7 Challenges to Japan’s Economy at Home and Abroad

Japan's economy is still growing better than expected, despite declines in housing investments and on the heels of good growth in the final three months of last year.

Still there are challenges –

1. There is a gap between real and nominal growth rate. Nominal growth is much less than real annualized expansion. Real growth rate for the first six months of this fiscal year is 1.2%, short of the hoped for 2%.

2. The U.S. economic slowdown is expected to have an impact on exports from Japan.

3. The Organization for Economic Cooperation and Development's leading gauge of the global economy dropped for the seventh consecutive month in December. The index for China, Japan's key trading partner, also declined.

4. Domestic demand is weak. 50% of Japan's GDP is accounted for by consumer spending. Higher prices on food items, gasoline, kerosene, caused consumer sentiment to decline.

5. Winter bonuses grew only slightly.

6. Corporate hiring is slowing.

7. Pretax profit in the corporate sector from July-Sep declined for the first time in five years last year.

Japan's economy is likely to grow as long as China's grows and demands from the Middle Kingdom are up. But, it can never be a good thing for one country to have their livelihood depending on another country. No? 

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