Economy of Japan

Main article: Japan

GDP

Main article: Japan's GDP

Japan Budget

2020: Japan's budget for 2021 exceeded $1 trillion for the first time against the background of twice the GDP of the public debt

In mid-December 2020, the Japanese Cabinet of Ministers approved the budget for 2021, which for the first time exceeded $1 trillion against the background of twice the GDP of the public debt. For example, the total amount of spending adopted by the US Senate for 2020 was $1.4 trillion. Japan's 2021 budget provides for a total expenditure of 106.6 trillion yen, up 3.8% from last year's original budget. Actual costs could turn out to be much higher given the effects of the pandemic.

It is reported that 5 trillion yen is an investment in reserve funds, which are primarily intended to combat the spread of infection. In addition, the budget increased spending on social security, which also contributed to its sharp growth. The final stage of negotiations on the draft budget in the government will be held on December 21. Finance Minister Taro Aso plans to approve the document at this cabinet meeting.

We had to balance the costs of fighting infection, economic recovery and fiscal consolidation, "explained Finance Minister Taro Aso. - Achieving this balance was the most difficult stage of budgeting.

In 2020 Japan , due to the fall in the economy associated with the pandemic, in addition to the main budget, it adopted two additional budgets in the amount of 25.6 trillion yen and 31.9 trillion yen, respectively. In addition, on December 15, the government approved the third such document, worth more than 19 trillion yen. Even before the introduction of the third supplementary budget, the International Monetary Fund reported that Japan's public debt in 2020 reached 266% of gross domestic product, and the budget deficit - 14.2% of GDP.

The budget spending division for 2021 is as follows: 66.9 trillion yen for total spending, including: about 35.8 trillion yen for social security; 5 trillion yen for the reserve fund for the fight against coronavirus; closing a debt of 23.8 trillion yen; 16 trillion yen in transfers to regional and local authorities.^[1]

Financial system

Bank of Japan

Main article: Bank of Japan

Modern monetary theory

Main article: Modern Monetary Theory (SDT)

The financial policy of the country corresponds to the Modern Monetary Theory (SDT).

Non-financial debt

Non-financial debt consists of credit instruments issued by government agencies, households and businesses that are not included in the financial sector.

2022: Aggregate non-financial debt

National debt

2023

Public debt - $9.1 trillion, 98% nominated in yen

Japan's national debt in mid-2023 is approaching 1300 trillion yen, which is about $9.1 trillion. or 230% of GDP.

The increase in debt burden continues continuously, compared to 2019, an increase of 30 percentage points.

The basis for the sustainability of Japan's public debt is the structure of holders, where the Bank of Japan seized almost half of it, the remaining 30% is held by Japanese commercial banks, pension and insurance funds, which, in fact, represent quasi-state entities due to the specifics of the functioning of the Japanese financial system and statehood.

The second important stabilizing feature is the currency structure, where 98.7% is nominated in yen, which allows you to fully close the entire debt structure on the financial system of Japan, reducing dependence on the external environment.

Another 13.6% is held by non-residents, whose share tends to decline. In 2009, non-residents occupied almost a quarter of the debt, in 2015 - 17%, in 2019 - 15.5%.

The third stabilizing feature is low interest rates.

The duration of Japanese government bonds (JGBs) is skewed toward the long-term spectrum. This is a reflection of the Bank of Japan's quantitative easing (QE) program, which has been buying up large amounts of long-term JGBs in recent years.

Net placements outside the buyback of the Bank of Japan on short-term and medium-term debt took place at weighted average rates of only 0.09% and 0.18%, respectively, on average over the past three years.

All this will collectively stabilize the national debt in Japan. The interesting thing about all this is that Japan, unlike other Central Banks, managed to sit out an inflation storm with zero rates, Spydell Finance wrote.

Moreover, Japan continues to increase public debt, increasing investments in JGB by 30 trillion yen from the beginning of 2023 (main operations in January-May 2023).

Japan is the only country in the world trying to mimic the invention of the eternal motor.

Debt crisis and record money issue

At the beginning of 2023, Japan's debt is approaching 1,100 trillion yen. The debt burden is 230-240% of GDP - this is more than 115% in the United States and 97% in the Eurozone.

Half of the public debt is held by the Bank of Japan, 14-15% are affiliated with the state Japanese banks, 20% - insurance funds of Japan, about 7% - pension funds, 7% non-residents, 1.2% of households.

Japan's finsystem has been gutted just under in the last 25 years. Everything that could be driven into public debt has already been driven. At the same time, objectively insufficiently generated cash flow in the amount commensurate with the need to ensure financing of the budget deficit.

There are no external investors in Japanese debt, unlike the situation in the dollar and euro zones, which is closed to international capital. Japan is a "thing in itself."

Japan's record trade deficit led to a near-nullification of the current account, and a differential of rates in Japanese and foreign markets provokes capital outflows, which hit the yen in mid-2022, triggering the worst yen collapse in several decades.

In Japan, capital flight trends are being actualized in search of greater returns, with the generated flow through the current account surplus becoming insufficient (1% of GDP per year current versus 4% typical) to balance internal structural contradictions.

The Bank of Japan in January 2023 launched an unprecedented amount of QE. The printing press will be heated and randomly beaten with liquidity in all directions, the Spydell Finance channel noted. The Bank of Japan's balance sheet is growing, both through the redemption of government bonds of the Japanese government and through an increase in bank lending (earlier something worked one thing).

From January 1, 2023 to January 20, 2023, the Bank of Japan's assets grew by 23.4 trillion yen, the most significant increase since December 1999, when 27.2 trillion yen was charged in a month, but almost everything has been taken since January 2000.

This time, the increase in assets occurs within the framework of a consistent and agreed policy of closing cash flows into the internal circuit of the Central Bank, i.e., in fact, the nationalization of the entire financial system.

High debt burden and a specific debt structure prevent the Bank of Japan from raising rates, as this will accelerate the cost of servicing to unacceptable levels.

The actions of the Bank of Japan provoke an aggravation of imbalances and a debt crisis, as the gap between the current rate and inflation increases, which makes rates record negative for Japan.

Negative debt rates reset demand for new debt placements and trigger Japanese capital flight due to differential rates in Japan and foreign capital markets. This puts pressure on the yen and intensifies Japan's debt crisis.

An attempt to maintain/hold the 0.5% rate target forces the BOJ to redeem all debt, further driving the system into dependency and further increasing imbalances.

This is what Japan's debt crisis looks like.

2020: State debt 254% of GDP

2018: Giant national debt per capita

2017: Public debt 238% of GDP

How Japan solves the problem of public debt

For 2017, everyone knows well that Japan is the leader in terms of public debt among all countries of the world. The ratio of public debt to GDP in Japan is 250%. The absolute amount of debt is 12.5 trillion dollars. Here's his dynamic in the last decade.

It is believed that having a deficit budget is not good. But the Japanese were the least strained and strained about this. They willingly financed and continue to finance the budget deficit through the placement of bonds. International financial institutions have constantly criticized and criticized them for this. In 2017, it suddenly suddenly turned out that there was no problem with public debt at all. Let's explain why now. But a bit of numbers first.

The federal budget in Japan is $830-850 billion in expenses. They issue bonds each year for $1.5 trillion. I.e. bond issue is twice the budget. Most of the bonds are used to refinance accumulated debt (see chart).

Black segments are bonds issued in order to refinance debt. Red segments are bonds issued to finance budget deficits. Gray segments are bonds issued in order to finance the deficit of the pension fund.

At the same time, Japan's budget deficit is 4.5% of GDP.

For comparison, the United States at this time has a budget deficit of 3.2% of GDP, the UK - 3% of GDP.

15.6% of all federal budget revenues in Japan go to pay only interest on government bonds. bonds. At the same time, the Bank of Japan holds 40% of the total debt of the Government of Japan. And the Bank of Japan returns back to the Government all interest payments on those bonds that it (the Bank of Japan) is holding. Well, that is, servicing the part of the debt that belongs to the Bank of Japan does not cost the Government anything. And 15.6% of budget revenues are spent on servicing other part of the state. debt - that state. debt that belongs to individuals and legal entities.

And in 2017, the Government of Japan, together with the Central Bank of Japan, decided to completely solve the problem of public debt. They agreed that the Central Bank of Japan will redeem from the market the national debt of Japan, owned by all other bondholders. Every year, debt will be redeemed for 700-800 billion dollars. The entire debt is expected to be repurchased by the Bank of Japan by 2026. Accordingly, by 2026, budget expenditures on servicing government debt will fall to zero. I.e. The Central Bank of Japan will pay to the Government of Japan in the form of profit the same amount that the Government of Japan must pay to the Central Bank of Japan in the form of interest on bonds. This is a normal practice when the Central Bank pays part of its profits to the Government. (The Central Bank of Russia, for example, deducts 75% of profits to the Government of the Russian Federation.).

That's how it's not difficult. Of course, the redemption of debt for 700-800 billion dollars per year means an issue for the same amount. But inflation in Japan is now 0.02%, that is, inflation is zero. So it is not difficult to pursue a soft monetary policy. And even if inflation suddenly jumps, it will not change anything, because there are a million ways to sterilize excess money supply.

In principle, the United States can do the same with its public debt. To do this, they will have to issue $11.5 trillion. Well, that is, about a third more than the Japanese. As we remember during the QE1-QE3, the Fed issued 3.6 trillion dollars and 90% of this money never got into the economy, remaining in the offset accounts of banks in the Fed (more here). So issuing 11.5 trillion dollars will not be difficult either. If necessary. So far, apparently not needed.

Gold and foreign exchange reserves

2022: Second in world reserves - $1.27 trillion

At the end of 2022, China's reserves amounted to $3.31 trillion, Japan took second place with accumulations of $1.27 trillion, Switzerland - third with assets of $924 billion. Russia finished the year in fourth place with $582 billion. India is fifth, its reserves reach $563 billion.

Sovereign Wealth Fund

Currency: Japanese Yen

2023: Depreciation to JPY 160 per euro - minimum since 2008

On October 31, 2023, the Japanese yen fell to 160 per euro for the first time since August 2008.

Japan has a current account surplus and is a major net lender for the world. So the drop in the yen is not related to any of that. On the contrary, it is Japan's enormous debt burden that forces the BOJ to keep rates low even with their widespread growth. This leads to strong pressure on the yen.

2022: Depreciation to 1990 crisis level - ¥148 per dollar

On October 17, 2022, the yen fell to 148.6 yen per dollar for the first time since 1990.

Japan spent $43 billion on currency interventions from September 29 to October 27 to keep its currency from crashing.

2019: Yen volume in circulation - $953 billion

The gold supply as of August 2019 is $8.7 trillion, the US dollar supply is $1.7 trillion.

�​Obyem of cash in circulation (in USD UNITED STATES). Data for 2019]]

Cryptocurrencies

Main article: Cryptocurrencies in Japan

Inflation

2023: Comparison of inflation in Japan with other countries

2022: Up to 3.7% - record since 2014

Annual inflation in Japan in October 2022 accelerated to 3.7% - a record since 2014.

Stock market

2024: Nikkei 225 breaks record high in 34 years

On February 22, 2024, Japan's Nikkei 225 passed its record high in 34 years.

After a powerful rally that began in January, the benchmark index exceeded the maximum level reached during the bubble in the late 1980s.

Japan Electronic Payment Systems

2020:60% of Internet users prefer cashless payment

Labour market

2022: Proportion of workers aged 65 or over - above 25%

Pensions

2021: Japan's world's largest pension fund makes record profit of 25% or $339 billion

The world's largest, Japan's public pension fund made a 25% profit, or 37.8 trillion yen ($339 billion). United States), for the 2020 fiscal year ended March 2021

That's the largest figure since the fund began managing the nation's pension reserves in 2001.

Overseas shares were the most yielding investments in the period, yielding 59.4%, followed by Japanese shares, which yielded 41.6%.

2020: Average retirement age for women is 66, for men it is 68

Working hours

2015: More than 9.2% of workers work 60 or more hours a week

Unemployment

2023: Youth unemployment - 4.2%

2020: Unemployment rate - 3.3%

Incomes of the population

2022

Real wages remain at 2000 levels

Decrease in real income per employee in the third quarter by 1.5%

in

Small and medium-sized businesses

2022: Bankruptcy of 463 companies

In fiscal 2022 (ended March 31, 2023), 463 small and medium-sized companies went bankrupt in Japan. Such data are provided in a study by Teikoku Databank, the results of which were released in early May 2023.

The key reasons for the ruin are the rise in prices for imported raw materials and food, the inability to cover costs and the difficult macroeconomic situation as a whole. It is noted that the number of bankruptcies of Japanese small and medium-sized businesses at the end of fiscal 2022 was 3.4 times higher than the previous year, when 136 cases were registered. Moreover, in March 2023 alone, 67 companies went bankrupt - this is a record high for one month.

The growing threat of bankruptcies and a lack of working capital are holding back the prospects for higher wages in small and medium-sized firms, where the bulk of wage earners in Japan are employed. And this has a negative impact on the restaurant and hotel business. Soaring prices are forcing consumers to carefully plan costs and save on non-essential goods and services. In the logistics business, costs are expected to rise due to the introduction of restrictions on overtime for drivers in 2024.

A survey conducted by the Bank of Japan in March 2023 among approximately 4,000 citizens on a national scale showed that for 57.6% of respondents, the level of prices for goods and services is the key factor in making spending decisions. For comparison: a year earlier, this figure was 51.7%. According to trade unions, in early 2023, wages and other payments to employees in Japan rose by 3.69% compared with the previous year - the highest value in three decades. However, the increase concerns primarily employees of large corporations, and not workers in the environment of small and medium-sized businesses.^[2]

Business and Community Support

2020

Japan gives companies hundreds of billions to pull production out of China

In April 2020, Japan allocated 243.5 billion yen (about $2.2 billion) to help companies withdraw production from China. The state took such a step due to the COVID-19 coronavirus pandemic, which led to a violation of supply chains between states.

Approximately $2 billion will be allocated to help companies that will transfer production from China to Japan. The rest of the money will go to help Japanese enterprises that place production facilities in other countries outside the Celestial Empire.

Before the pandemic, China was Japan's largest trading partner. However, the coronavirus crisis led to the fact that work at many factories was stopped, and imports from China almost halved. Many Japanese firms are betting on a close partner and are entirely dependent on Chinese factories that provide them with critical goods. Against this background, Japan decided to reduce its dependence on China as the largest production base.

The COVID-19 pandemic has shown that Japanese firms should diversify risks and include some redundancy in supply chains, especially for products critical to Japan's stability and security. In addition, Japan seeks to reorient strategically important production. Such measures could strengthen national security, as well as benefit small and medium-sized firms in Japan and stimulate provincial restructuring plans.

It is still difficult to assess the geopolitical and geo-economic implications of these measures, but they will surely depend on the Free and Open Indo-Pacific (FOIP) strategy. As part of this strategy, Japan intends to cooperate with Australia, India, the United States and the developing countries of the Indo-Pacific region to support regional economic development. If Japan decides to encourage the movement of Japanese supply chains from China to FOIP partner countries, it could increase its influence.^[3]

Japanese authorities compensate 100% of salaries for small businesses affected by coronavirus

At the end of April 2020, it became known the subsidies provided by Japan, thanks to which small enterprises affected by the coronavirus will be able to receive from the state up to 100% of wages during the state of emergency in the context of the COVID-19 pandemic.

The Ministry of Health, Labor and Welfare plans to use the existing subsidy to adjust employment: it was paid to enterprises that saw no choice but to temporarily lay off workers, but through compensation continued to at least partially provide wages during downtime.

In this situation, dismissed employees have the right to receive at least 60% of their regular wages. The government has promised to take up to 90% of the payments, provided that the idle company does not lay off workers.

Other options are possible. If the central or local government asks small companies (up to 5 workers from the service sector) to temporarily suspend work, and the business responds by applying for a subsidy to adjust employment, the government will compensate 100% of salaries at the level of last year if the company does not lay off workers. The government assumes that idle companies will prefer this option.

The Tokyo government and other cities across Japan have already asked restaurants and other businesses to close or reduce opening hours during the health crisis. The financial support of the central government is aimed at maintaining the income level of workers in these industries. The subsidy program will cover up to 3 million companies and about 10 million employees.

Previously, the employment adjustment subsidy was not popular, in part because of the complicated application process and the long wait. During the coronavirus crisis, only 985 Japanese companies submitted applications.^[4]

Japan will pay $2,700 to all citizens whose incomes have plummeted due to coronavirus

On April 7, 2020, Japanese Prime Minister Shinzo Abe announced a local state of emergency and the allocation of about 108 trillion yen ($990 billion) to support business and the population amid the COVID-19 coronavirus pandemic. This amount is about 20% of Japan's GDP.

According to Abe, cash benefits worth more than 6 trillion yen will be paid to families in a difficult situation, as well as small and medium-sized businesses, micro-enterprises. All citizens of the country who, due to the coronavirus, faced a sharp decrease in income, will receive $2,750 each.

The authorities will also expand the range of interest-free lending to include private credit institutions, as well as introduce a deferral of tax payments and social security contributions of 26 trillion yen, thus supporting the continuation of business and protecting employment.

According to Asahi Shimbun, Japan is forced to significantly increase the issue of government bonds to finance a large-scale program of measures to support the economy in the context of the COVID-19 coronavirus pandemic. The volume of additional issue in the financial year, which began on April 1, 2020, will amount to 18.2 trillion yen ($165 billion). This is a record amount of additional accommodation, the previous maximum of 16.9 trillion yen was recorded during the global financial crisis in 2009

By April 7, 2020, 4.5 thousand cases of infection with a new type of coronavirus were registered in Japan. More than 100 people have died.

Shinzo Abe promised that there would be no closure of cities - the so-called lockdown - under any circumstances. The head of the Japanese government stressed that the supply of water, electricity, gas, as well as the work of public transport and key municipal services, including garbage collection, will be fully carried out.^[5]

Businessmen

Japan's richest people

Less than $2 million - the threshold for entering the number of 1% of the richest people in the country

2021: The richest 1% of citizens account for 18.7% of the population's assets

Energy carriers

Japan traditionally suffers from a shortage of minerals, which in 2020 bring five leading trading companies to the country:

• Itochu,
• Marubeni,
• Mitsubishi,
• Mitsui и
• Sumitomo.

According to Bloomberg, over 75% of their revenue comes from imports of minerals.

Gasoline price

Power

NPP

Main article: Nuclear power plants in Japan

2020: Energy consumption per capita

and

Industry

2021:399 robots per 10,000 employees

Electronics industry

Main article: Electronics industry in Japan

Mechanical engineering

2019: 8.3 million cars produced

1920

R&D

2022: Japan creates $82 billion innovation fund in universities

In early April 2022, Japan officially opened its first national trust capital fund of $82 billion for universities, which is the largest in the world. The fund is part of Japan's two-pronged approach, which includes supporting start-up companies as well as focused government support for the basic research that underpins the innovation strategy. The purpose of the fund is to provide financial support for research through annual returns on investment. Read more here.

2020: R&D spending - $170.5 billion

2019: Third most patented in the world

At the end of April 2020, the World Intellectual Property Organization (WIPO) ranked countries by the number of new patents. In 2019, Japan accounted for 52,660 patents. Read more here.

Astronautics

Main article: Cosmonautics in Japan

Transport

Main article: Transport in Japan

Foreign trade

Main article: Japan's Foreign Trade

Internet trade

2021: 12.9% of total retail sales come from the Internet

Telecommunications

• Communications (Japanese market)

Information Technology Markets

• Japan IT Market
• Information Security Software (Japanese Market)

Agriculture

2022: High level of state support for agriculture

2021: Share of farmland - 12%

2019: High levels of pesticide use in agriculture

Tourism

2022: Tourist flow from Russia to Japan falls 11.5 times

The tourist flow from Russia to Japan in 2022 against the background of the outbreak of the conflict in Ukraine fell 11.5 times - ATOR.

2018: Tourists spending $34 billion

Alcohol market

2022

7th in the world in terms of beer production

Stimulation of alcohol consumption among young people due to decline in tax revenues

In August 2022, the tax authorities of Japan announced a competition among people aged 20 to 39 - its participants should offer ways to persuade young people to consume more alcohol, writes the Financial Times. The reason for the initiative is that in 2011, alcoholic beverages accounted for 3% of all tax revenues in Japan, then by 2020 it decreased to 2%.

Participants of the contest Sake Viva! it is necessary to present "new products and designs," as well as ways to encourage drinking at home.

2018: Minimum age to purchase alcoholic beverages - 20 years

Consumption

Meat

2023: Fish consumption is higher than meat consumption

Notes