Assess Japan's current overall economic situation

This document assesses Japan's current overall economic situation. It discusses the economic growth of Japan in 2017 and 2018, the decline in major components of GDP, the slowdown in investments, the growth of exports, the rate of inflation, the monetary policies of the Bank of Japan, and the impact of free trade relationships with other nations. It also mentions the decrease in purchasing power and the impact of increased consumption tax on sales and consumer spending.

Running head: International Business
INTERNATIONAL BUSINESS
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International Business
Assess Japan's current overall economic situation
In 2017, the economic growth of Japan was having a strong growth and in 2018, the
growth of the economy slowed down. All the major components of GDP in the form of
consumption, investment and net exports have declined significantly. The first and third quarter
of the economy witnessed slowdown with sharp decline in rate of investments. The annual
growth rate of the GDP is 1.4% and country is having decreased level of population (Deloitte
Insights, 2019). Most of the business houses are investing in the labour saving technologies due
to lack of labour within the economy. On the other hand, the growth of export of Japan was
going at a moderate rate as the demand within the China was falling and presence of weak trade
relations among China and US. Due to drop in the energy prices within Japan has forced the
economy of Japan to decrease the rate of inflation within economy. On the other hand, in
December consumer price was up by 0.3% compared to the last year (Deloitte Insights, 2019). In
the current period, the Bank of Japan predicted that inflation rate will increase by 2% and even
taking the volatile food prices into consideration the rate of inflation was around 0.7%.
Keeping the interest rate low is one of the crucial monetary policies that is taken by the
Bank of Japan and they are planning to slow down the pace of asset purchases within economy.
The abolition of Comprehensive and Progressive Agreement Trans-Pacific Partnership by US
has forced the economy of Japan to indulge in free trade relationship with other developed
nations and developing nations. The purchasing manufacturing index or PMI is significantly
claiming that purchasing power of the manufactured sections fell from 50.3 to 48.3 (Deloitte
Insights, 2019). The export of Japan fell to 8.4%. The export of Japan to China fell by 17.4 and
exports to Western Europe fell by 6.4%. Even the Japanese exports to South Korea were down
11.6 percent, to Taiwan 11.0 percent, and to Australia 18.7 percent. Considering the product in

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International Business
the export section, transport equipment was down 5.9 percent and machinery was down 10.7
percent. Sales will fall as the consumption tax increased to about 10.9% and due to this impact,
the consumers will not be willing to continue their spending as the deadweight loss in going to
fall heavily on the consumers (Baird, 2019).

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International Business
Reference list
Baird, C. (2019). Economic outlook for 2019: More uncertainty for Japan's economy amid
planned tax rise and global slowdown | The Japan Times. [online] The Japan Times. Available
at: https://www.japantimes.co.jp/news/2019/01/02/business/economy-business/economic-
outlook-2019-uncertainty-japans-economy-amid-planned-tax-rise-global-slowdown/
#.XNfaPhQzbIU [Accessed 12 May 2019].
Deloitte Insights. (2019). Japan. [online] Available at:
https://www2.deloitte.com/insights/us/en/economy/asia-pacific/japan-economic-outlook.html
[Accessed 12 May 2019].
IMF. (2018). Japan's Economic Outlook in Five Charts. [online] Available at:
https://www.imf.org/en/News/Articles/2018/11/27/na112818-japans-economic-outlook-in-five-
charts [Accessed 12 May 2019].
Oecd.org. (2019). Japan - Economic forecast summary (November 2018) - OECD. [online]
Available at: https://www.oecd.org/economy/japan-economic-forecast-summary.htm [Accessed
12 May 2019].