The economy bottoms out, foreigner worker shortage and urban mining : a week in Japan

The economy bottoms out, foreigner worker shortage and urban mining : a week in Japan

Japan was in a recession before the coronavirus pandemic struck. Since lockdowns spread to Europe and the US, the picture has gotten worse for the world’s third largest economy. Sort of.

A week of not-so-bad news…

Surveys reported this week suggest both business and worker sentiment is improving. That’s not to say it isn’t profoundly negative, just less negative than it was a few weeks ago. Continuing the “it isn’t as bad as we thought” theme, even the fall in GDP wasn’t as bad as everyone first thought.

For the Japanese citizen this may be little comfort. Real wages have fallen by 0.7% and overtime pay dropped by 12%, putting less money in their pocket. That said, less money might go out as people shun bars and restaurants and there are signs of price deflation.

All this not-so-bad news may have prompted the Bank of Japan to talk about “bottoming out”. Comments made late this week ahead of next week’s numbers suggest the view is the impact of the pandemic has done its worse. From here, the road is a slow and steady recovery.

My view is it’s a little early to talk about “recovery”. I think the “bottoming out” will be another 3 to 4 months of bouncing along before trade looks something like normal.

Accessing support is expensive for business

Japan’s support for its economy is substantial. Prime Minister ABE Shinzo has thrown everything bar the kitchen sink at the Japanese, from face masks sent to every household to ¥100,000 payments to citizens and residents, to funds to keep businesses going. This latter support has faced problems though and may not have reached the smallest of businesses. Already famed for its red tape, support funds were awash in bureaucracy and form filling, with some reporting it costs more to fill in the forms than they would receive in aid.

May saw the lowest number of “corporate” bankruptcies since 1964, according to Tokyo Shoko Research. Just 81 firms went bust that left liabilities of ¥10 million or more.

Although it sounds counter-intuitive it could be a side-effect of a tendency to hold large cash reserves, prompt action to reduce costs and government support. Tokyo Shoko has also reported over 170 listed firms have tapped banks, borrowing almost ¥10 Trillion.

Japan’s running out of foreign workers

With a declining population, Japan relies on foreign workers in some parts of its economy. The country’s Sakoku-lite isolation has meant fewer gaijin to staff deliveries, konbinis and care homes. While some have adapted by reducing service levels or operating hours, others may find it harder to go on.

Could production return to Japan?

Japan’s offering support for companies who want to bring production home from China. It’s easier said than done and so far only one company has taken advantage of the scheme. With complex supply chains, contracts, capital investments and market access to unwind, it may be some time before it bears fruit.

Mining rubbish for resources

Japan’s natural resources are limited, forcing it to import raw materials. However, decades of consumerism and rising recycling rates has created a new source for what they need. Urban mining is on the rise and companies are cashing in on extracting raw materials from the trash.

About Ross A Hall

A business researcher and writer, I help companies find new markets, form strategies and build successful businesses.

Find out more about my work.

  • linkedin