from the agencies) &nbsp;

The recent turmoil in the bond market has prompted caution from the Bank of Japan (BOJ), especially following a weak auction of 20-year bonds, leading to soaring yields. 

The Bank of Japan (BOJ) is pressing pause on the pace of its balance sheet drawdown, signalling a cautious turn in its policy normalisation journey amid rising global uncertainty. On Tuesday, the central bank held interest rates steady at 0.5 per cent, its highest level since 2007, but announced that it would reduce its purchases of Japanese Government Bonds (JGBs) at a slower pace beginning next year, as reported by Reuters. What exactly did the BOJ decide? Since ending its yield curve control and negative interest rate policy, the BOJ has been gradually scaling back its massive JGB holdings in a bid to exit its decade-long ultra-loose monetary regime. Under the previous plan, the bank was reducing bond purchases by around 400 billion yen (approximately $2.8 billion) per quarter. Now, starting April 2026, the pace will be halved to 200 billion yen per quarter, effectively delaying the target of tapering bond purchases to 2 trillion yen per month until March 2027, as quoted by Reuters. The move marks a significant shift in tone, especially as inflation in Japan remains above the BOJ’s 2 per cent target. Consumer prices rose 3.5 per cent year-on-year in April, driven by surging food costs and sustained wage pressures, Reuters reported. Why slow down now? Two words: global risk. The BOJ’s revised taper plan comes as storm clouds gather over the global economy. An escalating Iran–Israel conflict has triggered fears of energy price shocks, while fresh US trade tariffs on Japanese goods — imposed under President Donald Trump’s new “reciprocal” policy, threaten to derail Japan’s export recovery. In a statement, the BOJ said it would act “nimbly” if long-term interest rates spiked, hinting at readiness to buy more bonds again if market volatility resurfaces, as per Reuters. As Lee Hardman of MUFG noted before the meeting, “The recent softening of the yen could already partly reflect expectations for a cautious policy update from the BOJ… alongside negative spillovers for Japan from the Middle East conflict,” as quoted by Reuters. Bond market turmoil prompts caution The BOJ’s decision follows weeks of volatility in the JGB market. Last month, a weak auction of 20-year bonds sent yields soaring across maturities, with the 40-year JGB yield hitting a record 3.675 per cent. Demand from traditional buyers like insurers has waned, adding to market instability, according to Reuters. With Japan’s debt burden standing at a staggering 250 per cent of GDP, the highest in the developed world — any spike in yields poses significant fiscal risks. Finance Minister Katsunobu Kato warned that higher borrowing costs “could further imperil Japan’s finances,” as per Reuters. To calm nerves, the finance ministry is reportedly planning to cut issuance of super-long bonds and may even launch buybacks to contain borrowing costs, Reuters has reported. Domestic pressure vs external shocks While Japan’s economy is seeing inflation, the BOJ is walking a tightrope. On the one hand, persistent cost pressures and labour shortages are prompting firms to raise wages, a potential sign of sustainable inflation. But on the other hand, sluggish exports, Trump’s tariff threats, and war-driven oil volatility threaten to choke off growth. Prime Minister Shigeru Ishiba has admitted that trade talks with the US have not produced a breakthrough, as quoted by Reuters. Carol Kong of the Commonwealth Bank of Australia told AFP that “slowing the bond taper will help keep interest rates lower than otherwise, providing support to the economy amid heightened trade uncertainty.” What’s next? The BOJ said it will conduct an interim review of its fiscal 2026 taper strategy at its policy meeting in June next year. Analysts believe the bank could resume rate hikes later in 2025, if inflation remains sticky and economic growth holds. But until then, the message from Tokyo is clear: caution first. As the world’s third-largest economy battles both internal and external headwinds, the BOJ is in no rush to tighten the screws, especially with a volatile bond market and geopolitical turmoil at its doorstep. (With inputs from the agencies)

The Bank of Japan (BOJ) is slowing its balance sheet drawdown, maintaining interest rates at 0.5% and reducing Japanese Government Bond (JGB) purchases from 400 billion yen to 200 billion yen quarterly starting April 2026.

BOJ keeps rates steady, slows bond taper,  what it means for Japan’s economy?

Japan’s core inflation in its capital has surged to the highest level in more than two years, fuelling expectations of a rate hike by the Bank of Japan (BOJ).&nbsp;&nbsp;However, the central bank’s path forward remains fraught, as the economy grapples with a slump in factory output and intensifying trade tensions with the United States.&nbsp;According to Reuters, the Tokyo core consumer price index (CPI), which excludes fresh food costs, rose by 3.6 per cent in May from a year earlier, higher than market forecasts of 3.5 per cent and up from 3.4 per cent in April. This is the fastest rate of increase since January 2023, when inflation peaked at 4.3 per cent.&nbsp;A broader inflation gauge that excludes both fresh food and fuel, and is closely tracked by the BOJ, climbed 3.3 per cent in May. It had risen 3.1 per cent the previous month, indicating that price pressures are deepening beyond just food and energy.&nbsp;Marcel Thieliant, head of Asia-Pacific at Capital Economics, told Reuters: “The Tokyo CPI showed a further broad-based acceleration in inflation, which suggests that the BOJ may hike even earlier than our current forecast of October.”<h2>Factory slowdown raises red flags</h2>While inflation surges, Japan’s manufacturing sector shows signs of weakening. As reported by Reuters, factory output dropped by 0.9 per cent in April from the previous month. Manufacturers anticipate a 9.0 per cent rebound in May, followed by a projected 3.4 per cent dip in June, suggesting volatility and uncertainty within the sector.&nbsp;The BOJ is now confronted with a delicate balancing act: containing inflation without choking off growth at a time when global demand is waning.<h2>US tariffs create additional economic headwinds</h2>Complicating the picture further is Japan’s deteriorating trade relationship with the United States. President Donald Trump’s administration recently imposed steep tariffs on key Japanese exports, including vehicles, steel components, and electronic goods. Some duties reportedly exceed 24 per cent.&nbsp;Reuters notes that while Japan’s overall exports rose by 2 per cent in April, shipments to the US reportedly dropped by 1.8 per cent year-on-year. This decline signals that Trump’s tariff regime is beginning to take a toll on Japan’s external sector.&nbsp;Adding to the uncertainty, the Japanese government has lowered its global growth outlook and acknowledged that the trade friction with Washington could hinder the country’s post-pandemic recovery. The BOJ itself has already revised down its growth forecasts for the year, citing the impact of these tariffs.<h2>Rising food and service costs keep inflation expectations alive</h2>Food inflation remains a major driver of Japan’s price rise. Reuters reports that non-fresh food prices soared by 6.9 per cent in May, while the cost of rice skyrocketed by 93.2 per cent.&nbsp;Additionally, services inflation, which the BOJ closely monitors, rose to 2.2 per cent from 2.0 per cent in April, suggesting firms are beginning to pass labour costs onto consumers.&nbsp;A survey by Teikoku Databank, cited by Reuters, revealed that Japanese companies plan to increase prices on 1,932 food and beverage items in June, triple the number from a year earlier.&nbsp;BOJ Governor Kazuo Ueda told parliament on Friday that the central bank remains attentive to wage hikes and corporate pricing strategies, both of which are crucial to sustained inflation.&nbsp;“Japan may face a tricky situation where public attention to rising food prices heightens inflation expectations, which have so far been stable,” said Tsutomu Watanabe, professor at the University of Tokyo’s graduate school of economics, in an interview with Reuters.<h2>A cautious road ahead for the BOJ</h2>The BOJ exited its ultra-loose monetary stance last year and raised short-term rates to 0.5 per cent in January. However, the timing of the next move remains uncertain.&nbsp;&nbsp;While inflation has clearly exceeded the 2 per cent target, the broader economic environment, including shrinking factory output and external shocks from US protectionism, could restrain the bank’s hand.&nbsp;For now, expectations of another rate hike remain on the table, but the path ahead is far from clear. As Japan contends with internal price pressures and external trade risks, the BOJ will need to weigh its next steps with caution and flexibility.

Business & Economy: However, the central bank path forward remains uncertain due to a slump in factory output and intensifying trade tensions with the US. 

Japan’s core inflation in its capital has surged to the highest level in more than two years, fuelling expectations of a rate hike by the Bank of Japan (BOJ). However, the central bank’s path forward remains fraught, as the economy grapples with a slump in factory output and intensifying trade tensions with the United States. According to Reuters, the Tokyo core consumer price index (CPI), which excludes fresh food costs, rose by 3.6 per cent in May from a year earlier, higher than market forecasts of 3.5 per cent and up from 3.4 per cent in April. This is the fastest rate of increase since January 2023, when inflation peaked at 4.3 per cent. A broader inflation gauge that excludes both fresh food and fuel, and is closely tracked by the BOJ, climbed 3.3 per cent in May. It had risen 3.1 per cent the previous month, indicating that price pressures are deepening beyond just food and energy. Marcel Thieliant, head of Asia-Pacific at Capital Economics, told Reuters: “The Tokyo CPI showed a further broad-based acceleration in inflation, which suggests that the BOJ may hike even earlier than our current forecast of October.” Factory slowdown raises red flags While inflation surges, Japan’s manufacturing sector shows signs of weakening. As reported by Reuters, factory output dropped by 0.9 per cent in April from the previous month. Manufacturers anticipate a 9.0 per cent rebound in May, followed by a projected 3.4 per cent dip in June, suggesting volatility and uncertainty within the sector. The BOJ is now confronted with a delicate balancing act: containing inflation without choking off growth at a time when global demand is waning. US tariffs create additional economic headwinds Complicating the picture further is Japan’s deteriorating trade relationship with the United States. President Donald Trump’s administration recently imposed steep tariffs on key Japanese exports, including vehicles, steel components, and electronic goods. Some duties reportedly exceed 24 per cent. Reuters notes that while Japan’s overall exports rose by 2 per cent in April, shipments to the US reportedly dropped by 1.8 per cent year-on-year. This decline signals that Trump’s tariff regime is beginning to take a toll on Japan’s external sector. Adding to the uncertainty, the Japanese government has lowered its global growth outlook and acknowledged that the trade friction with Washington could hinder the country’s post-pandemic recovery. The BOJ itself has already revised down its growth forecasts for the year, citing the impact of these tariffs. Rising food and service costs keep inflation expectations alive Food inflation remains a major driver of Japan’s price rise. Reuters reports that non-fresh food prices soared by 6.9 per cent in May, while the cost of rice skyrocketed by 93.2 per cent. Additionally, services inflation, which the BOJ closely monitors, rose to 2.2 per cent from 2.0 per cent in April, suggesting firms are beginning to pass labour costs onto consumers. A survey by Teikoku Databank, cited by Reuters, revealed that Japanese companies plan to increase prices on 1,932 food and beverage items in June, triple the number from a year earlier. BOJ Governor Kazuo Ueda told parliament on Friday that the central bank remains attentive to wage hikes and corporate pricing strategies, both of which are crucial to sustained inflation. “Japan may face a tricky situation where public attention to rising food prices heightens inflation expectations, which have so far been stable,” said Tsutomu Watanabe, professor at the University of Tokyo’s graduate school of economics, in an interview with Reuters. A cautious road ahead for the BOJ The BOJ exited its ultra-loose monetary stance last year and raised short-term rates to 0.5 per cent in January. However, the timing of the next move remains uncertain. While inflation has clearly exceeded the 2 per cent target, the broader economic environment, including shrinking factory output and external shocks from US protectionism, could restrain the bank’s hand. For now, expectations of another rate hike remain on the table, but the path ahead is far from clear. As Japan contends with internal price pressures and external trade risks, the BOJ will need to weigh its next steps with caution and flexibility.

Japan's core inflation in Tokyo reached its highest level in over two years, causing expectations of a rate hike by the Bank of Japan (BOJ).&nbsp;

Japan’s inflation at two-year high intensifies pressure on rate hike, but US trade tensions cloud outlook

Japan’s national debt, which has long been at the centre of the country’s economic policy, is now straining under its own weight. The government’s borrowing has reached unprecedented levels, with outstanding debt surpassing $9 trillion—more than double the size of the nation's GDP.This vast debt load, accumulated over decades of low interest rates and heavy government spending, is now starting to show signs of fragility, as the Bank of Japan gradually phases out its ultra-low interest rate policy. With interest rates climbing, the cost of servicing Japan’s debt is poised to rise, triggering alarm bells in both domestic and global financial markets.Japan’s recent bond market struggles reflect growing concerns about its fiscal health. A bond auction for 40-year government bonds last week met the weakest demand in almost a year, exacerbating fears over the country’s financial future. Yields on long-term government bonds have surged, and analysts are watching these movements closely, fearing that rising borrowing costs could further undermine the country’s already strained fiscal position.Japan's 40-year bond yield recently hit 3.13 per cent, its highest level in two decades. A failed bond auction on May 20, where the bid-to-cover ratio plummeted to 2.50 from 2.96, only added to investor unease.The situation is further complicated by Japan’s demographic challenges. The country’s ageing population has led to an explosion in social security spending, including pensions and healthcare. As the country’s population continues to shrink and age—over 30 per cent of its population will be 65 or older by 2024—government expenditures are expected to rise sharply, placing additional pressure on an already stretched budget.&nbsp;Rising deficits and political strain&nbsp;Japan’s national debt has ballooned to an unsustainable 195 per cent of GDP in 2023, the highest among major advanced economies. Much of this debt stems from persistent fiscal deficits, as government spending consistently outpaces revenue.In particular, Japan's social security deficit has been a key driver of the country’s fiscal imbalance. Despite efforts at fiscal consolidation, including tax hikes in 2014 and 2019, the country has struggled to rein in its deficits. Financing the growing debt has largely relied on domestic bond issuance, but with bond yields rising, this approach is becoming less viable.Prime Minister Shigeru Ishiba faces mounting political pressure as the country’s fiscal outlook grows more precarious. With upper house elections approaching, Ishiba is under increasing pressure from voters struggling with inflation and the economic impact of tariffs imposed by the United States.Populist demands for tax cuts are growing louder, even as Ishiba cautions against the dangers of higher interest rates. The prospect of a fiscal crisis similar to that of Greece’s 2009 debt debacle is being raised by analysts, further intensifying concerns about Japan’s financial future.&nbsp;Rising concern&nbsp;Japan's fiscal troubles are not just a domestic issue. As one of the world’s largest economies, Japan’s bond market plays a significant role in global financial markets. Its recent bond market volatility, characterised by sharp increases in long-term bond yields, has had ripple effects in global markets, particularly in the US Treasury market. Japan is the largest foreign holder of US government debt, and any significant shift in its bond market could reverberate across global financial systems.A sharp rise in Japanese bond yields could also divert capital back into Japan, as investors may seek higher returns on its bonds. This could affect other major economies by driving up borrowing costs worldwide. With Japan’s economic growth stagnant and its demographic challenges deepening, many economists believe that Japan must implement serious fiscal reforms to address its unsustainable debt trajectory.While Japan’s fiscal problems are not expected to lead to an immediate collapse, the country’s fiscal trajectory is unsustainable in the long term. Experts argue that Japan must begin serious fiscal consolidation to avoid a full-blown crisis. Ageing demographics, rising social security costs, and now higher interest rates mean the country faces a shrinking window of opportunity to enact meaningful fiscal reforms.For now, Japan’s fiscal woes remain a major concern for policymakers and investors alike. With rising bond yields, a growing debt burden, and an uncertain political landscape, Japan’s economic future hangs in the balance.

The vast debt load, accumulated over decades of low interest rates and heavy government spending, is now starting to show signs of fragility, as the Bank of Japan gradually phases out its ultra-low interest rate policy.

Japan’s national debt, which has long been at the centre of the country’s economic policy, is now straining under its own weight. The government’s borrowing has reached unprecedented levels, with outstanding debt surpassing $9 trillion—more than double the size of the nation's GDP. This vast debt load, accumulated over decades of low interest rates and heavy government spending, is now starting to show signs of fragility, as the Bank of Japan gradually phases out its ultra-low interest rate policy. With interest rates climbing, the cost of servicing Japan’s debt is poised to rise, triggering alarm bells in both domestic and global financial markets. Japan’s recent bond market struggles reflect growing concerns about its fiscal health. A bond auction for 40-year government bonds last week met the weakest demand in almost a year, exacerbating fears over the country’s financial future. Yields on long-term government bonds have surged, and analysts are watching these movements closely, fearing that rising borrowing costs could further undermine the country’s already strained fiscal position. Japan's 40-year bond yield recently hit 3.13 per cent, its highest level in two decades. A failed bond auction on May 20, where the bid-to-cover ratio plummeted to 2.50 from 2.96, only added to investor unease. The situation is further complicated by Japan’s demographic challenges. The country’s ageing population has led to an explosion in social security spending, including pensions and healthcare. As the country’s population continues to shrink and age—over 30 per cent of its population will be 65 or older by 2024—government expenditures are expected to rise sharply, placing additional pressure on an already stretched budget. Rising deficits and political strain Japan’s national debt has ballooned to an unsustainable 195 per cent of GDP in 2023, the highest among major advanced economies. Much of this debt stems from persistent fiscal deficits, as government spending consistently outpaces revenue. In particular, Japan's social security deficit has been a key driver of the country’s fiscal imbalance. Despite efforts at fiscal consolidation, including tax hikes in 2014 and 2019, the country has struggled to rein in its deficits. Financing the growing debt has largely relied on domestic bond issuance, but with bond yields rising, this approach is becoming less viable. Prime Minister Shigeru Ishiba faces mounting political pressure as the country’s fiscal outlook grows more precarious. With upper house elections approaching, Ishiba is under increasing pressure from voters struggling with inflation and the economic impact of tariffs imposed by the United States. Populist demands for tax cuts are growing louder, even as Ishiba cautions against the dangers of higher interest rates. The prospect of a fiscal crisis similar to that of Greece’s 2009 debt debacle is being raised by analysts, further intensifying concerns about Japan’s financial future. Rising concern Japan's fiscal troubles are not just a domestic issue. As one of the world’s largest economies, Japan’s bond market plays a significant role in global financial markets. Its recent bond market volatility, characterised by sharp increases in long-term bond yields, has had ripple effects in global markets, particularly in the US Treasury market. Japan is the largest foreign holder of US government debt, and any significant shift in its bond market could reverberate across global financial systems. A sharp rise in Japanese bond yields could also divert capital back into Japan, as investors may seek higher returns on its bonds. This could affect other major economies by driving up borrowing costs worldwide. With Japan’s economic growth stagnant and its demographic challenges deepening, many economists believe that Japan must implement serious fiscal reforms to address its unsustainable debt trajectory. While Japan’s fiscal problems are not expected to lead to an immediate collapse, the country’s fiscal trajectory is unsustainable in the long term. Experts argue that Japan must begin serious fiscal consolidation to avoid a full-blown crisis. Ageing demographics, rising social security costs, and now higher interest rates mean the country faces a shrinking window of opportunity to enact meaningful fiscal reforms. For now, Japan’s fiscal woes remain a major concern for policymakers and investors alike. With rising bond yields, a growing debt burden, and an uncertain political landscape, Japan’s economic future hangs in the balance.

The vast debt load, accumulated over decades of low interest rates and heavy government spending, is now starting to show signs of fragility, as the Bank of Japan gradually phases out its ultra-low interest rate policy.

Japan's fiscal health suffering as debt reaches unsustainable levels

For the first time in more than three decades, Japan has lost its position as the world’s largest creditor nation. This resonates as a symbolic shift that reflects deeper vulnerabilities in the country’s economic foundations.&nbsp;&nbsp;According to data released by Japan’s Ministry of Finance, the nation’s net external assets reached ¥533.05 trillion ($3.7 trillion) at the end of 2024, an all-time high, yet not enough to maintain its top ranking.&nbsp;Germany has now overtaken Japan, recording net external assets of ¥569.7 trillion, buoyed by its sizeable current account surplus of €248.7 billion last year, according to Bloomberg. China retained third place with net assets of ¥516.3 trillion, according to Bloomberg. &nbsp;This development marks the end of a 34-year reign for Japan, whose overseas assets have long reflected its post-war export dominance and global investment clout. The fall, though, is not due to a sudden decline in foreign investments, in fact, Japan’s assets grew by about 13 per cent year-on-year.&nbsp;&nbsp;Rather, a combination of yen depreciation and the relatively faster accumulation of wealth abroad by competitors like Germany have tilted the balance.&nbsp;A weaker yen, while enhancing the value of overseas holdings in local currency terms, also inflated Japan’s liabilities. The Ministry of Finance noted that Japanese businesses continued to invest robustly abroad, particularly in the US and UK, with sectors such as finance, insurance, and retail attracting considerable capital. &nbsp;Yet this outward investment boom is doing little to shield the domestic economy from escalating global pressures.<h2>Japan’s fragile position in a new global order</h2>The loss of creditor status is just one sign of Japan’s broader economic fragility. Despite high overseas asset growth, the domestic economy is grappling with multiple challenges: declining consumer confidence, ageing demographics, and trade frictions that are dampening industrial momentum. &nbsp;According to the International Monetary Fund (IMF), Japan’s economy grew by just 1 per cent in 2024. The IMF projects Japan’s growth to slow further in 2025, with real GDP expected to expand only 0.9 per cent, a stark contrast to its regional peers. Inflation, meanwhile, has remained persistently above the Bank of Japan’s target, averaging around 3.1 per cent in 2024, driven largely by energy prices and a weaker yen, as reported by Reuters.&nbsp;This stagnation is compounded by global trade shifts. The return of Donald Trump to the US presidency has reignited protectionist policies, with renewed tariffs rattling key Japanese sectors. According to Reuters, Japanese automakers are already reeling from a 25 per cent US tariff on finished cars and car parts.&nbsp;&nbsp;Toyota, the country’s largest company, has projected a $1.3 billion hit to its profits for April and May alone. Nissan is reportedly considering closing two domestic plants and shifting more production to the US to bypass rising trade barriers.&nbsp;These developments have triggered warnings from Japanese economists and officials. The automotive industry, a cornerstone of Japan’s GDP and employment is caught in a tightening vice of tariff shocks and supply chain disruptions. Public dissatisfaction is also rising, with wage growth lagging behind inflation, squeezing household budgets.&nbsp;While Japan’s economy struggles, others are rising, most notably India. According to ANI, NITI Aayog CEO BVR Subrahmanyam confirmed that India has overtaken Japan to become the world’s fourth-largest economy, citing the latest International Monetary Fund data. &nbsp;The IMF’s April 2025 World Economic Outlook estimates India’s nominal GDP will reach $4.187 trillion, slightly surpassing Japan’s projected $4.186 trillion. This shift underscores Japan’s declining share in the global economy and highlights a regional power rebalancing in Asia.<h2>Tokyo’s ¥980 billion shield to counter Trump’s tariffs</h2>According to the New York Times, in a bid to cushion the domestic blow from rising tariffs and inflation, the Japanese government has unveiled a ¥980 billion ($6.3 billion) emergency spending package. The funds reportedly aim to subsidise energy costs for households and provide support to small and medium-sized enterprises (SMEs) struggling under new trade constraints. &nbsp;Cabinet Secretary Yoshimasa Hayashi announced the package earlier this week, saying it was designed to “fully support” the population during a volatile economic phase. As per Reuters, the measures are also politically timed — the Kishida administration faces an upper house election in July, and public frustration is growing over stagnant wages and higher consumer prices. &nbsp;Meanwhile, Japan’s efforts to negotiate tariff relief from the US have hit a wall. Tokyo’s top trade envoy, Ryosei Akazawa, met Trump administration officials in Washington last week, but talks reportedly stalled.&nbsp;&nbsp;Trump officials have signalled that Japan’s primary demand an exemption from auto tariffs is currently off the table. Hopes now rest on the upcoming G7 Summit in Canada, where informal discussions may resume.&nbsp;Japan’s decline in economic influence symbolised by the loss of its top creditor status and its fall behind India in GDP rankings reflects more than just statistical shifts. It signals an urgent need for economic renewal in a nation facing demographic decline, external trade pressure, and internal stagnation.&nbsp;The government’s recent fiscal package offers short-term relief, but structural reforms are needed to chart a more sustainable path forward. Analysts point to innovation, productivity gains, and trade diversification as key to Japan’s future competitiveness.&nbsp;As global economic power continues to shift and trade alliances reshape, Japan must adapt or risk fading further from the world’s economic centre stage.

Business & Economy: Germany has now overtaken Japan, with net external assets of ¥569.7 trillion, supported by its €248.7 billion current account surplus. China retained third place with net assets of ¥516.3 trillion.

For the first time in more than three decades, Japan has lost its position as the world’s largest creditor nation. This resonates as a symbolic shift that reflects deeper vulnerabilities in the country’s economic foundations. According to data released by Japan’s Ministry of Finance, the nation’s net external assets reached ¥533.05 trillion ($3.7 trillion) at the end of 2024, an all-time high, yet not enough to maintain its top ranking. Germany has now overtaken Japan, recording net external assets of ¥569.7 trillion, buoyed by its sizeable current account surplus of €248.7 billion last year, according to Bloomberg. China retained third place with net assets of ¥516.3 trillion, according to Bloomberg. This development marks the end of a 34-year reign for Japan, whose overseas assets have long reflected its post-war export dominance and global investment clout. The fall, though, is not due to a sudden decline in foreign investments, in fact, Japan’s assets grew by about 13 per cent year-on-year. Rather, a combination of yen depreciation and the relatively faster accumulation of wealth abroad by competitors like Germany have tilted the balance. A weaker yen, while enhancing the value of overseas holdings in local currency terms, also inflated Japan’s liabilities. The Ministry of Finance noted that Japanese businesses continued to invest robustly abroad, particularly in the US and UK, with sectors such as finance, insurance, and retail attracting considerable capital. Yet this outward investment boom is doing little to shield the domestic economy from escalating global pressures. Japan’s fragile position in a new global order The loss of creditor status is just one sign of Japan’s broader economic fragility. Despite high overseas asset growth, the domestic economy is grappling with multiple challenges: declining consumer confidence, ageing demographics, and trade frictions that are dampening industrial momentum. According to the International Monetary Fund (IMF), Japan’s economy grew by just 1 per cent in 2024. The IMF projects Japan’s growth to slow further in 2025, with real GDP expected to expand only 0.9 per cent, a stark contrast to its regional peers. Inflation, meanwhile, has remained persistently above the Bank of Japan’s target, averaging around 3.1 per cent in 2024, driven largely by energy prices and a weaker yen, as reported by Reuters. This stagnation is compounded by global trade shifts. The return of Donald Trump to the US presidency has reignited protectionist policies, with renewed tariffs rattling key Japanese sectors. According to Reuters, Japanese automakers are already reeling from a 25 per cent US tariff on finished cars and car parts. Toyota, the country’s largest company, has projected a $1.3 billion hit to its profits for April and May alone. Nissan is reportedly considering closing two domestic plants and shifting more production to the US to bypass rising trade barriers. These developments have triggered warnings from Japanese economists and officials. The automotive industry, a cornerstone of Japan’s GDP and employment is caught in a tightening vice of tariff shocks and supply chain disruptions. Public dissatisfaction is also rising, with wage growth lagging behind inflation, squeezing household budgets. While Japan’s economy struggles, others are rising, most notably India. According to ANI, NITI Aayog CEO BVR Subrahmanyam confirmed that India has overtaken Japan to become the world’s fourth-largest economy, citing the latest International Monetary Fund data. The IMF’s April 2025 World Economic Outlook estimates India’s nominal GDP will reach $4.187 trillion, slightly surpassing Japan’s projected $4.186 trillion. This shift underscores Japan’s declining share in the global economy and highlights a regional power rebalancing in Asia. Tokyo’s ¥980 billion shield to counter Trump’s tariffs According to the New York Times, in a bid to cushion the domestic blow from rising tariffs and inflation, the Japanese government has unveiled a ¥980 billion ($6.3 billion) emergency spending package. The funds reportedly aim to subsidise energy costs for households and provide support to small and medium-sized enterprises (SMEs) struggling under new trade constraints. Cabinet Secretary Yoshimasa Hayashi announced the package earlier this week, saying it was designed to “fully support” the population during a volatile economic phase. As per Reuters, the measures are also politically timed — the Kishida administration faces an upper house election in July, and public frustration is growing over stagnant wages and higher consumer prices. Meanwhile, Japan’s efforts to negotiate tariff relief from the US have hit a wall. Tokyo’s top trade envoy, Ryosei Akazawa, met Trump administration officials in Washington last week, but talks reportedly stalled. Trump officials have signalled that Japan’s primary demand an exemption from auto tariffs is currently off the table. Hopes now rest on the upcoming G7 Summit in Canada, where informal discussions may resume. Japan’s decline in economic influence symbolised by the loss of its top creditor status and its fall behind India in GDP rankings reflects more than just statistical shifts. It signals an urgent need for economic renewal in a nation facing demographic decline, external trade pressure, and internal stagnation. The government’s recent fiscal package offers short-term relief, but structural reforms are needed to chart a more sustainable path forward. Analysts point to innovation, productivity gains, and trade diversification as key to Japan’s future competitiveness. As global economic power continues to shift and trade alliances reshape, Japan must adapt or risk fading further from the world’s economic centre stage.

Amid global trade tension, Japan has lost its position as the world's largest creditor nation for the first time in over three decades, according to data from Japan's Ministry of Finance.&nbsp;

Japan loses top creditor rank as economic troubles deepen

Japan&rsquo;s economy contracted unexpectedly in the first quarter of 2025, signalling a fragile recovery. The contraction, which marks the first since 2024, has been attributed to a drop in exports, flat consumer spending, and the looming impact of trade tensions with the US, including tariffs imposed by President Donald Trump.
According to preliminary data from the Cabinet Office, Japan&rsquo;s real GDP contracted an annualised 0.7 per cent in the January-March period, far worse than the median forecast of a 0.3 per cent drop.
This decline follows a robust 2.4 per cent expansion in the previous quarter, highlighting the vulnerability of the export-heavy economy. With private consumption, which accounts for more than half of the economy, stagnating and net exports contributing negatively to growth, Japan&rsquo;s economic outlook appears increasingly uncertain.
<h2>US tariffs deepen challenges</h2>
The contraction in Japan&rsquo;s economy comes as the country faces mounting challenges from trade tensions with the US, particularly following Trump&rsquo;s sweeping tariff measures. In March, the US imposed a 25 per cent duty on steel and aluminium imports, followed by tariffs on automobiles and other Japanese goods in April. These measures are expected to weigh heavily on Japan&rsquo;s export-driven industries, notably the automotive sector, which is a cornerstone of its economic growth.
Japanese automakers, such as Toyota and Honda, have already signalled that the tariffs are affecting their profitability. Honda recently revised its profit forecast for the fiscal year, and Toyota followed suit. The tariffs could cost Japan&rsquo;s automotive sector an estimated &yen;2 trillion ($13.7 billion) in operating profits for the current financial year, prompting concerns about the broader impact on Japan&rsquo;s economy.
Despite these challenges, Japan has signalled that it is prepared to hold out for a better trade deal with the United States. Prime Minister Shigeru Ishiba has made it a priority to negotiate with the US over tariff exemptions. However, the outcome of these talks remains uncertain as the negotiators have yet to reach a breakthrough, and the pressure is mounting on Japan&rsquo;s leadership to secure a favourable deal.
As Japan&rsquo;s economy faces significant headwinds, much of the focus is now on the negotiations with the US over trade tariffs. Japan&rsquo;s economy minister, Ryosei Akazawa, and finance minister, Katsunobu Kato, have already held several rounds of talks with US officials, but significant hurdles remain.
Japan&rsquo;s starting position is the elimination of all new tariffs, including those on automotive and steel imports, which have been particularly damaging to its largest industries. The question now is whether Japan can win exemptions from these tariffs through continued negotiations or whether it will be forced to accept a deal that could further hamper its economic recovery.
While the US and China have recently negotiated a temporary truce, Japan has not yet made substantial progress in its talks with Washington, leaving the country&rsquo;s economic future hanging in the balance.
<h2>India&rsquo;s rising economic power</h2>
While Japan grapples with economic contraction, India is on a different trajectory. With a large and youthful population, a growing manufacturing base, and increasing digital transformation, India has almost closed the economic gap with Japan.
This shift will soon propel India into the position of the world&rsquo;s fourth-largest economy, as Japan&rsquo;s economic challenges deepen. Experts suggest that, with Japan&rsquo;s economy slowing and India continuing its growth trajectory, India may soon surpass Japan in terms of total GDP.
Although the United Nations has reduced India&rsquo;s 2025 growth forecast to 6.3 per cent, experts still predict that India&rsquo;s economic ascent will continue, potentially shifting the global rankings in the coming years.
<h2>The future of Japan&rsquo;s economy</h2>
Japan&rsquo;s economic vulnerability, coupled with its slowing domestic demand, has raised questions about its ability to withstand the impacts of external trade pressures, particularly in light of India&rsquo;s growing economic influence. While Japan&rsquo;s policymakers face pressure to stimulate growth through fiscal measures or interest rate cuts, they are constrained by political considerations and weak demand.
For Japan, the road ahead is fraught with uncertainty. The ongoing trade challenges, combined with stagnant domestic consumption and global trade disruptions, threaten to undermine the nation&rsquo;s ability to maintain its position as a global economic power. Meanwhile, India&rsquo;s continued rise suggests that Japan may soon face new competition for its spot in the top tier of the world&rsquo;s largest economies.
As Japan grapples with these challenges, the global economic landscape is set to undergo a transformation. The balance of power may soon shift, with countries like India emerging as stronger players in the global economy, while Japan&rsquo;s future hangs in the balance amid ongoing trade tensions and internal stagnation.

Business & Economy: Japan’s real GDP contracted an annualised 0.7 per cent in the January-March period highlighting the vulnerability of the export-heavy economy.

Japan’s economy contracted unexpectedly in the first quarter of 2025, signalling a fragile recovery. The contraction, which marks the first since 2024, has been attributed to a drop in exports, flat consumer spending, and the looming impact of trade tensions with the US, including tariffs imposed by President Donald Trump. According to preliminary data from the Cabinet Office, Japan’s real GDP contracted an annualised 0.7 per cent in the January-March period, far worse than the median forecast of a 0.3 per cent drop. This decline follows a robust 2.4 per cent expansion in the previous quarter, highlighting the vulnerability of the export-heavy economy. With private consumption, which accounts for more than half of the economy, stagnating and net exports contributing negatively to growth, Japan’s economic outlook appears increasingly uncertain. US tariffs deepen challenges The contraction in Japan’s economy comes as the country faces mounting challenges from trade tensions with the US, particularly following Trump’s sweeping tariff measures. In March, the US imposed a 25 per cent duty on steel and aluminium imports, followed by tariffs on automobiles and other Japanese goods in April. These measures are expected to weigh heavily on Japan’s export-driven industries, notably the automotive sector, which is a cornerstone of its economic growth. Japanese automakers, such as Toyota and Honda, have already signalled that the tariffs are affecting their profitability. Honda recently revised its profit forecast for the fiscal year, and Toyota followed suit. The tariffs could cost Japan’s automotive sector an estimated ¥2 trillion ($13.7 billion) in operating profits for the current financial year, prompting concerns about the broader impact on Japan’s economy. Despite these challenges, Japan has signalled that it is prepared to hold out for a better trade deal with the United States. Prime Minister Shigeru Ishiba has made it a priority to negotiate with the US over tariff exemptions. However, the outcome of these talks remains uncertain as the negotiators have yet to reach a breakthrough, and the pressure is mounting on Japan’s leadership to secure a favourable deal. As Japan’s economy faces significant headwinds, much of the focus is now on the negotiations with the US over trade tariffs. Japan’s economy minister, Ryosei Akazawa, and finance minister, Katsunobu Kato, have already held several rounds of talks with US officials, but significant hurdles remain. Japan’s starting position is the elimination of all new tariffs, including those on automotive and steel imports, which have been particularly damaging to its largest industries. The question now is whether Japan can win exemptions from these tariffs through continued negotiations or whether it will be forced to accept a deal that could further hamper its economic recovery. While the US and China have recently negotiated a temporary truce, Japan has not yet made substantial progress in its talks with Washington, leaving the country’s economic future hanging in the balance. India’s rising economic power While Japan grapples with economic contraction, India is on a different trajectory. With a large and youthful population, a growing manufacturing base, and increasing digital transformation, India has almost closed the economic gap with Japan. This shift will soon propel India into the position of the world’s fourth-largest economy, as Japan’s economic challenges deepen. Experts suggest that, with Japan’s economy slowing and India continuing its growth trajectory, India may soon surpass Japan in terms of total GDP. Although the United Nations has reduced India’s 2025 growth forecast to 6.3 per cent, experts still predict that India’s economic ascent will continue, potentially shifting the global rankings in the coming years. The future of Japan’s economy Japan’s economic vulnerability, coupled with its slowing domestic demand, has raised questions about its ability to withstand the impacts of external trade pressures, particularly in light of India’s growing economic influence. While Japan’s policymakers face pressure to stimulate growth through fiscal measures or interest rate cuts, they are constrained by political considerations and weak demand. For Japan, the road ahead is fraught with uncertainty. The ongoing trade challenges, combined with stagnant domestic consumption and global trade disruptions, threaten to undermine the nation’s ability to maintain its position as a global economic power. Meanwhile, India’s continued rise suggests that Japan may soon face new competition for its spot in the top tier of the world’s largest economies. As Japan grapples with these challenges, the global economic landscape is set to undergo a transformation. The balance of power may soon shift, with countries like India emerging as stronger players in the global economy, while Japan’s future hangs in the balance amid ongoing trade tensions and internal stagnation.

Japan’s economy contracts amid US tariff strains, India poised to overtake

Japan’s inflation is gaining momentum, with January’s consumer price index expected to rise to 4 percent, up from 3.6 percent in December. This positions Japan as the fastest-inflating economy among g-7 nations. A key driver of inflation is food prices, particularly fresh produce.

BOJ under pressure as Japan leads G-7 inflation

Japan is sitting on a gold mine. Not exactly gold, but some Earth minerals that can keep its economy running for the next 10 years have been found deep in the ocean. Worth $26,290,780,000, it's a field of dense manganese nodules and contains millions of metric tonnes of cobalt and nickel, Unilad reported.

The Nippon Foundation and the University of Tokyo carried out a survey during which they stumbled upon the manganese field on the seabed of Minami-Tori-shima island. The nodules sit 5,700 meters below sea level and can help Japan sustain for years to come.

According to Nikkei Asia, these minerals were formed over millions of years. Fish bones carried these metals to the region where they stuck to the seabed, resulting in the creation of these minerals. There is also copper under there, also a valuable item.

Cobalt and nickel are precious minerals that are used for various technological components. They are used to create electric vehicle (EV) batteries, besides jet engines, and gas turbines and also in chemical processing. The team found a staggering amount of cobalt and nickel, which translated to a lot of money.

As per market figures from Trading Economics, one metric tonne of cobalt is currently worth $24,300 while nickel is worth $15,497. The find includes 610,000 metric tonnes of cobalt and 740,000 metric tonnes of nickel.

Also Read:&nbsp;<a href="https://www.wionews.com/world/lie-in-a-coffin-reflect-on-life-funeral-home-offers-morbid-experience-in-japan-776694">Lie in a coffin, reflect on life: Funeral home offers morbid experience in Japan</a>

This means 610,000 metric tonnes of cobalt is worth $14,823,000,000 while nickel is worth $11,467,780,000. It adds up to a total of $26,290,780,000.

<h2>Minerals stuck around Megalodon teeth</h2>

The first time these minerals were spotted was in 2016. The horde has since grown, as spotted by the recent survey. Experts say that more of them have formed around the teeth of a prehistoric shark, the Megalodon.

Yasuhiro Kato, a professor at the University of Tokyo, has revealed plans for the minerals. While the aim is to take the minerals out of the sea, he says it needs to be done in a manner that "minimises the impact on the marine environment". So, "three million tonnes" of it will be extracted from the deposits every year.

A press release from the University of Tokyo reads, “Ultimately, we expect that our research outcomes will help boost Japan’s growth by establishing a domestic supply chain stretching from ‘resource-mining’ to ‘manufacturing’."

The process will start in 2025 and will involve the use of overseas mining vessels.&nbsp;

Japan is sitting on a gold mine. Not exactly gold, but some Earth minerals that can keep its economy running for the next 10 years have been found deep in the ocean.

Japan is sitting on a gold mine. Not exactly gold, but some Earth minerals that can keep its economy running for the next 10 years have been found deep in the ocean. Worth $26,290,780,000, it's a field of dense manganese nodules and contains millions of metric tonnes of cobalt and nickel, Unilad reported. The Nippon Foundation and the University of Tokyo carried out a survey during which they stumbled upon the manganese field on the seabed of Minami-Tori-shima island. The nodules sit 5,700 meters below sea level and can help Japan sustain for years to come. According to Nikkei Asia, these minerals were formed over millions of years. Fish bones carried these metals to the region where they stuck to the seabed, resulting in the creation of these minerals. There is also copper under there, also a valuable item. Cobalt and nickel are precious minerals that are used for various technological components. They are used to create electric vehicle (EV) batteries, besides jet engines, and gas turbines and also in chemical processing. The team found a staggering amount of cobalt and nickel, which translated to a lot of money. As per market figures from Trading Economics, one metric tonne of cobalt is currently worth $24,300 while nickel is worth $15,497. The find includes 610,000 metric tonnes of cobalt and 740,000 metric tonnes of nickel. Also Read: Lie in a coffin, reflect on life: Funeral home offers morbid experience in Japan This means 610,000 metric tonnes of cobalt is worth $14,823,000,000 while nickel is worth $11,467,780,000. It adds up to a total of $26,290,780,000. Minerals stuck around Megalodon teeth The first time these minerals were spotted was in 2016. The horde has since grown, as spotted by the recent survey. Experts say that more of them have formed around the teeth of a prehistoric shark, the Megalodon. Yasuhiro Kato, a professor at the University of Tokyo, has revealed plans for the minerals. While the aim is to take the minerals out of the sea, he says it needs to be done in a manner that "minimises the impact on the marine environment". So, "three million tonnes" of it will be extracted from the deposits every year. A press release from the University of Tokyo reads, “Ultimately, we expect that our research outcomes will help boost Japan’s growth by establishing a domestic supply chain stretching from ‘resource-mining’ to ‘manufacturing’." The process will start in 2025 and will involve the use of overseas mining vessels.

Minerals worth $26,290,780,000 found attached to Megalodon teeth near Japan

Japanese Prime Minister Shigeru Ishiba on November 11, unveiled a $65 billion plan to boost the country's chip and artificial intelligence (AI) industries through subsidies and other financial incentives, according to a detailed report by Reuters.

Objective of the plan

The plan, which will provide support worth 10 trillion yen ($65 billion) or more by fiscal 2030, comes as countries look to strengthen control over their chip supply chains after global shocks including trade tensions between the United States and China, the Reuters report explained further.

Japan's government intends to submit the plan, including bills to support the mass production of next-generation chips, to the next parliament session, according to a draft of the plan seen by Reuters earlier on November 11.

It specifically targets chip foundry venture Rapidus and other suppliers of chips for artificial intelligence, the draft showed. The government expects the economic impact to total around 160 trillion yen, according to the draft.

Rapidus is headed by industry veterans and is targeting mass production of cutting-edge chips on the northern island of Hokkaido from 2027 in partnership with IBM and Belgium-based research organisation Imec.

In a news conference on Monday, Ishiba confirmed that the government would not issue deficit-covering bonds to finance its plan to support Japan's semiconductor industry, although he did not provide details on alternative funding sources. Deficit-covering bonds are typically issued to offset shortfalls in state revenue, the Reuters report elaborated further.

Last year, the Japanese government announced an allocation of 2 trillion yen to bolster the semiconductor sector. The new plan, which is part of a broader economic package to be approved by the cabinet on November 22, aims to secure a total of 50 trillion yen in investments, both public and private, in the chip industry over the next decade.

Ishiba also highlighted that the government would meet with representatives from business and labour unions later this month to discuss next year’s wage negotiations. Ensuring sustained wage increases has become a key priority for the administration as Japan grapples with rising living costs, which are putting pressure on households and could dampen consumer spending and overall economic growth.

Market participants and global investors will closely follow these developments. This will help them make informed investment decisions with regard to the Japanese domestic chip industry.

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Japanese Prime Minister Shigeru Ishiba on November 11, unveiled a $65 billion plan to boost the country's chip and artificial intelligence (AI) industries through subsidies and other financial incentives, according to a detailed report by Reuters.

Japanese Prime Minister Shigeru Ishiba on November 11, unveiled a $65 billion plan to boost the country's chip and artificial intelligence (AI) industries through subsidies and other financial incentives, according to a detailed report by Reuters. Objective of the plan The plan, which will provide support worth 10 trillion yen ($65 billion) or more by fiscal 2030, comes as countries look to strengthen control over their chip supply chains after global shocks including trade tensions between the United States and China, the Reuters report explained further. Japan's government intends to submit the plan, including bills to support the mass production of next-generation chips, to the next parliament session, according to a draft of the plan seen by Reuters earlier on November 11. It specifically targets chip foundry venture Rapidus and other suppliers of chips for artificial intelligence, the draft showed. The government expects the economic impact to total around 160 trillion yen, according to the draft. Rapidus is headed by industry veterans and is targeting mass production of cutting-edge chips on the northern island of Hokkaido from 2027 in partnership with IBM and Belgium-based research organisation Imec. In a news conference on Monday, Ishiba confirmed that the government would not issue deficit-covering bonds to finance its plan to support Japan's semiconductor industry, although he did not provide details on alternative funding sources. Deficit-covering bonds are typically issued to offset shortfalls in state revenue, the Reuters report elaborated further. Last year, the Japanese government announced an allocation of 2 trillion yen to bolster the semiconductor sector. The new plan, which is part of a broader economic package to be approved by the cabinet on November 22, aims to secure a total of 50 trillion yen in investments, both public and private, in the chip industry over the next decade. Ishiba also highlighted that the government would meet with representatives from business and labour unions later this month to discuss next year’s wage negotiations. Ensuring sustained wage increases has become a key priority for the administration as Japan grapples with rising living costs, which are putting pressure on households and could dampen consumer spending and overall economic growth. Market participants and global investors will closely follow these developments. This will help them make informed investment decisions with regard to the Japanese domestic chip industry.

Japan unveils $65 billion plan to support domestic chip industry

Household spending in Japan rose less than expected in July, with consumers still showing wariness in opening wallets amid high prices, a factor that could further complicate the central bank's plans for more rate hikes over the coming months.

Consumer spending inched up 0.1 per cent in July from a year earlier, against the median market forecast for 1.2 per cent growth, government data showed on Friday. On a seasonally adjusted, month-on-month basis, spending fell 1.7 per cent versus an estimated 0.2 per cent drop.

"There is a very good chance that consumer spending will be negative again in the next month," said Takeshi Minami, chief economist at Norinchukin Research Institute, adding that households appear to be sceptical about whether wage gains will continue next year.

Data a day earlier showed Japan's inflation-adjusted wages grew for a second straight month in July, propelled by a bump in summertime bonuses. Base pay, or regular pay, rose at the quickest pace in nearly 32 years, reflecting the outcome of this spring's labour-management wage talks.

However, the government said the big test would be whether real wages continue rising in August and beyond without the seasonal factor of summer bonuses.

Consumers spent more on television and travelling but cut back on food and utility expenses due to higher prices in July, an internal affairs ministry official said, adding they also put their income into savings.

Private consumption, accounting for over half of the economic output, had become a weak link in the Japanese economy over the last year or so. But it marked the first gain in five quarters in the April-to-June period, stirring hopes that a consumer-led recovery might be in store.

Strong consumption, added to solid wages and durable inflation, are the chief reasons the Bank of Japan says are indispensable in deciding on further rises in interest rates.

With a view that the economy was making progress toward durably achieving its 2 per cent inflation target, the BOJ jettisoned negative interest rates in March and raised short-term rates to 0.25 per cent in July.

The BOJ needs to confirm through relevant data before raising borrowing costs again, Minami said, adding the July rate hike was carried out without looking at the recovery of consumption.

The Japanese government last month upgraded its economic assessment for the first time in more than a year on signs of improving personal spending.

Household spending in Japan rose less than expected in July, with consumers still showing wariness in opening wallets amid high prices, a factor that could further complicate the central bank's plans for more rate hikes over the coming months.

Household spending in Japan rose less than expected in July, with consumers still showing wariness in opening wallets amid high prices, a factor that could further complicate the central bank's plans for more rate hikes over the coming months. Consumer spending inched up 0.1 per cent in July from a year earlier, against the median market forecast for 1.2 per cent growth, government data showed on Friday. On a seasonally adjusted, month-on-month basis, spending fell 1.7 per cent versus an estimated 0.2 per cent drop. "There is a very good chance that consumer spending will be negative again in the next month," said Takeshi Minami, chief economist at Norinchukin Research Institute, adding that households appear to be sceptical about whether wage gains will continue next year. Data a day earlier showed Japan's inflation-adjusted wages grew for a second straight month in July, propelled by a bump in summertime bonuses. Base pay, or regular pay, rose at the quickest pace in nearly 32 years, reflecting the outcome of this spring's labour-management wage talks. However, the government said the big test would be whether real wages continue rising in August and beyond without the seasonal factor of summer bonuses. Consumers spent more on television and travelling but cut back on food and utility expenses due to higher prices in July, an internal affairs ministry official said, adding they also put their income into savings. Private consumption, accounting for over half of the economic output, had become a weak link in the Japanese economy over the last year or so. But it marked the first gain in five quarters in the April-to-June period, stirring hopes that a consumer-led recovery might be in store. Strong consumption, added to solid wages and durable inflation, are the chief reasons the Bank of Japan says are indispensable in deciding on further rises in interest rates. With a view that the economy was making progress toward durably achieving its 2 per cent inflation target, the BOJ jettisoned negative interest rates in March and raised short-term rates to 0.25 per cent in July. The BOJ needs to confirm through relevant data before raising borrowing costs again, Minami said, adding the July rate hike was carried out without looking at the recovery of consumption. The Japanese government last month upgraded its economic assessment for the first time in more than a year on signs of improving personal spending.

Japan's sluggish consumer spending growth adds challenges to BOJ's rate hike plan

Japan's inflation-adjusted wages rose for a second straight month in July, bolstered by a bump in summertime bonuses, government data showed on Thursday.

Real wages in the world's fourth-largest economy grew 0.4 per cent in July, rising at a slower pace than June's 1.1 per cent growth when it turned positive for the first time in 27 months, data from the labour ministry showed.

The timing of the BOJ rate hike largely depends on wages. BOJ Governor Kazuo Ueda has reiterated that inflation will not durably reach the central bank's 2 per cent target without broad-based increases in pay accompanying the rise in prices.

July's slowdown in real wage growth was because fewer firms paid bonuses in that month compared to June, according to a labour ministry official. Special payments rose 6.2 per cent in July, after a revised 7.8 per cent increase in the previous month.

Most companies pay summer bonuses in June and July, so the contribution of special pay to lifting real wages would disappear from August, the official said.

"From August and thereafter monthly wages (composed of regular and overtime payment) will be a deciding factor" in anchoring growth in the real wages, the official said.

Nominal wages, or the average total cash earnings per worker, grew 3.6 per cent to 403,490 yen ($2,785.19), compared with a 4.5 per cent increase in June when it marked the fastest pace of growth since January 1997.

Base pay, or regular pay, rose 2.7 per cent, the fastest growth in almost 32 years, boosted by results of this spring's labour-management wage talks. Overtime pay, which reflects the strength of corporate Japan, fell 0.1 per cent in July after a revised 0.9 per cent gain in June.

Japanese firms agreed on an average pay increase of 5.10 per cent per month this year- the highest pay growth in 33 years.

Meanwhile, the consumer price index officials use to calculate real wages, which includes fresh food prices but excludes owners' equivalent rent, rose 3.2 per cent, edging down from a 3.3 per cent gain the previous month.

"Prices are still at a high level, so if prices subside a little more, real wages may continue to be positive," the official said.

Japan's inflation-adjusted wages rose for a second straight month in July, bolstered by a bump in summertime bonuses, government data showed on Thursday. Real wages in the world's fourth-largest economy grew 0.

Japan's inflation-adjusted wages rose for a second straight month in July, bolstered by a bump in summertime bonuses, government data showed on Thursday. Real wages in the world's fourth-largest economy grew 0.4 per cent in July, rising at a slower pace than June's 1.1 per cent growth when it turned positive for the first time in 27 months, data from the labour ministry showed. The timing of the BOJ rate hike largely depends on wages. BOJ Governor Kazuo Ueda has reiterated that inflation will not durably reach the central bank's 2 per cent target without broad-based increases in pay accompanying the rise in prices. July's slowdown in real wage growth was because fewer firms paid bonuses in that month compared to June, according to a labour ministry official. Special payments rose 6.2 per cent in July, after a revised 7.8 per cent increase in the previous month. Most companies pay summer bonuses in June and July, so the contribution of special pay to lifting real wages would disappear from August, the official said. "From August and thereafter monthly wages (composed of regular and overtime payment) will be a deciding factor" in anchoring growth in the real wages, the official said. Nominal wages, or the average total cash earnings per worker, grew 3.6 per cent to 403,490 yen ($2,785.19), compared with a 4.5 per cent increase in June when it marked the fastest pace of growth since January 1997. Base pay, or regular pay, rose 2.7 per cent, the fastest growth in almost 32 years, boosted by results of this spring's labour-management wage talks. Overtime pay, which reflects the strength of corporate Japan, fell 0.1 per cent in July after a revised 0.9 per cent gain in June. Japanese firms agreed on an average pay increase of 5.10 per cent per month this year- the highest pay growth in 33 years. Meanwhile, the consumer price index officials use to calculate real wages, which includes fresh food prices but excludes owners' equivalent rent, rose 3.2 per cent, edging down from a 3.3 per cent gain the previous month. "Prices are still at a high level, so if prices subside a little more, real wages may continue to be positive," the official said.

Japan’s real wages rise for second month in July on strong bonuses

Bank of Japan Governor Kazuo Ueda has fully taken on the mantle of leading the normalisation of Japan's economy by ratcheting up efforts to move the central bank away from unconventional policy measures to more orthodox policy settings. On Wednesday, Ueda and the BOJ board hiked interest rates for the second time this year and announced significant cuts in bond purchases, ending more than a decade of aggressive debt-buying.

The new interest rate of 0.25 per cent, while remaining very low by the standards of the rest of the world, is still Japan's highest borrowing cost since December 2008. Further rate increases, according to the BOJ, will depend on future inflation forecasts. It is a strategic move underlining Ueda's commitment to dismantling the world's most extensive central bank stimulus program, even in the face of potential risks.

"Today's BOJ meeting proved to be the blockbuster event that we have been forecasting," said Krishna Bhimavarapu, APAC economist at State Street Global Advisors. Bhimavarapu called the rate hike, reduction of bond-buying, and clearer policy direction key components of the BOJ's latest measures.

After initial gyrations in markets, Ueda's press briefing following the announcement only served to further confirm market expectations of sustained interest rate hikes. The subsequent meeting by the Federal Reserve also hinted at a probable cut in US rates by September, which added further support to the yen's momentum.

The dollar fell against the yen on Thursday, breaching 149 for the first time in over four months, while the Nikkei 225 stock index was also lower in morning trade.

Bhimavarapu expects rates in Japan to reach 1 per cent next year amid improving consumer spending and economic growth. "Either way, the BOJ has taken the big bold step towards normalisation," Bhimavarapu added.

Bank of Japan Governor Kazuo Ueda has fully taken on the mantle of leading the normalisation of Japan's economy by ratcheting up efforts to move the central bank away from unconventional policy measures to more orthodox policy settings.

Bank of Japan Governor Kazuo Ueda has fully taken on the mantle of leading the normalisation of Japan's economy by ratcheting up efforts to move the central bank away from unconventional policy measures to more orthodox policy settings. On Wednesday, Ueda and the BOJ board hiked interest rates for the second time this year and announced significant cuts in bond purchases, ending more than a decade of aggressive debt-buying. The new interest rate of 0.25 per cent, while remaining very low by the standards of the rest of the world, is still Japan's highest borrowing cost since December 2008. Further rate increases, according to the BOJ, will depend on future inflation forecasts. It is a strategic move underlining Ueda's commitment to dismantling the world's most extensive central bank stimulus program, even in the face of potential risks. "Today's BOJ meeting proved to be the blockbuster event that we have been forecasting," said Krishna Bhimavarapu, APAC economist at State Street Global Advisors. Bhimavarapu called the rate hike, reduction of bond-buying, and clearer policy direction key components of the BOJ's latest measures. After initial gyrations in markets, Ueda's press briefing following the announcement only served to further confirm market expectations of sustained interest rate hikes. The subsequent meeting by the Federal Reserve also hinted at a probable cut in US rates by September, which added further support to the yen's momentum. The dollar fell against the yen on Thursday, breaching 149 for the first time in over four months, while the Nikkei 225 stock index was also lower in morning trade. Bhimavarapu expects rates in Japan to reach 1 per cent next year amid improving consumer spending and economic growth. "Either way, the BOJ has taken the big bold step towards normalisation," Bhimavarapu added.

BOJ's Ueda charts bold course towards economic normalisation

Japan's government cut its growth forecast for the current fiscal year, driven by a consumption slowdown because of the rising import costs related to a weak yen.

The updated forecast issued Friday expects the economy to grow 0.9 per cent in the fiscal year ending March 2025, down from 1.3 per cent projected in January.

Though it has cut the forecast, the government still projects the economy to grow 1.2 per cent in fiscal 2025 on the back of solid capital expenditure and an expected consumption uptick.

These are revised estimates much more upbeat than some private sector forecasts calling for growth of only 0.4 per cent.

Members of the government's top economic council expressed their worry about how the weak yen was weakening household purchasing power.

They said that rising prices, partly due to a weakened yen, were partly putting an overall chill in consumption.

"We can't overlook the impact a weak yen and rising prices are having on households' purchasing power," the council members said in the meeting discussing new growth projections.

It also includes Prime Minister Fumio Kishida adding warnings over the economic impact of higher prices, saying that the government is required to be extremely careful about the effects that the weak yen is going to have on the economy, the Kyodo news agency reported.

The revised forecasts by the Japanese government of annual economic growth, published in January and revised around July each year, are core factors in state budget planning.

The latest revision portrays deeper concerns about the fragility of the economy amid global uncertainties.

While the weak yen has been a boon to make exporters' products cheaper abroad, it has also driven up costs at home for fuel and food imports that hit consumers hard.

Moves believed to have been made by the government this month several times to stem the yen's fall continue in full swing.

Attention turns to whether the Bank of Japan will hike interest rates in its upcoming policy-setting gathering on July 31.

The BOJ is also likely to cut its growth forecast for the current fiscal year after a rare unscheduled downgrade of historical GDP figures earlier this month.

The central bank now forecasts growth of 0.8 per cent for the fiscal year.

(With inputs from Reuters)

Japan's government cut its growth forecast for the current fiscal year, driven by a consumption slowdown because of the rising import costs related to a weak yen.

Japan's government cut its growth forecast for the current fiscal year, driven by a consumption slowdown because of the rising import costs related to a weak yen. The updated forecast issued Friday expects the economy to grow 0.9 per cent in the fiscal year ending March 2025, down from 1.3 per cent projected in January. Though it has cut the forecast, the government still projects the economy to grow 1.2 per cent in fiscal 2025 on the back of solid capital expenditure and an expected consumption uptick. These are revised estimates much more upbeat than some private sector forecasts calling for growth of only 0.4 per cent. Members of the government's top economic council expressed their worry about how the weak yen was weakening household purchasing power. They said that rising prices, partly due to a weakened yen, were partly putting an overall chill in consumption. "We can't overlook the impact a weak yen and rising prices are having on households' purchasing power," the council members said in the meeting discussing new growth projections. It also includes Prime Minister Fumio Kishida adding warnings over the economic impact of higher prices, saying that the government is required to be extremely careful about the effects that the weak yen is going to have on the economy, the Kyodo news agency reported. The revised forecasts by the Japanese government of annual economic growth, published in January and revised around July each year, are core factors in state budget planning. The latest revision portrays deeper concerns about the fragility of the economy amid global uncertainties. While the weak yen has been a boon to make exporters' products cheaper abroad, it has also driven up costs at home for fuel and food imports that hit consumers hard. Moves believed to have been made by the government this month several times to stem the yen's fall continue in full swing. Attention turns to whether the Bank of Japan will hike interest rates in its upcoming policy-setting gathering on July 31. The BOJ is also likely to cut its growth forecast for the current fiscal year after a rare unscheduled downgrade of historical GDP figures earlier this month. The central bank now forecasts growth of 0.8 per cent for the fiscal year. (With inputs from Reuters)

Japan lowers growth forecast as weak Yen impacts consumption

Japan welcomed a million more foreign visitors in the first half of 2024 compared to pre-pandemic levels, logging a new record of 17.78 million, the national tourism organisation said Friday.

The weak yen is attracting large crowds to Japan, with tourists splashing out on everything from kimonos to knives and pricey meals.

The January-June figure beat the previous high from 2019 of 16.63 million, an influx that has prompted overcrowding concerns at hotspots such as Kyoto and Mount Fuji.

"It's important that we promote rural regions to visitors, while taking measures against overtourism," Prime Minister Fumio Kishida told a cabinet meeting on the nation's efforts to expand inbound tourism.

Also read:&nbsp;<a href="https://www.wionews.com/world/journalism-is-dead-us-based-magazine-faces-flak-for-disgusting-cover-featuring-trump-and-biden-742158">'Journalism is dead': US-based magazine faces flak for 'disgusting' cover featuring Trump and Biden</a>

Japan is expecting 35 million overseas visitors in 2024, with tourist consumption estimated at eight trillion yen ($50 billion).

Over the whole of 2023, 25 million visitors came to Japan, after strict pandemic-era border restrictions were lifted.

The country has set an ambitious goal of luring 60 million tourists a year by 2030 -- around double 2019's full-year record of 31.88 million.

But some residents are already fed up with unruly behaviour and etiquette breaches by some foreign visitors.

In a town near Mount Fuji in May, authorities mounted a large barrier at a popular viewing spot next to a convenience store in an attempt to deter photo-taking.

New crowd control measures have been put in place on the volcano's most popular hiking trail, which now has an entry fee of 2,000 yen ($13) plus an optional donation.

Locals in tradition-steeped Kyoto have complained of tourists harassing the city's famed geisha, with visitors now banned from some private alleys.

And the mayor of Himeji has said the western Japanese city, famous for its castle, could make tourists pay four times as much as locals to visit the World Heritage site.

<h2>- 'Pretty bad in Kyoto' -</h2>

"The yen definitely being so weak, we knew our money would go a long way," Ian Dickson, a 41-year-old American, told AFP in Tokyo's Asakusa district, a top tourist draw.

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"Love it so far," he added. "There's no trash on the ground, no litter. It's a beautiful country, beautiful culture."

Andrea Bugnicourt, 28, a French tour guide working in Tokyo, said demand has been "crazy" since the pandemic ended.

"I heard it's pretty bad in Kyoto," she said about the overtourism complaints.

"Japan has so many social rules, right? And people are not used to it. So I think the Japanese government should help on educating foreigners."

In the first six months of 2024, South Korean visitors to Japan topped the list of foreign tourists by country at 4.4 million.

China was second at around three million, five times as many as in the same period last year. Visitors from Taiwan were in third place and the United States in fourth.

Kishida's government on Friday presented plans to encourage luxury hotels to come to Japan's 35 national parks, Nippon TV and other local media reported.

The prime minister also instructed ministers to take emergency measures to address a jet fuel shortage, partly caused by surging demand from tourists, that has prevented airlines from increasing flights.

Disclaimer: This story has been published from a news agency feed with minimal edits to adhere to WION's style guide. The headline may have been changed to better reflect the content of the story or to make it more suitable for WION audience.

Japan welcomed a million more foreign visitors in the first half of 2024 compared to pre-pandemic levels, logging a new record of 17.78 million, the national tourism organisation said Friday.

Japan welcomed a million more foreign visitors in the first half of 2024 compared to pre-pandemic levels, logging a new record of 17.78 million, the national tourism organisation said Friday. The weak yen is attracting large crowds to Japan, with tourists splashing out on everything from kimonos to knives and pricey meals. The January-June figure beat the previous high from 2019 of 16.63 million, an influx that has prompted overcrowding concerns at hotspots such as Kyoto and Mount Fuji. "It's important that we promote rural regions to visitors, while taking measures against overtourism," Prime Minister Fumio Kishida told a cabinet meeting on the nation's efforts to expand inbound tourism. Also read: 'Journalism is dead': US-based magazine faces flak for 'disgusting' cover featuring Trump and Biden Japan is expecting 35 million overseas visitors in 2024, with tourist consumption estimated at eight trillion yen ($50 billion). Over the whole of 2023, 25 million visitors came to Japan, after strict pandemic-era border restrictions were lifted. The country has set an ambitious goal of luring 60 million tourists a year by 2030 -- around double 2019's full-year record of 31.88 million. But some residents are already fed up with unruly behaviour and etiquette breaches by some foreign visitors. In a town near Mount Fuji in May, authorities mounted a large barrier at a popular viewing spot next to a convenience store in an attempt to deter photo-taking. New crowd control measures have been put in place on the volcano's most popular hiking trail, which now has an entry fee of 2,000 yen ($13) plus an optional donation. Locals in tradition-steeped Kyoto have complained of tourists harassing the city's famed geisha, with visitors now banned from some private alleys. And the mayor of Himeji has said the western Japanese city, famous for its castle, could make tourists pay four times as much as locals to visit the World Heritage site. - 'Pretty bad in Kyoto' - "The yen definitely being so weak, we knew our money would go a long way," Ian Dickson, a 41-year-old American, told AFP in Tokyo's Asakusa district, a top tourist draw. Also read: Canada: Jennie Carignan becomes the first woman chief of the defense staff "Love it so far," he added. "There's no trash on the ground, no litter. It's a beautiful country, beautiful culture." Andrea Bugnicourt, 28, a French tour guide working in Tokyo, said demand has been "crazy" since the pandemic ended. "I heard it's pretty bad in Kyoto," she said about the overtourism complaints. "Japan has so many social rules, right? And people are not used to it. So I think the Japanese government should help on educating foreigners." In the first six months of 2024, South Korean visitors to Japan topped the list of foreign tourists by country at 4.4 million. China was second at around three million, five times as many as in the same period last year. Visitors from Taiwan were in third place and the United States in fourth. Kishida's government on Friday presented plans to encourage luxury hotels to come to Japan's 35 national parks, Nippon TV and other local media reported. The prime minister also instructed ministers to take emergency measures to address a jet fuel shortage, partly caused by surging demand from tourists, that has prevented airlines from increasing flights. Disclaimer: This story has been published from a news agency feed with minimal edits to adhere to WION's style guide. The headline may have been changed to better reflect the content of the story or to make it more suitable for WION audience.

Japan welcomes 1 million more tourists, setting new half-year record post-pandemic

Japanese manufacturers grew more confident about business conditions in July, while sentiment in the service sector dulled, a Reuters monthly Tankan poll showed on Wednesday. This transmits a mixed economic outlook with varied sectoral performance.

The survey, which captured responses from 506 large non-financial firms, came out just two weeks ahead of the policy review by the Central Bank of Japan on July 30-31. Much attention is now focused on the BOJ for hints on impending interest rate hikes as the central bank raised rates in March for the first time since 2007 and trimmed bond-buying last month.

The BOJ will keep a close watch on its own tankan survey, short-term outlook data, and indications from other leading economic indicators that could confirm the sustainability of inflation and strong household consumption—perhaps driven by wage hikes. This could mediate their case for further rate hikes.

The Reuters Tankan survey, which closely tracks the BOJ's tankan, demonstrated that the sentiment index for manufacturers jumped by five points from June to stand at plus 11, and also the first rise in four months. However, manufacturers said pessimism is yet to fully flee as they predict the index will fall over the next three months to plus 9.

"Domestic price hikes have weakened consumption and a slowing Chinese economy has caused China-bound materials from the Middle East to make inroads into the Japanese market at low prices," a manager at a chemicals manufacturer wrote in the Reuters poll, conducted July 2-12, on condition of anonymity.

"The double punches of weak domestic demand and cheap import materials from overseas are curbing our sales volume."

A food processing company manager wrote: "Input prices have risen and remain elevated due to the weak yen as we struggle to transfer costs to our customers."

The Reuters Tankan index for the service sector slipped to plus 27 from plus 31, its first fall in three months. Non-manufacturers expect the index to inch up to plus 28 by October.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive reading indicates a heftier number of optimists than pessimists.

Japanese manufacturers grew more confident about business conditions in July, while sentiment in the service sector dulled, a Reuters monthly Tankan poll showed on Wednesday.

Japanese manufacturers grew more confident about business conditions in July, while sentiment in the service sector dulled, a Reuters monthly Tankan poll showed on Wednesday. This transmits a mixed economic outlook with varied sectoral performance. The survey, which captured responses from 506 large non-financial firms, came out just two weeks ahead of the policy review by the Central Bank of Japan on July 30-31. Much attention is now focused on the BOJ for hints on impending interest rate hikes as the central bank raised rates in March for the first time since 2007 and trimmed bond-buying last month. The BOJ will keep a close watch on its own tankan survey, short-term outlook data, and indications from other leading economic indicators that could confirm the sustainability of inflation and strong household consumption—perhaps driven by wage hikes. This could mediate their case for further rate hikes. The Reuters Tankan survey, which closely tracks the BOJ's tankan, demonstrated that the sentiment index for manufacturers jumped by five points from June to stand at plus 11, and also the first rise in four months. However, manufacturers said pessimism is yet to fully flee as they predict the index will fall over the next three months to plus 9. "Domestic price hikes have weakened consumption and a slowing Chinese economy has caused China-bound materials from the Middle East to make inroads into the Japanese market at low prices," a manager at a chemicals manufacturer wrote in the Reuters poll, conducted July 2-12, on condition of anonymity. "The double punches of weak domestic demand and cheap import materials from overseas are curbing our sales volume." A food processing company manager wrote: "Input prices have risen and remain elevated due to the weak yen as we struggle to transfer costs to our customers." The Reuters Tankan index for the service sector slipped to plus 27 from plus 31, its first fall in three months. Non-manufacturers expect the index to inch up to plus 28 by October. The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive reading indicates a heftier number of optimists than pessimists.

Japanese manufacturers show increased confidence while service sector sentiment declines

Japanese worker's average base pay jumped 2.5 per cent in May. This marks the strongest growth in 31 years. This positive trend comes amid annual wage negotiations.

There is a labour shortage. However, inflation continues to outpace wage growth. Consequently, real wages have declined for the 26th consecutive month.

The Bank of Japan (BOJ) is closely monitoring wage growth. This is a key factor in determining when to raise interest rates. BOJ Governor Kazuo Ueda has stressed the need for sustained wage increases to meet the bank's 2 per cent inflation target.

Nominal wages are rising. Inflation is decaying&nbsp;their buying power. Real wages fell 1.4 per cent in May. This follows a 1.2 per cent decline in April. There are signs that the labour shortage is leading to more widespread wage hikes. Companies with 30 or more employees finally saw wage growth outpace inflation for the first time in over two years. However smaller firms are still lagging behind.

The trend is particularly positive for part-time workers. Their wages rose 4 per cent year-on-year in May. This compares to 2.7 per cent increase for full-time employees.

For instance, hotel in Sapporo increased its hourly wages for part-time workers by 15 per cent. This is significantly higher than the 4 per cent raise for full-time staff. The hotel manager attributed this decision. The need to attract part-time workers in a competitive labour market played a crucial role.

A part-time worker at the hotel mentioned the attractive pay. Also, flexible hours were reasons for returning to the workforce. This occurred after a five-year break.

Part-time workers make up a significant portion of Japan's workforce. They account for 30 per cent of the total. But their wages are considerably lower than salaried workers. On average, they earn only a third.

An economist expects the rising wages for part-time workers to eventually boost consumer spending. This will happen by increasing their purchasing power.

(With inputs from Reuters)

Japanese worker's average base pay jumped 2.5 per cent in May. This marks the strongest growth in 31 years. This positive trend comes amid annual wage negotiations.

Japanese worker's average base pay jumped 2.5 per cent in May. This marks the strongest growth in 31 years. This positive trend comes amid annual wage negotiations. There is a labour shortage. However, inflation continues to outpace wage growth. Consequently, real wages have declined for the 26th consecutive month. The Bank of Japan (BOJ) is closely monitoring wage growth. This is a key factor in determining when to raise interest rates. BOJ Governor Kazuo Ueda has stressed the need for sustained wage increases to meet the bank's 2 per cent inflation target. Nominal wages are rising. Inflation is decaying their buying power. Real wages fell 1.4 per cent in May. This follows a 1.2 per cent decline in April. There are signs that the labour shortage is leading to more widespread wage hikes. Companies with 30 or more employees finally saw wage growth outpace inflation for the first time in over two years. However smaller firms are still lagging behind. The trend is particularly positive for part-time workers. Their wages rose 4 per cent year-on-year in May. This compares to 2.7 per cent increase for full-time employees. For instance, hotel in Sapporo increased its hourly wages for part-time workers by 15 per cent. This is significantly higher than the 4 per cent raise for full-time staff. The hotel manager attributed this decision. The need to attract part-time workers in a competitive labour market played a crucial role. A part-time worker at the hotel mentioned the attractive pay. Also, flexible hours were reasons for returning to the workforce. This occurred after a five-year break. Part-time workers make up a significant portion of Japan's workforce. They account for 30 per cent of the total. But their wages are considerably lower than salaried workers. On average, they earn only a third. An economist expects the rising wages for part-time workers to eventually boost consumer spending. This will happen by increasing their purchasing power. (With inputs from Reuters)

Japanese wages see sharpest rise in 3 decades, but real wages remain negative

A private sector survey data shows that Japanese services activity in June contracted for the first time since August 2016, largely because of easing domestic demand. Notwithstanding the contraction, business confidence and hiring indicators rub off a positive note.

The service sector has turbocharged Japan's economy and so far has cushioned the blow from a poor performance in the manufacturing sector. The final au Jibun Bank Service Purchasing Managers' index (PMI) slid to 49.4 in June from 53.8 in May, bringing a 21-month streak of growth to an abrupt halt, the S&amp;P Global Market Intelligence survey showed. The PMI was weaker than the preliminary figure of 49.8 and the first reading below the 50.0 threshold separating expansion from contraction since August 2022.

Trevor Balchin, economics director at S&amp;P Global Market Intelligence, commented June's decline in new business simply reflects a pause in growth, rather than any great fall in demand.&nbsp;

"Looking beyond the headline figure, the picture is less concerning," Balchin said.

Consumer services, finance and insurance, and real estate and business services were all seeing a fall in demand, but transports and storage together with information and communication rose in June. Meanwhile, the weak yen-the currency has lost over 12 per cent so far this year-boosted foreign demand for Japanese services.

While still broadly positive, at a slower pace, the 12-month outlook for employment and business confidence grew. At the same time, rising wages and food and fuel costs, along with the weaker yen, firmed up the input price increases, driving through the fastest rate of inflation since last August.

Companies continued to pass on price hikes to consumers against the backdrop of higher wages and material costs, and the pace of growth of average prices charged remained close to record levels seen in April and May.

The composite PMI, which combines manufacturing and services activity figures, fell to 49.7 in June from 52.6 in May indicating the first reading below the 50.0 level in seven months.

The economy now approaches a critical juncture, dependent as it has been on services to balance out a weak manufacturing sector, following the recent Japanese service sector contraction. In addition, the au Jibun Bank Service PMI final reading dropped to 49.4 in June, which signals no growth, even though business confidence and hiring indicators showed resilience and thus held some potential for recovery. However, these might be constrained by rising input costs and inflation. As these continue to be passed on to consumers from companies, the economic landscape will balance inflationary pressures with sustainable growth.

A private sector survey data shows that Japanese services activity in June contracted for the first time since August 2016, largely because of easing domestic demand.

A private sector survey data shows that Japanese services activity in June contracted for the first time since August 2016, largely because of easing domestic demand. Notwithstanding the contraction, business confidence and hiring indicators rub off a positive note. The service sector has turbocharged Japan's economy and so far has cushioned the blow from a poor performance in the manufacturing sector. The final au Jibun Bank Service Purchasing Managers' index (PMI) slid to 49.4 in June from 53.8 in May, bringing a 21-month streak of growth to an abrupt halt, the S&P Global Market Intelligence survey showed. The PMI was weaker than the preliminary figure of 49.8 and the first reading below the 50.0 threshold separating expansion from contraction since August 2022. Trevor Balchin, economics director at S&P Global Market Intelligence, commented June's decline in new business simply reflects a pause in growth, rather than any great fall in demand. "Looking beyond the headline figure, the picture is less concerning," Balchin said. Consumer services, finance and insurance, and real estate and business services were all seeing a fall in demand, but transports and storage together with information and communication rose in June. Meanwhile, the weak yen-the currency has lost over 12 per cent so far this year-boosted foreign demand for Japanese services. While still broadly positive, at a slower pace, the 12-month outlook for employment and business confidence grew. At the same time, rising wages and food and fuel costs, along with the weaker yen, firmed up the input price increases, driving through the fastest rate of inflation since last August. Companies continued to pass on price hikes to consumers against the backdrop of higher wages and material costs, and the pace of growth of average prices charged remained close to record levels seen in April and May. The composite PMI, which combines manufacturing and services activity figures, fell to 49.7 in June from 52.6 in May indicating the first reading below the 50.0 level in seven months. The economy now approaches a critical juncture, dependent as it has been on services to balance out a weak manufacturing sector, following the recent Japanese service sector contraction. In addition, the au Jibun Bank Service PMI final reading dropped to 49.4 in June, which signals no growth, even though business confidence and hiring indicators showed resilience and thus held some potential for recovery. However, these might be constrained by rising input costs and inflation. As these continue to be passed on to consumers from companies, the economic landscape will balance inflationary pressures with sustainable growth.

Japan's service sector stumbles: a wake-up call for economic strategy

Japan's economy shrank more than expected in the March quarter of 2024. Unscheduled revision to gross domestic data (GDP) has worsened the outlook of an already fragile economy. This revision can affect quarterly projects due later this month and subsequently affect the timing of interest rate cuts.

The Bank of Japan is facing multiple issues. Weakening currency and falling economic output are hurting growth prospects. The country is already reeling with older demographics and falling demand. <a href="https://www.wionews.com/business-economy/japans-stock-rally-expected-to-slow-investors-eye-rivals-as-yen-weakens-and-economy-slows-736483">The stock rally</a> is also expected to slow in the latter half of 2024.

According to the latest correction, Japan's real GDP for the months of January to March is 2.9 per cent, instead of the contraction of 1.8 per cent reported before. Earlier GDP projections have also been revised downward, worsening the prospects of an economic recovery. This correction was in the construction order data.

Meanwhile, Japan's land prices rose at the fastest pace since 2010. A brief tourism revival after COVID boosted demand for shopping areas &amp; entertainment complexes. According to Reuters, Tokyo's Ginza shopping area is still the most expensive location in Japan for the 39th straight year.

A weakening yen has also boosted inbound tourism. The country recorded more than 3 million visitors for a third consecutive month in May.&nbsp;

Japan's economy shrank more than expected in the March quarter of 2024. Unscheduled revision to gross domestic data (GDP) has worsened the outlook of an already fragile economy.

Japan's economy shrank more than expected in the March quarter of 2024. Unscheduled revision to gross domestic data (GDP) has worsened the outlook of an already fragile economy. This revision can affect quarterly projects due later this month and subsequently affect the timing of interest rate cuts. The Bank of Japan is facing multiple issues. Weakening currency and falling economic output are hurting growth prospects. The country is already reeling with older demographics and falling demand. The stock rally is also expected to slow in the latter half of 2024. According to the latest correction, Japan's real GDP for the months of January to March is 2.9 per cent, instead of the contraction of 1.8 per cent reported before. Earlier GDP projections have also been revised downward, worsening the prospects of an economic recovery. This correction was in the construction order data. Meanwhile, Japan's land prices rose at the fastest pace since 2010. A brief tourism revival after COVID boosted demand for shopping areas & entertainment complexes. According to Reuters, Tokyo's Ginza shopping area is still the most expensive location in Japan for the 39th straight year. A weakening yen has also boosted inbound tourism. The country recorded more than 3 million visitors for a third consecutive month in May.

Japan downgrades GDP numbers for the March quarter amid data corrections

The pace of the rally of Japan's stock market is now expected to slow down in the second half of 2024, giving investors a greater likelihood of shifting investments to rival markets.

A Bloomberg survey of asset managers and strategists called for a benchmark Topix index rise of around 2.9 per cent to 2,890 by year-end, while the Nikkei 225 Stock Average will climb about 4.8 per cent to 41,489. That would be a serious deceleration from the gain of about 18 per cent these indices made in the first half of this year. The broader Topix even climbed to a 34-year high, above its March highs, with the financial sector leading the gains.

Concerns about further yen weakness weighed on sentiment. Consumer and business spending wilted, and around a third of Bank of Japan watchers surveyed by Bloomberg expect a July rate increase. Released Friday morning, Tokyo's June inflation data came in higher - enough to keep a possible interest rate hike on the table, in theory, for the upcoming Bank of Japan meeting.

“I don’t think we will see out-performance from Japanese stocks from here,” said Kyle Rodda, a senior market analyst at Capital.Com Inc. “Given the rally we saw at the start of the year, the underlying trends in the economy and policy lend themselves to more downside than upside risks.”

The yen slipped to 161 per dollar, bringing it close to levels not seen since 1986. Further predictions had it slumping as low as 170 per dollar. While a weaker yen benefits exporters, a weaker yen also contributes to inflation through higher import costs, hence suppressing real wages, which becomes a critical factor for the growth of Japanese equities.

Currency risks and a slowing economy are making some foreign investors look for opportunities outside Japan. The Topix trades at a price to earnings ratio of about 17 times, while 14 times for the Shanghai Stock Exchange Composite index. It is reported that for a fifth week, foreign investors sold Japanese cash equities in a row, which is the longest streak since March of the previous year.

“We think Japan may lag China, but still do quite well to broader Asia,” said Alexander Cousley, an investment strategist at Russell Investments Group LLC. “Valuations are there, with Chinese equities notably cheaper than Japanese and global equities.”

That said, many still remain positive on Japan with companies such as BlackRock Inc. staying overweight on Japan equities. In June, a survey by Bank of America showed Japan is still the most favoured market in the region. Using forward earnings, the MSCI Japan index is expected to rise 16 per cent in the next 12 months, while the MSCI World index is expected to rise by 8.5 per cent, based on Bloomberg data.

“Earnings for Japanese companies, which have already outperformed the underlying economy, are expected to improve even further and lead the developed world at about 11%–13% this year,” Alexander Wolf, head of Asia Investment Strategy at JP Morgan Chase Bank NA wrote in a note this month.

The pace of the rally of Japan's stock market is now expected to slow down in the second half of 2024, giving investors a greater likelihood of shifting investments to rival markets.

The pace of the rally of Japan's stock market is now expected to slow down in the second half of 2024, giving investors a greater likelihood of shifting investments to rival markets. A Bloomberg survey of asset managers and strategists called for a benchmark Topix index rise of around 2.9 per cent to 2,890 by year-end, while the Nikkei 225 Stock Average will climb about 4.8 per cent to 41,489. That would be a serious deceleration from the gain of about 18 per cent these indices made in the first half of this year. The broader Topix even climbed to a 34-year high, above its March highs, with the financial sector leading the gains. Concerns about further yen weakness weighed on sentiment. Consumer and business spending wilted, and around a third of Bank of Japan watchers surveyed by Bloomberg expect a July rate increase. Released Friday morning, Tokyo's June inflation data came in higher - enough to keep a possible interest rate hike on the table, in theory, for the upcoming Bank of Japan meeting. “I don’t think we will see out-performance from Japanese stocks from here,” said Kyle Rodda, a senior market analyst at Capital.Com Inc. “Given the rally we saw at the start of the year, the underlying trends in the economy and policy lend themselves to more downside than upside risks.” The yen slipped to 161 per dollar, bringing it close to levels not seen since 1986. Further predictions had it slumping as low as 170 per dollar. While a weaker yen benefits exporters, a weaker yen also contributes to inflation through higher import costs, hence suppressing real wages, which becomes a critical factor for the growth of Japanese equities. Currency risks and a slowing economy are making some foreign investors look for opportunities outside Japan. The Topix trades at a price to earnings ratio of about 17 times, while 14 times for the Shanghai Stock Exchange Composite index. It is reported that for a fifth week, foreign investors sold Japanese cash equities in a row, which is the longest streak since March of the previous year. “We think Japan may lag China, but still do quite well to broader Asia,” said Alexander Cousley, an investment strategist at Russell Investments Group LLC. “Valuations are there, with Chinese equities notably cheaper than Japanese and global equities.” That said, many still remain positive on Japan with companies such as BlackRock Inc. staying overweight on Japan equities. In June, a survey by Bank of America showed Japan is still the most favoured market in the region. Using forward earnings, the MSCI Japan index is expected to rise 16 per cent in the next 12 months, while the MSCI World index is expected to rise by 8.5 per cent, based on Bloomberg data. “Earnings for Japanese companies, which have already outperformed the underlying economy, are expected to improve even further and lead the developed world at about 11%–13% this year,” Alexander Wolf, head of Asia Investment Strategy at JP Morgan Chase Bank NA wrote in a note this month.

Japan’s stock rally expected to slow: investors eye rivals as yen weakens and economy slows

The price Japanese companies charge each other for services increased 2.5 per cent in May compared to last year, indicating that businesses are passing on rising labour costs to their clients. This is according to Reuters.

This rise, however, is slower than the 2.7 per cent gain observed in April. 
The Bank of Japan (BOJ) data also showed that an index measuring service prices with high labour content remained unchanged at 2.5 per cent year-on-year.

According to a report by Associate Press, even though this growth in business service prices, Japan's economy contracted at an annualised rate of 1.8 per cent in the first quarter of 2023. This is a slight improvement from the initial estimate of a 2.0 per cent decline. The revision can be attributed to an upward adjustment in private sector investments, which went from -0.5 per cent to -0.4 per cent, according to data provided by the Cabinet Office.

Japan's GDP, a measure of the nation's economic output, remained negative due to a decrease in exports and consumption compared to the previous quarter. The economy also witnessed a 0.5 per cent decline on a quarter-to-quarter basis in the January-March period.

Slow wage growth and rising import prices due to the weakening yen against the US dollar have been hurdles for the Japanese economy. The dollar has recently been trading at nearly 157 yen, compared to 140 yen a year ago.

While the weak yen has boosted tourism, it has also made imports more expensive, impacting a nation that relies heavily on energy imports. Stagnant consumer spending, which makes up half of Japan's economic activity, has further burdened the economy.

Another factor weighing on the economy is the ongoing scandal involving deceptive vehicle testing by major automakers, including Toyota, which has damaged Japan's reputation for quality. The scandal has led to production halts on some models.

Government officials have raided the headquarters of several automakers, including Honda and Mazda, investigating their testing practices. Toyota's chairman recently apologised for the widespread fraudulent testing, which involved the use of incorrect data and improper testing procedures. While the safety of the vehicles was not compromised, the companies aimed to expedite the testing process.

Investors are closely following the upcoming meeting of the Bank of Japan's monetary policy board. The central bank raised interest rates earlier this year for the first time since 2007, but only marginally, to a range of 0 per cent to 0.1 per cent. S&amp;P Global Market Intelligence highlighted concerns about the weak yen and rising input costs faced by Japanese manufacturers.

Japan's unemployment rate remains low at around 2.6 per cent, one of the lowest among major economies. However, the country faces a serious labour shortage due to its declining birth rate, which hit a record low last year, along with a decrease in marriages.

Analysts warn that these demographic trends could pose a long-term threat, potentially weakening Japan's global influence and even impacting its security in the future, given the country's already low per capita output.

The International Monetary Fund (IMF) predicts that Japan's GDP will fall to the fifth-largest globally by next year, surpassed by India.

(With inputs from Reuters and Associate Press)

The price Japanese companies charge each other for services increased 2.5 per cent in May compared to last year, indicating that businesses are passing on rising labour costs to their clients.

The price Japanese companies charge each other for services increased 2.5 per cent in May compared to last year, indicating that businesses are passing on rising labour costs to their clients. This is according to Reuters. This rise, however, is slower than the 2.7 per cent gain observed in April. The Bank of Japan (BOJ) data also showed that an index measuring service prices with high labour content remained unchanged at 2.5 per cent year-on-year. According to a report by Associate Press, even though this growth in business service prices, Japan's economy contracted at an annualised rate of 1.8 per cent in the first quarter of 2023. This is a slight improvement from the initial estimate of a 2.0 per cent decline. The revision can be attributed to an upward adjustment in private sector investments, which went from -0.5 per cent to -0.4 per cent, according to data provided by the Cabinet Office. Japan's GDP, a measure of the nation's economic output, remained negative due to a decrease in exports and consumption compared to the previous quarter. The economy also witnessed a 0.5 per cent decline on a quarter-to-quarter basis in the January-March period. Slow wage growth and rising import prices due to the weakening yen against the US dollar have been hurdles for the Japanese economy. The dollar has recently been trading at nearly 157 yen, compared to 140 yen a year ago. While the weak yen has boosted tourism, it has also made imports more expensive, impacting a nation that relies heavily on energy imports. Stagnant consumer spending, which makes up half of Japan's economic activity, has further burdened the economy. Another factor weighing on the economy is the ongoing scandal involving deceptive vehicle testing by major automakers, including Toyota, which has damaged Japan's reputation for quality. The scandal has led to production halts on some models. Government officials have raided the headquarters of several automakers, including Honda and Mazda, investigating their testing practices. Toyota's chairman recently apologised for the widespread fraudulent testing, which involved the use of incorrect data and improper testing procedures. While the safety of the vehicles was not compromised, the companies aimed to expedite the testing process. Investors are closely following the upcoming meeting of the Bank of Japan's monetary policy board. The central bank raised interest rates earlier this year for the first time since 2007, but only marginally, to a range of 0 per cent to 0.1 per cent. S&P Global Market Intelligence highlighted concerns about the weak yen and rising input costs faced by Japanese manufacturers. Japan's unemployment rate remains low at around 2.6 per cent, one of the lowest among major economies. However, the country faces a serious labour shortage due to its declining birth rate, which hit a record low last year, along with a decrease in marriages. Analysts warn that these demographic trends could pose a long-term threat, potentially weakening Japan's global influence and even impacting its security in the future, given the country's already low per capita output. The International Monetary Fund (IMF) predicts that Japan's GDP will fall to the fifth-largest globally by next year, surpassed by India. (With inputs from Reuters and Associate Press)

Japan's business service prices rise as companies pass on labour costs

A recent survey by the Bank of Japan shows that Japanese families now think prices will go up more in the next three months up to early March.

According to a Reuters report, the survey, conducted from February 8 to March 5, finds more people worry about future price rises.

Over 83 per cent of the families think prices will climb a year from now. This is up from 79.3 per cent in the last check three months ago.

The survey also finds a jump in how many see prices going up in five years, at 80.6 per cent, higher than 76.5 per cent before.

The Bank of Japan watches what families think about price rises to see if inflation will stay at its 2 per cent goal.

Governor Kazuo Ueda told the Asahi newspaper last week that price rises might pick up from "summer towards autumn" due to expected big pay raises pushing prices up.

The new survey highlights how Japanese families feel sure that prices will keep rising soon and later on.

This puts more pressure on the Bank of Japan's policymakers to keep their money plans in line with their price rise goals.

As Japan moves through economic uncertain, the central bank's moves will remain key in setting the country's price rise path.

(With inputs from Reuters)

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A recent survey by the Bank of Japan shows that Japanese families now think prices will go up more in the next three months up to early March. According to a Reuters report, the survey, conducted from February 8 to March 5, finds more people worry about future price rises.

A recent survey by the Bank of Japan shows that Japanese families now think prices will go up more in the next three months up to early March. According to a Reuters report, the survey, conducted from February 8 to March 5, finds more people worry about future price rises. Over 83 per cent of the families think prices will climb a year from now. This is up from 79.3 per cent in the last check three months ago. The survey also finds a jump in how many see prices going up in five years, at 80.6 per cent, higher than 76.5 per cent before. The Bank of Japan watches what families think about price rises to see if inflation will stay at its 2 per cent goal. Governor Kazuo Ueda told the Asahi newspaper last week that price rises might pick up from "summer towards autumn" due to expected big pay raises pushing prices up. The new survey highlights how Japanese families feel sure that prices will keep rising soon and later on. This puts more pressure on the Bank of Japan's policymakers to keep their money plans in line with their price rise goals. As Japan moves through economic uncertain, the central bank's moves will remain key in setting the country's price rise path. (With inputs from Reuters) 

Japanese household inflation expectations surge. Here is what it means for the economy

The downward trajectory of real wages in Japan has persisted in February, marking the 23rd consecutive month of decline, according to recent data released on Monday. <o:p></o:p>

According to Reuters, this prolonged decrease in real wages is indicative of the sustained pressure on consumers' purchasing power, attributed to rising prices. <o:p></o:p>

The data on wages serves as a key indicator for the Bank of Japan (BOJ) in assessing both pay trends and inflation outlooks, important factors guiding decisions on monetary policy adjustments. <o:p></o:p>

The latest figures indicate a 1.3 per cent year-on-year decrease in inflation-adjusted real wages in February, following a revised decline of 1.1 per cent in January. <o:p></o:p>

This decline reflects the constant attrition of consumer purchasing power amid escalating prices. <o:p></o:p>

Meanwhile, the consumer inflation rate, which incorporates fresh food prices while excluding rent, accelerated to 3.3 per cent in February from 2.5 per cent in January. <o:p></o:p>

Despite this inflationary pressure, nominal pay increased by 1.8 per cent in February compared to the previous year, marking a considerable growth since June last year.<o:p></o:p>

A ministry said that monitoring the interplay between nominal pay growth and the dampening effect of price increases on real wages would be crucial. <o:p></o:p>

Against this backdrop, Japanese firms have promised a wage hike of 5.24 per cent this year, marking a major increase in the last 33 years.<o:p></o:p>

Breaking down the wage components, regular or base salary recorded an increase of 2.2 per cent year-on-year in February, surpassing the revised figure from the previous month. <o:p></o:p>

However, special payments, including bonuses, saw a downturn, declining by 5.5 per cent compared to the same period last year, following a revised gain of 12.4 per cent in January. <o:p></o:p>

The data on real wages comes against the backdrop of a significant policy shift by the Bank of Japan, which recently announced the termination of eight years of negative interest rates and other unconventional policies.<o:p></o:p>

This historic move signals a departure from the central bank's longstanding focus on stimulating growth through heavy monetary stimulus. <o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

The downward trajectory of real wages in Japan has persisted in February, marking the 23rd consecutive month of decline, according to recent data released on Monday.

The downward trajectory of real wages in Japan has persisted in February, marking the 23rd consecutive month of decline, according to recent data released on Monday. According to Reuters, this prolonged decrease in real wages is indicative of the sustained pressure on consumers' purchasing power, attributed to rising prices. The data on wages serves as a key indicator for the Bank of Japan (BOJ) in assessing both pay trends and inflation outlooks, important factors guiding decisions on monetary policy adjustments. The latest figures indicate a 1.3 per cent year-on-year decrease in inflation-adjusted real wages in February, following a revised decline of 1.1 per cent in January. This decline reflects the constant attrition of consumer purchasing power amid escalating prices. Meanwhile, the consumer inflation rate, which incorporates fresh food prices while excluding rent, accelerated to 3.3 per cent in February from 2.5 per cent in January. Despite this inflationary pressure, nominal pay increased by 1.8 per cent in February compared to the previous year, marking a considerable growth since June last year. A ministry said that monitoring the interplay between nominal pay growth and the dampening effect of price increases on real wages would be crucial. Against this backdrop, Japanese firms have promised a wage hike of 5.24 per cent this year, marking a major increase in the last 33 years. Breaking down the wage components, regular or base salary recorded an increase of 2.2 per cent year-on-year in February, surpassing the revised figure from the previous month. However, special payments, including bonuses, saw a downturn, declining by 5.5 per cent compared to the same period last year, following a revised gain of 12.4 per cent in January. The data on real wages comes against the backdrop of a significant policy shift by the Bank of Japan, which recently announced the termination of eight years of negative interest rates and other unconventional policies. This historic move signals a departure from the central bank's longstanding focus on stimulating growth through heavy monetary stimulus. (With inputs from Reuters)

Japan's real wages decline for 23rd consecutive month in February

Japan's economy managed to dodge a technical recession, as per revised government data released on Monday.

The revised Gross Domestic Product (GDP) figures for the October-December period indicated an expansion, although weaker than anticipated, sparking concerns over the slow economic recovery.

According to the Cabinet Office, the revised GDP expanded at an annualised rate of 0.4 per cent, a notable improvement from the initial estimate of a 0.4 per cent contraction.

However, this upward revision fell short of economists' expectations, with a median forecast predicting a 1.1 per cent uptick in GDP, as revealed by a Reuters poll.

Regardless of the revision, concerns lingered over the dull performance of domestic demand, particularly in consumption, as noted by Saisuke Sakai, senior economist at Mizuho Research and Technologies.

Sakai remarked, "The headline is an upward revision, but domestic demand remains lackluster, particularly in consumption".

The positive revision in GDP figures was primarily driven by a 2.0 per cent increase in capital expenditure quarter-on-quarter, surpassing the preliminary estimate of a 0.1 per cent decrease.

Nonetheless, it still fell short of the median market forecast of a 2.5 per cent rise.

On the other hand, private consumption, a component constituting approximately 60 per cent of Japan's economy, experienced a decline of 0.3 per cent in the October-December period, slightly worse than the initial estimate.

Factors such as seafood and household appliances contributed to the downward pressure on consumption.

External demand contributed 0.2 percentage points to real GDP, remaining unchanged from the preliminary reading.

However, concerns regarding the current quarter loomed large, with predictions of a potential contraction due to various factors such as the slowdown in the Chinese economy, production halts at Toyota Motor Corp, and weak consumption, as per Sakai.

He observed, "In the current January-March quarter, the Japanese economy could suffer contraction after factoring in the slowdown in the Chinese economy, production halt at a unit of Toyota Motor Corp, and weak consumption".

Amid the economic indicators pointing to weaknesses, speculation intensified regarding the Bank of Japan's (BOJ) upcoming decisions.

There were growing expectations that the BOJ might abandon its negative interest rates as early as the following month.

This anticipation was fueled partly by recent hawkish comments from board members, suggesting that Japan was progressing towards the central bank's 2 per cent inflation target.

Marcel Thieliant, head of Asia-Pacific at Capital Economics, suggested, "The Bank of Japan will likely abandon the negative interest rates by next month citing a growing prospect of hefty pay hikes at annual wage talks with labor unions".

The looming decision of the BOJ gained further attention with Japan's largest trade union confederation, Rengo, demanding pay raises this year, exceeding 5 per cent for the first time in three decades.

The BOJ has stressed strong wage growth as crucial for unwinding its radical monetary policies spanning over a decade.

However, recent economic data painted a contrasting picture, with real wages shrinking for the 22nd consecutive month in January, and household spending witnessing the largest drop in 35 months.

As the BOJ prepares for its two-day policy-setting meeting scheduled for March 18-19, the economic indicators and demands from labor unions add complexity to the central bank's decision-making process.

(With inputs from Reuters)

Japan's economy managed to dodge a technical recession, as per revised government data released on Monday. The revised Gross Domestic Product (GDP) figures for the October-December period indicated an expansion, although weaker than anticipated, sparking concerns over the slow economic recovery.

Japan's economy managed to dodge a technical recession, as per revised government data released on Monday. The revised Gross Domestic Product (GDP) figures for the October-December period indicated an expansion, although weaker than anticipated, sparking concerns over the slow economic recovery. According to the Cabinet Office, the revised GDP expanded at an annualised rate of 0.4 per cent, a notable improvement from the initial estimate of a 0.4 per cent contraction. However, this upward revision fell short of economists' expectations, with a median forecast predicting a 1.1 per cent uptick in GDP, as revealed by a Reuters poll. Regardless of the revision, concerns lingered over the dull performance of domestic demand, particularly in consumption, as noted by Saisuke Sakai, senior economist at Mizuho Research and Technologies. Sakai remarked, "The headline is an upward revision, but domestic demand remains lackluster, particularly in consumption". The positive revision in GDP figures was primarily driven by a 2.0 per cent increase in capital expenditure quarter-on-quarter, surpassing the preliminary estimate of a 0.1 per cent decrease. Nonetheless, it still fell short of the median market forecast of a 2.5 per cent rise. On the other hand, private consumption, a component constituting approximately 60 per cent of Japan's economy, experienced a decline of 0.3 per cent in the October-December period, slightly worse than the initial estimate. Factors such as seafood and household appliances contributed to the downward pressure on consumption. External demand contributed 0.2 percentage points to real GDP, remaining unchanged from the preliminary reading. However, concerns regarding the current quarter loomed large, with predictions of a potential contraction due to various factors such as the slowdown in the Chinese economy, production halts at Toyota Motor Corp, and weak consumption, as per Sakai. He observed, "In the current January-March quarter, the Japanese economy could suffer contraction after factoring in the slowdown in the Chinese economy, production halt at a unit of Toyota Motor Corp, and weak consumption". Amid the economic indicators pointing to weaknesses, speculation intensified regarding the Bank of Japan's (BOJ) upcoming decisions. There were growing expectations that the BOJ might abandon its negative interest rates as early as the following month. This anticipation was fueled partly by recent hawkish comments from board members, suggesting that Japan was progressing towards the central bank's 2 per cent inflation target. Marcel Thieliant, head of Asia-Pacific at Capital Economics, suggested, "The Bank of Japan will likely abandon the negative interest rates by next month citing a growing prospect of hefty pay hikes at annual wage talks with labor unions". The looming decision of the BOJ gained further attention with Japan's largest trade union confederation, Rengo, demanding pay raises this year, exceeding 5 per cent for the first time in three decades. The BOJ has stressed strong wage growth as crucial for unwinding its radical monetary policies spanning over a decade. However, recent economic data painted a contrasting picture, with real wages shrinking for the 22nd consecutive month in January, and household spending witnessing the largest drop in 35 months. As the BOJ prepares for its two-day policy-setting meeting scheduled for March 18-19, the economic indicators and demands from labor unions add complexity to the central bank's decision-making process. (With inputs from Reuters)

Japan's economy evades recession, but concerns persist over weak recovery

The Japanese government is contemplating on officially declaring an end to the prolonged battle against deflation; Kyodo News reported citing sources familiar with the matter.<o:p></o:p>

According to the report, this consideration comes after nearly two decades of the country grappling with moderate price declines. <o:p></o:p>

While Japan has consistently denied being in a state of deflation, dispelling entrenched public perceptions of stagnant prices and wages has proven challenging.<o:p></o:p>

"The recent bout of inflation, driven mostly by higher import costs, and the prospect of sustainable wage growth is seen as clearing the way for Japan to end its war on deflation," the sources in correspondence with Kyodo News stated. <o:p></o:p>

The government is closely monitoring labour-management wage negotiations and the trajectory of inflation to ascertain whether conditions have matured for a definitive departure from deflationary pressures.<o:p></o:p>

For Japan, entrenched deflationary pressures have perpetuated a detrimental cycle, wherein falling prices have constrained corporate profits and impeded wage growth, subsequently hampering private consumption—a pivotal component of the economy. <o:p></o:p>

Thus, an official declaration will mark the removal of a major growth obstacle for Japan's economy.<o:p></o:p>

Potential avenues for a formal announcement include Prime Minister Fumio Kishida or Cabinet members making a public declaration, or the government issuing a statement in its monthly economic report. <o:p></o:p>

However, government officials indicate that any decision will hinge on economic performance and ultimately lie within the purview of the Prime Minister.<o:p></o:p>

"June will be important," noted one government official, citing upcoming policy measures aimed at bolstering domestic demand, including income and residence tax cuts for Japanese households. <o:p></o:p>

However, there exists caution within the government regarding the timing of declaring an end to deflation, given lingering uncertainties in the price outlook and broader economic landscape.<o:p></o:p>

Despite signs of progress, scepticism persists within certain quarters of the government regarding the necessity and timing of officially ending the deflation narrative. <o:p></o:p>

Some officials assert that maintaining the current stance, which denies Japan being in a state of deflation, remains a priority. <o:p></o:p>

They highlight potential reputational risks should economic conditions deteriorate post-declaration.<o:p></o:p>

The Bank of Japan's aggressive monetary easing measures, in tandem with a joint agreement with the government in 2013 aimed at achieving 2 percent inflation, have been significant efforts to combat deflation. <o:p></o:p>

However, BOJ Chief Kazuo Ueda recently acknowledged Japan's state of inflation, fuelling speculation about potential shifts in monetary policy.<o:p></o:p>

Critical economic indicators, including Japan's closing output gap, indicate a pickup in demand—a positive sign for achieving stable inflation. <o:p></o:p>

Yet, amidst cautious optimism, government officials stress the need for prudence and vigilance, particularly given the unforeseen recessionary episode at the end of 2023.

<o:p>(With inputs from agencies)</o:p>

The Japanese government is contemplating on officially declaring an end to the prolonged battle against deflation; Kyodo News reported citing sources familiar with the matter.

The Japanese government is contemplating on officially declaring an end to the prolonged battle against deflation; Kyodo News reported citing sources familiar with the matter. According to the report, this consideration comes after nearly two decades of the country grappling with moderate price declines. While Japan has consistently denied being in a state of deflation, dispelling entrenched public perceptions of stagnant prices and wages has proven challenging. "The recent bout of inflation, driven mostly by higher import costs, and the prospect of sustainable wage growth is seen as clearing the way for Japan to end its war on deflation," the sources in correspondence with Kyodo News stated. The government is closely monitoring labour-management wage negotiations and the trajectory of inflation to ascertain whether conditions have matured for a definitive departure from deflationary pressures. For Japan, entrenched deflationary pressures have perpetuated a detrimental cycle, wherein falling prices have constrained corporate profits and impeded wage growth, subsequently hampering private consumption—a pivotal component of the economy. Thus, an official declaration will mark the removal of a major growth obstacle for Japan's economy. Potential avenues for a formal announcement include Prime Minister Fumio Kishida or Cabinet members making a public declaration, or the government issuing a statement in its monthly economic report. However, government officials indicate that any decision will hinge on economic performance and ultimately lie within the purview of the Prime Minister. "June will be important," noted one government official, citing upcoming policy measures aimed at bolstering domestic demand, including income and residence tax cuts for Japanese households. However, there exists caution within the government regarding the timing of declaring an end to deflation, given lingering uncertainties in the price outlook and broader economic landscape. Despite signs of progress, scepticism persists within certain quarters of the government regarding the necessity and timing of officially ending the deflation narrative. Some officials assert that maintaining the current stance, which denies Japan being in a state of deflation, remains a priority. They highlight potential reputational risks should economic conditions deteriorate post-declaration. The Bank of Japan's aggressive monetary easing measures, in tandem with a joint agreement with the government in 2013 aimed at achieving 2 percent inflation, have been significant efforts to combat deflation. However, BOJ Chief Kazuo Ueda recently acknowledged Japan's state of inflation, fuelling speculation about potential shifts in monetary policy. Critical economic indicators, including Japan's closing output gap, indicate a pickup in demand—a positive sign for achieving stable inflation. Yet, amidst cautious optimism, government officials stress the need for prudence and vigilance, particularly given the unforeseen recessionary episode at the end of 2023. (With inputs from agencies)

Japan government contemplates declaring an end to the deflation battle, sources say

Japan's Nikkei 225 Stock Average surged beyond the psychologically significant threshold of 40,000 points for the first time on Monday.<o:p></o:p>

According to a Bloomberg report, this signals potential for further upward momentum in its recent ascent.<o:p></o:p>

The blue-chip index soared by up to 1 per cent to reach 40,301.30, marking a fresh intraday record. <o:p></o:p>

Led by gains in the technology sector, with Advantest Corp notably the top performer, the Nikkei’s rally indicates investor confidence and favourable market conditions.<o:p></o:p>

"The Nikkei 225's 40,000 is certainly a key psychological level, which could offer some resistance for the index and bring volatility," Bloomberg quoted Charu Chanana, a strategist at Saxo Capital Markets, as saying. <o:p></o:p>

Chanana noted that although there are potential short-term fluctuations, prevailing structural factors and yen weakness are likely to sustain the bullish sentiment, mitigating concerns of overvaluation in Japanese stocks.<o:p></o:p>

The recent surge in the Nikkei mirrors an ongoing trend of investor optimism buoyed by improving shareholder returns, currency dynamics, and robust corporate earnings. <o:p></o:p>

Last month, the Nikkei reclaimed its peak from 1989, with international investors flocking to Japan's leading companies. <o:p></o:p>

Warren Buffett's endorsement of Japanese trading houses further instilled confidence in the market, while apprehensions over a slowdown in China prompted capital reallocation towards Japanese equities.<o:p></o:p>

Foreign investors continue to exhibit confidence in the prospects of Japanese stocks. <o:p></o:p>

Major asset managers such as BlackRock Inc and Amundi Asset Management foresee sustained earnings growth and favourable shifts in corporate governance as catalysts for continued market strength. <o:p></o:p>

However, despite bullish sentiment, concerns linger regarding potential overheating in the stock market.<o:p></o:p>

"While 40,000 yen for the Nikkei 225 is a passing point, the pace is too fast and the level is reached a little too early for the economy and companies' actual performance to keep up with," cautioned Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank. <o:p></o:p>

According to Bloomberg, Sera said that a cautious approach was imperative, further noting that economic fundamental must align with market valuations to ensure sustained growth.<o:p></o:p>

Encouragingly, efforts to enhance equity valuations are underway, with the Tokyo Stock Exchange advocating for greater transparency through the publication of companies' plans to boost shareholder value. <o:p></o:p>

Initiatives such as share buybacks, dividend hikes, and management buyouts are gaining traction, underscoring a proactive approach to fortify market resilience. <o:p></o:p>

Additionally, the prevalence of net cash positions among Nikkei companies, indicative of robust financial health, further bolsters investor confidence.<o:p></o:p>

"This is not a groundless frenzy," Bloomberg quoted Masahiro Yamaguchi, a senior market analyst at SMBC Trust &amp; Banking Ltd, citing the strong economic and corporate landscape in both Japan and the United States. <o:p></o:p>

(With inputs from Bloomberg)<o:p></o:p>

Japan's Nikkei 225 Stock Average surged beyond the psychologically significant threshold of 40,000 points for the first time on Monday. According to a Bloomberg report, this signals potential for further upward momentum in its recent ascent.

Japan's Nikkei 225 Stock Average surged beyond the psychologically significant threshold of 40,000 points for the first time on Monday. According to a Bloomberg report, this signals potential for further upward momentum in its recent ascent. The blue-chip index soared by up to 1 per cent to reach 40,301.30, marking a fresh intraday record. Led by gains in the technology sector, with Advantest Corp notably the top performer, the Nikkei’s rally indicates investor confidence and favourable market conditions. "The Nikkei 225's 40,000 is certainly a key psychological level, which could offer some resistance for the index and bring volatility," Bloomberg quoted Charu Chanana, a strategist at Saxo Capital Markets, as saying. Chanana noted that although there are potential short-term fluctuations, prevailing structural factors and yen weakness are likely to sustain the bullish sentiment, mitigating concerns of overvaluation in Japanese stocks. The recent surge in the Nikkei mirrors an ongoing trend of investor optimism buoyed by improving shareholder returns, currency dynamics, and robust corporate earnings. Last month, the Nikkei reclaimed its peak from 1989, with international investors flocking to Japan's leading companies. Warren Buffett's endorsement of Japanese trading houses further instilled confidence in the market, while apprehensions over a slowdown in China prompted capital reallocation towards Japanese equities. Foreign investors continue to exhibit confidence in the prospects of Japanese stocks. Major asset managers such as BlackRock Inc and Amundi Asset Management foresee sustained earnings growth and favourable shifts in corporate governance as catalysts for continued market strength. However, despite bullish sentiment, concerns linger regarding potential overheating in the stock market. "While 40,000 yen for the Nikkei 225 is a passing point, the pace is too fast and the level is reached a little too early for the economy and companies' actual performance to keep up with," cautioned Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank. According to Bloomberg, Sera said that a cautious approach was imperative, further noting that economic fundamental must align with market valuations to ensure sustained growth. Encouragingly, efforts to enhance equity valuations are underway, with the Tokyo Stock Exchange advocating for greater transparency through the publication of companies' plans to boost shareholder value. Initiatives such as share buybacks, dividend hikes, and management buyouts are gaining traction, underscoring a proactive approach to fortify market resilience. Additionally, the prevalence of net cash positions among Nikkei companies, indicative of robust financial health, further bolsters investor confidence. "This is not a groundless frenzy," Bloomberg quoted Masahiro Yamaguchi, a senior market analyst at SMBC Trust & Banking Ltd, citing the strong economic and corporate landscape in both Japan and the United States. (With inputs from Bloomberg)

Nikkei 225 surpasses 40,000 mark amid historic rally in Japanese stock market

The latest government data from Reuters reveals that Japan's jobless rate experienced a notable decline, reaching 2.4 per cent in January, down from a revised 2.5 per cent in the previous month.<o:p></o:p>

This positive shift, the first in three months, aligns with economists' expectations, as the seasonally adjusted unemployment rate met the median forecast in a Reuters poll.<o:p></o:p>

The jobs-to-applicants ratio, a key indicator of labour market health, remained steady at 1.27, matching the median forecast. <o:p></o:p>

This ratio signifies that there were 127 jobs available for every 100 job seekers, reflecting the persistent tightness in the labour market. <o:p></o:p>

The stability of this ratio suggests a balance between job demand and supply in the country.<o:p></o:p>

According to a report by the Mainichi, the Ministry of Internal Affairs and Communications reported a decrease of 30,000 employed individuals in January, bringing the total to a seasonally adjusted 67.61 million. <o:p></o:p>

Concurrently, the number of unemployed individuals dropped by 1.2 per cent to 1.70 million. <o:p></o:p>

Notably, 750,000 people voluntarily left their jobs, representing a 1.3 per cent decrease, while 360,000 individuals were dismissed, marking a 7.7 per cent decline from the previous month.<o:p></o:p>

The report cited Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute, who attributed the improvement in the jobless rate to a reduction in involuntary job losses, particularly related to company bankruptcies or restructuring. <o:p></o:p>

Despite the positive trend, the labour market remains tight, with steady growth observed in the face-to-face service sectors, such as entertainment. <o:p></o:p>

The information and communication sector is also experiencing increased employment, driven by a recovery in the semiconductor industry.<o:p></o:p>

The breakdown of gender-specific unemployment data showed a rise of 60,000 unemployed women in January, reaching a total of 730,000. <o:p></o:p>

This increase is attributed to more women leaving their jobs in pursuit of better working conditions amid the ongoing economic recovery. <o:p></o:p>

In contrast, the number of unemployed men declined by 90,000, totalling 960,000. <o:p></o:p>

The job-to-applicant ratio remains unchanged, indicating labour shortages in various industries, including medical and welfare, while others, like construction and manufacturing, struggle to offer job openings.<o:p></o:p>

Analysis of specific sectors reveals a diverse landscape in job offers. <o:p></o:p>

Lifestyle and entertainment services witnessed a 5.7 per cent increase, and information and communications experienced a 4.5 per cent climb. <o:p></o:p>

However, the manufacturing sector saw an 11.6 per cent decline in job offers, and the accommodation and food services industry recorded an 8.8 per cent decrease. <o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

The latest government data from Reuters reveals that Japan's jobless rate experienced a notable decline, reaching 2.4 per cent in January, down from a revised 2.

The latest government data from Reuters reveals that Japan's jobless rate experienced a notable decline, reaching 2.4 per cent in January, down from a revised 2.5 per cent in the previous month. This positive shift, the first in three months, aligns with economists' expectations, as the seasonally adjusted unemployment rate met the median forecast in a Reuters poll. The jobs-to-applicants ratio, a key indicator of labour market health, remained steady at 1.27, matching the median forecast. This ratio signifies that there were 127 jobs available for every 100 job seekers, reflecting the persistent tightness in the labour market. The stability of this ratio suggests a balance between job demand and supply in the country. According to a report by the Mainichi, the Ministry of Internal Affairs and Communications reported a decrease of 30,000 employed individuals in January, bringing the total to a seasonally adjusted 67.61 million. Concurrently, the number of unemployed individuals dropped by 1.2 per cent to 1.70 million. Notably, 750,000 people voluntarily left their jobs, representing a 1.3 per cent decrease, while 360,000 individuals were dismissed, marking a 7.7 per cent decline from the previous month. The report cited Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute, who attributed the improvement in the jobless rate to a reduction in involuntary job losses, particularly related to company bankruptcies or restructuring. Despite the positive trend, the labour market remains tight, with steady growth observed in the face-to-face service sectors, such as entertainment. The information and communication sector is also experiencing increased employment, driven by a recovery in the semiconductor industry. The breakdown of gender-specific unemployment data showed a rise of 60,000 unemployed women in January, reaching a total of 730,000. This increase is attributed to more women leaving their jobs in pursuit of better working conditions amid the ongoing economic recovery. In contrast, the number of unemployed men declined by 90,000, totalling 960,000. The job-to-applicant ratio remains unchanged, indicating labour shortages in various industries, including medical and welfare, while others, like construction and manufacturing, struggle to offer job openings. Analysis of specific sectors reveals a diverse landscape in job offers. Lifestyle and entertainment services witnessed a 5.7 per cent increase, and information and communications experienced a 4.5 per cent climb. However, the manufacturing sector saw an 11.6 per cent decline in job offers, and the accommodation and food services industry recorded an 8.8 per cent decrease. (With inputs from Reuters)

Japan's jobless rate hits 2.4 per cent in January amid labour shortage: Report

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