Japan Economy Watch

Japan Economy Watch Substack provides analysis on Japan's economic landscape, highlighting issues like wage stagnation, currency valuation, and economic policy. It explores international trade, comparisons with other economies, and the impact of technology on growth. Discussions also extend to global economic trends, environmental debates, and the dynamics of innovation in Japan.

Japan's Economic Policy Currency Valuation and Trade Wage Stagnation International Trade and Competitiveness Innovation and Entrepreneurship Environmental Policy and Climate Change Technological Advancements Global Economic Trends Corporate Practices and Taxation Monetary Policy and Interest Rates

The hottest Substack posts of Japan Economy Watch

And their main takeaways

Japan and Climate Change: Not As Bad As It Looks, Part I

279 implied HN points • 14 Jun 23
🌞 Climate & Environment Climate change
  1. Japan is facing challenges in tackling climate change due to influence from the fossil fuel lobby, but there are also strong economic forces pushing for a transition to renewable energy.
  2. The shift to renewable energy sources like solar and wind in Japan is becoming more cost-effective than operating coal or gas-fired power plants, creating a game-changing incentive for producers and consumers.
  3. Globally, there is a trend towards clean energy investment over fossil fuels, leading to a shift in the auto industry towards battery-powered electric vehicles and a decrease in the financial viability of new coal plants.

Foreign Affairs Runs Precis of My Book

139 implied HN points • 31 Jan 24
🌍 World Politics Global Economy Japan Entrepreneurship Economic Growth Globalization
  1. Japan's economic slump is not irreversible, and there is potential for recovery with shifts in attitudes, technology, and globalization.
  2. Despite Japan's structural flaws, South Korea's economic success shows that fixing the Japanese economy is achievable.
  3. The article in Foreign Affairs discusses the potential for Japan to revive entrepreneurial spirit for economic growth.

Japan Is Joining “De-Risk From China” Coalition

259 implied HN points • 03 Oct 23
🌍 World Politics Geopolitics Foreign Relations Economic Policies Global Trade International cooperation
  1. Japan is aligning with American and European entities in a 'De-Risking' strategy towards China, aiming to avoid extreme outcomes like 'decoupling'
  2. Although complete 'decoupling' with China is not desired due to global interdependence, there is a shift towards 'de-risking' by foreign companies and governments
  3. China's actions are alienating foreign companies and impacting productivity growth, urging a balance between economic independence and international engagement

Biden Statement On Nippon Steel Does Not Preclude Merger

79 implied HN points • 01 Apr 24
🇺🇸 U.S. Politics Elections Foreign Relations Trade Regulations Antitrust
  1. President Biden's statement opposing Nippon Steel's purchase of US Steel does not completely prevent the merger, as negotiations are ongoing.
  2. The Steelworkers Union and Nippon Steel are in arduous negotiations to reach an agreement that satisfies the union's conditions before the merger can proceed.
  3. If the Nippon Steel merger with US Steel fails, there are challenges for the union as there isn't another American company that can buy USS, potentially impacting union-management relations and financial stability.

Restoring Japan's Leadership In Innovation, Part I

379 implied HN points • 11 Mar 23
💼 Business Innovation Startup R&D Collaboration Financing
  1. Open innovation is crucial for technological advancement, emphasizing the need for collaboration between large companies and startups to succeed in rapidly changing industries.
  2. Japan lags behind in open innovation, with most R&D conducted in-house, leading to a decline in global competitiveness in industries like electronics.
  3. The immobility of star scientists in Japan, due to factors like lifetime employment systems and lack of mobility, hinders the growth of innovative startups and limits the potential for successful spin-offs.
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Reading the Mind of BOJ Chief Ueda

279 implied HN points • 22 May 23
💰 Finance Economy Inflation Monetary Policy Wages GDP
  1. Bank of Japan Governor Kazuo Ueda is determined to maintain current policies and resist pressure to raise interest rates, emphasizing the importance of waiting for sustained 2% inflation before making any changes.
  2. Japan's inflation is mainly cost-push due to external factors like energy and food prices influenced by global events like the Russia-Ukraine conflict, with wage hikes seen as essential for achieving the desired price and wage growth balance.
  3. A key aspect for Japan's economic recovery and future inflation rate is the slow GDP growth, indicating that the economy is operating below capacity, which poses challenges for potential consumer inflation.

How China’s Troubles Could Hurt Japan

239 implied HN points • 11 Oct 23
🌍 World Politics International relations Economic Impact Global Trade
  1. China's economic troubles could potentially send Japan into a mild recession by impacting its exports and GDP growth.
  2. The ongoing techno-war between China and the West is affecting economic growth for all nations, with Japan already experiencing a slowdown in foreign direct investment into China.
  3. Japanese companies are facing challenges like corporate espionage, reduced global sales, and the need to diversify their operations away from China due to economic and geopolitical tensions.

BS-TBS News Interviews Me On Japan's EV Problem

259 implied HN points • 25 May 23
💼 Business Automotive Innovation Economic Analysis Market Strategy
  1. Japanese automakers are resistant to adopting Electric Vehicles (EVs), leading to a loss in sales and risk of falling behind other countries like China.
  2. Successful companies can struggle to adapt to changing times, similar to how the Detroit Big Three faced challenges in the 1970s-80s.
  3. Japan's automakers need to prioritize entering the EV market successfully before exploring other options like hydrogen fuel cells. Shifting to Software-Defined Vehicles (SDVs) is crucial for future competitiveness.

Mr. Kishida: To Get 30% Female Executives, Enforce the Law

279 implied HN points • 01 May 23
🌍 World Politics Gender Equality Corporate Leadership
  1. Mr. Kishida expressed a goal of having 30% female executives, but lacks practical measures to achieve this
  2. Progress towards gender equality in Japanese companies has been slow, with women facing discrimination in pay and promotion
  3. Enforcing existing laws against gender discrimination in wages and promotion can be a crucial step towards increasing the number of women in managerial roles in Japan

Bestseller In Japan: “Degrowth Communism” As The Answer to Climate Change, Part I

599 implied HN points • 22 Sep 22
🌞 Climate & Environment Degrowth Communism Technology Growth
  1. Some believe 'Degrowth Communism' is the answer to climate change, promoting shrinking the economy, but it may pose risks by lowering living standards globally.
  2. Advanced countries show a trend of reducing CO2 emissions while still experiencing economic growth, indicating growth and technological progress are crucial solutions to climate change.
  3. Karl Marx emphasized the potential of technology for growth, contrasting with the view that the economy would hit a 'stationary state'; however, he underestimated capitalism's ability to address its own challenges.

70% Renewable Energy By 2035? Physics Vs. Politics

219 implied HN points • 21 Jul 23
🌞 Climate & Environment Renewable Energy Land use Government Policy Technology Carbon Emissions
  1. Achieving 70% renewable energy in Japan by 2035 is technically and economically feasible.
  2. Japan's Ministry of Economy, Trade, and Industry (METI) has a more pessimistic view on renewable energy due to geographical and physical challenges, suggesting the need for more modest goals and continued reliance on nuclear and fossil fuels.
  3. Regulations, business practices, and government policies are the main hurdles to faster adoption of renewable energy in Japan, not geographical limitations or costs.

Will Kuroda Blink This Week?

399 implied HN points • 14 Jan 23
💰 Finance Economy Interest Rates Inflation Currency Exchange Market Analysis
  1. The Bank of Japan is facing pressure to raise interest rates as the market challenges its efforts to keep rates down.
  2. Despite spending 5% of GDP on purchasing government bonds, the BOJ's attempts to control rates have not been successful.
  3. The future moves of the Bank of Japan will likely affect the yen's value, impacting inflation, trade competitiveness, and overall economic well-being of Japan.

Despite Trouble, Kishida Will Likely Last Until Sept. 2024 LDP Presidency Election

159 implied HN points • 22 Nov 23
🌍 World Politics
  1. There is uncertainty about Kishida's political future, with experts predicting he will likely hold office until the next election in September 2024, but his prospects beyond that remain challenging.
  2. Growing disenchantment among voters with all political parties in Japan, including declining support for the LDP and the leading opposition party, the Constitutional Democrats.
  3. The potential impact of decreasing voter turnout due to disenchantment, highlighting the need for opposition to engage with voters and the possibility of a new political figure emerging to capture public imagination.

China Replaces Japan As Top Auto Exporter in Jan-June 2023

199 implied HN points • 03 Aug 23
💼 Business Automotive Exports Manufacturing Market Share Electric Vehicles
  1. China has replaced Japan as the top auto exporter in the first half of 2023, showcasing an increase in auto exports and a decline in Japanese global auto production share.
  2. The importance of auto exports for the Japanese economy is significant, with implications for manufacturing shipments, capital investment, and employment.
  3. The rise of Chinese automakers and their shift towards upscale markets like Europe and Southeast Asia pose challenges to Japanese automakers, especially in markets where Japanese brands traditionally dominated.

Video of My Talk and Q&A on Japan Zoominar

99 implied HN points • 05 Feb 24
🌐 International Japan Economy Author Book launch Dialogue
  1. Richard Katz participated in a lively dialogue about his new book on Japan's economic future during the Japan Zoominar.
  2. Questions from the audience were diverse and engaging, sparking interesting discussions.
  3. Katz will provide answers to more audience questions in a future post and will speak at the Tokyo campus of Temple University on Feb. 8th.

Abe Left Japan’s Economy Worse Than He Found It

519 implied HN points • 13 Sep 22
💼 Business Economy Politics Finance Government Labor
  1. Shinzo Abe failed to improve Japan's economy during his tenure as Prime Minister, falling short of his promises and leaving living standards on a decline
  2. Abe's economic policies led to suppressed GDP growth, low wages, and a shift in national income from people to corporations
  3. Despite claimed achievements like 'womenomics' and ending deflation, Abe's tenure was marked by hollow measures and missed opportunities for real structural economic reforms

Is The Land Of The Rising Sun Finally On The Rise?

319 implied HN points • 25 Jan 23
🌐 International Economy Global Japan Economic outlook
  1. Experts have mixed opinions about Japan's economic future, with some being optimistic, predicting growth and avoiding recession, while others are more pessimistic, warning of a crisis.
  2. Japan has challenges like wage suppression and resistance to change, but also opportunities for economic revival through societal megatrends like entrepreneurship and e-commerce.
  3. The government needs to support and capitalize on these opportunities in order to avoid missing out on potential economic growth and progress.

METI's “2025 Digital Cliff,” Part II

239 implied HN points • 10 Apr 23
💼 Business Technology Salaries
  1. Japan faces a significant shortage of ICT professionals due to a shortfall in STEM students and low pay for ICT professionals.
  2. Japan ranks below average in key areas of ICT training, which impacts the preparedness of students for ICT occupations.
  3. Low pay in Japan contributes to a lack of interest in STEM careers, resulting in fewer university students majoring in STEM subjects.

METI’s 2025 “Digital Cliff, Part III

219 implied HN points • 15 Apr 23
🕹 Technology Labor Market Immigration STEM Education
  1. Changes in the labor market are compensating for the shortage in ICT professionals due to lack of government action.
  2. Companies are offering higher wages to attract experienced ICT workers, and mid-career hiring has significantly increased.
  3. Immigration could be a solution to the ICT labor shortage, but low pay in Japan compared to other countries is a major hindrance.

Restoring Japan’s Leadership In Innovation, Part II

239 implied HN points • 20 Mar 23
💼 Business Innovation Entrepreneurship Collaboration International Procurement
  1. International collaboration is crucial for innovation as it exposes firms to fresh ideas and different perspectives, contributing to better performance.
  2. Japanese scientists and companies exhibit low rates of international collaboration, hindering the quality and impact of their work.
  3. Japanese firms need to shift towards true open innovation by engaging in two-way collaboration for product and process development, requiring a shift in organizational processes and mindset.

June Wages and Consumer Spending Disappoint Again

159 implied HN points • 10 Aug 23
💰 Finance Economy Monetary Policy Wages Consumer spending Inflation
  1. Wages in Japan were lower than expected in June, leading to a decrease in real consumer spending. This could impact interest rates and the value of the yen.
  2. Increasing base pay is crucial for long-term financial stability for workers, compared to relying on overtime or bonuses.
  3. The Bank of Japan's policy decisions are influenced by data on wages and inflation, impacting interest rates and the value of the yen.

Inflation: Japan Stands Alone, Part I

439 implied HN points • 06 Sep 22
💰 Finance Inflation Interest Rates Central Banks Global Economy
  1. Different countries are experiencing different types of inflation, each requiring unique solutions. Japan faces a dilemma with its low headline inflation and core inflation dominated by food and energy.
  2. Central bankers focus on core inflation for long-term trends while considering demand-pull and cost-push sources of inflation. Japan's inflation is mainly driven by cost-push forces, unlike the US and Europe where demand-pull forces are stronger.
  3. Dealing with cost-push inflation is more complex as it involves supply chain disruptions and input price spikes. Timing the response to inflation and adjusting interest rates involves balancing economic growth and avoiding recession.

The Market Vs. The Bank of Japan

319 implied HN points • 20 Dec 22
💰 Finance Market Interest Rates Inflation Financial Markets
  1. Market pressure forced the Bank of Japan to increase the maximum rate of 10-year Japan Government Bonds
  2. BOJ Governor Kuroda believes the rate hike was a technical measure, not a start of tightening monetary policy
  3. The outcome will be shaped by factors like BOJ's bond purchases, impact of interest rate rises on businesses, value of the yen, and course of inflation

Interview: Entrepreneurship; Japan vs US, Etc.

439 implied HN points • 01 Aug 22
💼 Business Entrepreneurship Economy Labor Issues Economic outlook
  1. Entrepreneurship can be a key factor in reigniting Japan's economy with growing support and initiatives aimed at fostering new startups.
  2. Japan's issues are seen as more solvable compared to the US, with strengths in universal education and healthcare, while the US faces challenges with education and social issues impacting the American dream.
  3. Raising the minimum wage can have complex effects, influencing turnover rates and overall workforce costs, potentially impacting job creation and consumer spending.

Xi Reduces Role of Private Firms, Hurts Innovation

139 implied HN points • 26 Sep 23
🌍 World Politics Policy Leadership Economy Innovation Foreign Relations
  1. Xi Jinping's policies of reducing the role of private firms and emphasizing State-Owned Enterprises (SOEs) are hurting innovation and economic growth in China.
  2. Under Xi's leadership, China has seen a decrease in high-quality patents, lower productivity in companies, and a dampening of dynamism in the private sector.
  3. By prioritizing SOEs over private companies, Xi is exacerbating the tradeoff between growth and living standards, hindering the potential for increased personal consumption and economic prosperity.

Kishida May Raise Corporate Taxes, Part I

319 implied HN points • 30 Oct 22
💰 Finance Taxation Corporate Governance Investment Economic Policy
  1. The Japanese government is considering raising corporate taxes after years of lowering them, due to disappointing outcomes such as insufficient investment and wage hikes.
  2. The need to finance a significant increase in defense spending is a major factor in the potential corporate tax hike, as relying on deficits is seen as irresponsible.
  3. Japan has a significant amount of retained earnings due to low shareholder power, leading to companies not reinvesting the cash in the economy.

Reading Kuroda's Mind

239 implied HN points • 21 Jan 23
💰 Finance Monetary Policy Interest Rates
  1. Bank of Japan Governor Kuroda defied market expectations and successfully maintained Japan Government Bond rates below his target, causing losses for speculators.
  2. The perception of high inflation in Japan is misleading due to factors like food and energy prices and statistical illusions.
  3. To achieve sustained inflation and reach the 2% target, Japan needs significant wage hikes, as monetary policy alone has not been sufficient.

Why Kishida Retreated From “New Form of Capitalism”

439 implied HN points • 11 Jun 22
🌍 World Politics Economy Government Leadership Policy Foreign Relations
  1. Prime Minister Kishida retreated from his 'new form of capitalism' due to pressure from critics and financial markets misunderstanding his policies as socialist.
  2. The policy document lacked substantive measures to bring about a 'virtuous cycle of growth and distribution' despite initial reform efforts.
  3. Kishida's leadership style, as a consensus-builder, hindered the ability to make significant economic changes and prioritize key economic measures.

Video: Weakest Real Yen In Half Century Reflects Deterioration of Japan’s Competitiveness

279 implied HN points • 14 Nov 22
💰 Finance Economy Currency Competitiveness Monetary Policy Trade
  1. In the short term, Tokyo has limited options to address yen's weakness primarily due to the gap between American and Japanese interest rates.
  2. The weak yen reflects not just monetary policy differences but also a significant decline in Japan's real competitiveness over the years.
  3. To improve the situation, Japan needs to focus on reforms that enhance the country's underlying efficiency, making Japanese firms competitive in the global market once again.

Postponomics: Kishida Punts On Startups and Income Redistribution

259 implied HN points • 07 Dec 22
💼 Business Startups Taxation Government intervention Funding Economic Policy
  1. Kishida's administration has postponed crucial decisions on tax breaks for startups and corporate tax hikes, potentially hindering economic growth and income redistribution.
  2. Access to funding remains a significant challenge for startups in Japan, impacting their growth potential compared to other countries. More support is crucial for new companies to thrive.
  3. Government actions such as expanding angel tax credits and implementing R&D tax credit carry-forwards can significantly boost support for startups and innovation in Japan.

Is Japan’s Inflation Really At a 40-Year High?

259 implied HN points • 21 Nov 22
💰 Finance Inflation Banking Economy Monetary Policy
  1. Japan's inflation trend is not accurately represented by the headline figure of a 40-year high, considering the measure used is specific and not reflective of overall inflation.
  2. Year-to-year comparisons of inflation can be misleading, especially for products with price volatility, potentially skewing the true underlying trend.
  3. The causes and implications of inflation must be carefully analyzed to determine the appropriate monetary policy response, balancing economic growth with the impact of higher interest rates.

Support Japan Economy Watch With A Paid Sub

199 implied HN points • 24 Jan 23
💼 Business Economics Subscription Dialogue
  1. Free subscribers of Japan Economy Watch will still receive all posts and have full access to archives.
  2. Paid subscribers support the dialogue on Japan but do not receive additional posts, only gratitude from the author.
  3. Subscription options for Japan Economy Watch include a base price of $50 per year, a 'founding subscription' of $80 per year, and the ability to sign up for any amount $50 or higher.

Inflation: Japan Stands Alone, Part II

299 implied HN points • 08 Sep 22
💰 Finance Economy Inflation Interest Rates Currency Government Policy
  1. Bank of Japan faces a dilemma with interest rates and the yen due to the growing gap between Japan and other countries' interest rates.
  2. Japan's weak domestic demand and a very weak yen are impacting consumer spending and business investment negatively.
  3. There is uncertainty around whether speculators will force the Bank of Japan to raise 10-year bond rates above 0.25% in response to the weak yen.

Learning From the French Revolution In Startups

179 implied HN points • 02 Feb 23
💼 Business Startups Venture Capital Entrepreneurship Government Policy
  1. Using tax incentives to direct investments towards startup companies can have positive effects on entrepreneurship drive.
  2. Professional management of angel funds can help reduce risks for retail investors interested in startups.
  3. Models like France's tax incentive plan have successfully supported the growth of startups and innovation in a country.

Audio Debate On Japan’s Inflation, Interest Rates, and Low Growth

239 implied HN points • 07 Nov 22
💰 Finance Economy Interest Rates Inflation Monetary Policy
  1. Central banks no longer target money supply because the relationship between money growth and inflation became unstable due to changes in financial markets.
  2. In Japan, weak demand for goods and services, not poor monetary policy, has kept interest rates near zero for over a quarter century.
  3. Low aggregate demand in Japan is driven by falling household incomes, lack of competitiveness, and companies hesitating to expand due to weak capacity utilization.

Degrowth Movement Would Abort Renewables Revolution

259 implied HN points • 28 Sep 22
🌞 Climate & Environment Renewable Energy Economic Growth Carbon Emissions
  1. Renewable energy provides a big opportunity due to its cost advantage over traditional fuels, allowing poorer countries to leapfrog over coal and oil.
  2. As countries get richer, they emit less CO2, as seen in the correlation between GDP increase and carbon emissions decrease.
  3. Technological progress, driven by growth, leads to declining emissions per GDP, per person, and eventually in total, with services being less carbon-intensive than manufacturing.

Did China Destroy Globalization?

239 implied HN points • 22 Oct 22
🌍 World Politics Globalization Trade Populism Economic Policy
  1. Globalization has not been destroyed, but governments in the US and Europe are facing challenges in pursuing new trade agreements due to protectionism.
  2. Blaming China for rising protectionism overlooks the main issues, such as technological advancements and the shift towards services, leading to a decline in manufacturing jobs.
  3. Importance lies in addressing the root causes of worker distress, like job loss and wage suppression, with adjustments and mechanisms to alleviate these challenges.

WSJ Editorial Cites My Writings on BOJ Dilemma

179 implied HN points • 18 Jan 23
💰 Finance Monetary Policy Economics Financial Markets
  1. The Bank of Japan decided to maintain its monetary policy which initially impacted the currency exchange rate and bond yields.
  2. An editorial in the Wall Street Journal referenced writings by Richard Katz concerning the BOJ policy, shedding light on the ongoing discussions.
  3. Richard Katz had a letter to the editor published in response to an op-ed about BOJ policy, showcasing differing opinions and contributing to the dialogue.

Is Yen’s Decline Over?

299 implied HN points • 29 Jul 22
💰 Finance Currency Exchange Interest Rates Inflation Central Bank Market Trends
  1. Traders in currency and bond markets lost big on bets about the weakening yen and rising US interest rates, impacting the yen's value.
  2. The US Federal Reserve's quick actions against inflation caused a change in interest rate outlook, leading to a significant drop in US treasury bond rates.
  3. Market sentiment shifted due to the revised expectations of lower interest rates set by the US Federal Reserve, impacting traders' future predictions.