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27 Jan 2016
JPY: Increased resilience to external environment – Nomura
FXStreet (Delhi) – Research Team at Nomura, suggests that a Japanese domestic supply shortage has increased the resilience to the external environment in the recent past.
Key Quotes
“Through the 2000s, Japanese companies' capex plans tended to be highly sensitive to export projections, but in recent years their capex plans have tended to be on the strong side regardless of export projections. Moreover, sentiment at Japanese companies has remained strong even though the outlook for the global economy has become more and more uncertain since summer 2015. The Japanese economy thus appears to be increasingly resistant to the external environment.
Negative growth and the economic cycle: A slowdown in the rate of growth in supply capacity can also be described as a decline in the potential growth rate. We regard real GDP growth of around -1.0% q-q annualized as a post downturn yardstick. The simple argument that negative growth equals an economic downturn appears to have lost its currency among observers of the Japanese economy.
Decline in potential growth rate is a problem for the longer term: From a short-term perspective, we think the Japanese economy has become increasingly resistant to deterioration in the external environment as its shortage of supply capacity has intensified. From a longer-term perspective, however, the government's growth strategies do not at the moment appear to have discernibly boosted Japan's potential growth rate.
We will be looking out for signs that the shortage of supply capacity is in itself triggering an increase in capex and productivity improvements, for example, thus boosting the potential growth rate, as we have indicated in our medium-term economic forecasts.”
Key Quotes
“Through the 2000s, Japanese companies' capex plans tended to be highly sensitive to export projections, but in recent years their capex plans have tended to be on the strong side regardless of export projections. Moreover, sentiment at Japanese companies has remained strong even though the outlook for the global economy has become more and more uncertain since summer 2015. The Japanese economy thus appears to be increasingly resistant to the external environment.
Negative growth and the economic cycle: A slowdown in the rate of growth in supply capacity can also be described as a decline in the potential growth rate. We regard real GDP growth of around -1.0% q-q annualized as a post downturn yardstick. The simple argument that negative growth equals an economic downturn appears to have lost its currency among observers of the Japanese economy.
Decline in potential growth rate is a problem for the longer term: From a short-term perspective, we think the Japanese economy has become increasingly resistant to deterioration in the external environment as its shortage of supply capacity has intensified. From a longer-term perspective, however, the government's growth strategies do not at the moment appear to have discernibly boosted Japan's potential growth rate.
We will be looking out for signs that the shortage of supply capacity is in itself triggering an increase in capex and productivity improvements, for example, thus boosting the potential growth rate, as we have indicated in our medium-term economic forecasts.”