Things Set to Fall in Place for the Japanese Economy in 2015

January 20, 2015Japanby EW News Desk Team

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The island nation of Japan is all set for better economic times as cheap oil and zero interest rates empower the economy for a year of growth! This, coupled with the nation's weak yen, has set the stage for a long-term economic boost. This fiscal year the Japanese government is expecting some real economic growth, the target being around 1.5%. This is, of course, based on the premise that consumer spending will increase and capital investment will expand.

Twenty-five years after the nation's economic bubble burst and brought roughly two decades of crippling deflation (it certainly did not help that Japan has a socialized health care system), Japan is at a point in its history marked by the possibility of massive, yet painful improvement. This is especially true in the areas of agriculture, employment, and health and wellness.

This fiscal year’s growth estimates for the country's nominal gross domestic product in 2015 is about 2.7%. According to sources from the Mistubishi Corp, a surprising convergence of factors has given Japan an undeniable advantage. One of the advantages is when another country (the US) pays for much of their national defense.

Amidst all the speculation, it is noteworthy that in spite of the yen's loss against the dollar, investments and consumption by the private sector has failed to meet expectations.

Capital Spending Likely to Surge

Japan's Prime Minister Shinzo Abe, heralded as the nation's beacon of hope, has vowed to seek more economic reforms in 2015 than in the past 5 years combined. With crude oil falling almost 50% in 2014 and currently trading at roughly $50 per barrel, the pressure on Japan's existing trading houses has been overwhelming because most of them focus on the sales and marketing of energy, ferrous metals, and precious minerals.

Capital spending is likely to increase, as major Japanese corporations, including exporters, will benefit from improved earnings courtesy of a weaker yen. The subsequent drop in prices of crude oil has further reduced the acquisition costs for new businesses.

The Road Ahead – Japan and the Global Economy

Japan's Prime Minister, who won an early election in December, has vowed to restore momentum by developing an economic strategy that uses monetary flexibility coupled with business deregulation. The Prime Minister is also pushing to reduce the influence of Japan's biggest agricultural lobby, the JA Group. Motivating companies to raise wages, also part of the plan, may actually hurt the job sector because certain jobs are not worth what the government says they are worth. LA, Chicago, New York, and every city in America that has a high minimum wage is aware of this.

Oil Shale Making its Mark

The restoration of economic power for the world's third-largest economy is going to be dependent on the future movements in crude oil, currency, and of course geopolitics, in 2015. According to economic sources, the devaluation of US shale oil and other related assets have set the platform for the nation to boost its net income to 400 billion yen by 2019.

Experts have warned however, that this year could pose more geopolitical challenges. Commodity-market volatility is also a major issue that needs addressing. Although globalization continues to bring the world closer together, it is clear that countries who share friendlier ties with each other also share higher responsibilities and accountabilities.