Until December, economists believed that Japan’s economy had only grown an annualized 0.2% during the period of July-September, 2019. However, good news for investors: now, they are revising their estimates. They now believe that it grew by an annualized 1.8%.
Reuters in Tokyo reported the remarks of the Japanese Finance Minister Taro Aso, which he made on Tuesday. According to Aso, the economic situation in Japan continues to improve and get back on track, though the improvement is of a medium speed. This is in spite of the fact that around the world, growth rates are slowing down.
Aso held a cabinet meeting in which reporters were present. He told the reporters: “It’s true that manufacturers are mainly being affected by global slowdown, but fundamentals that support domestic demand remain solid.”
When discussing the state of the Japanese economy in 2019, it is important to look back and compare/contrast the Japanese economy in 2019 with that in 2014. The reason for this is that both years were sales tax increase years. In 2014, the sales tax rose from 5% to 8%, and this impacted the economy negatively. In 2019, there was another sales tax increase, this time from 8% to 10%. However, there were numerous countermeasures this time to prevent a recession. These included an incentive system for cashless payment that meant that those paying with cashless methods (e.g. Suica Card) get an immediate price reduction at the cash register. This can be seen on one’s receipt as 「キャッシュレス還元対象額」 (kyasshuresu kangen taishō gaku, Cashless Reduction Target Amount). The sales tax rate for groceries and convenience store food to be eaten off premises remains at 8%. These factors are part of the reason why consumers have not felt as squeezed as they did in 2014.
It is possible that in the future, given demographic trends, the government will increase sales tax further. Sales tax applies not only to food, drink, consumer goods, etc., but also to new buildings (not pre-existing buildings, though). It is probably wise for real estate investors who plan to buy a new building to invest before the sales tax goes up again.