Letter From Tokyo

This past week we visited our clients and friends in Japan. The last time we did, three months before Covid, that nation’s GDP had ended modestly down 0.2%. During 2020 it plunged 4.3%; about twice as sluggish as the US.

Japan’s economy rebounded strongly in 2021 to 2.1% and slowed to 1.1% last year. Projections for this year are settling in around the average growth for the past two years. Analysts say the nation’s birth rate – down annually since 2010 – contributes to slower growth.

Japan is struggling with the same issues of all developed economies: supply chain concerns, inflation and commodity prices. Although compared to the US and much of Europe, Japan’s consumer price index of 3-4% is not as elevated. That’s allowed the BOJ to keep rates at a much lower level, around 0.5%.