Wealth

Japan’s Surprising Economic Revival: How Geopolitical Shifts Are Driving A New Period Of Growth

GDP growth rate of 6%.

Not India, not Vietnam, but Japan.

It was just too surprising.

The 6% in the second quarter of this year is the largest increase recorded in Japan in the past three years.

6%, which is a speed that Chinese people need to miss, but it appeared in Japan, where the GDP growth rate has been maintained at around 1% all year round.

Moreover, in the first quarter of this year, Japan’s economic growth rate of 2.7% has surpassed that of the United States (1.3%), the United Kingdom (0.2%), and Germany (-0.3%).

In fact, if it is compared with the GDP growth rate before the epidemic, Japan’s growth against the trend is even more obvious.

Japan’s GDP growth rate in 2019 is 0.7%, and it will rise to 2.7% in the first quarter of 2023;
The GDP growth rate of the United States in 2019 is 2.3%, and it will only be 1.3% in the first quarter of 2023;
China’s GDP growth rate in 2019 is 6.0%, which will drop to 4.5% in the first quarter of 2023.

It’s not the best time in Japan’s history, but in a stagnant global economy, Japan’s current rebound is surprising.

In fact, not only the GDP growth rate, but also some interesting changes in Japan recently, all of which are subverting our long-term perception of Japan.

Prices that had not risen for 30 years began to soar;

Even wages that have not been raised much for 30 years will increase;

Young people are not staying at home anymore, and the job market is booming;

Big companies are no longer the first choice for employment, and being your own boss is the trend;

Enterprises began to make money one after another, and even used the profits to invest in reproduction…

Japan is a country with a strong sense of path dependence and is content with the status quo, but these changes, like trickles converging into a vast ocean, are making Japan different.

The wind starts at the end of Qingping, let’s take a look at some of the simplest changes on the surface.

First, the Japanese go out to buy and buy.

The latest data show that Japan’s CPI price rose 3.3% year-on-year, surpassing the US price increase for the first time in eight years.

And the core CPI, which excludes food and energy, rose 4.3%, once again breaking the record high.

Inflation in Japan will remain sticky. Even if imported inflation weakens, domestic demand will still support prices.

Second, the Japanese began to take the initiative to raise wages significantly.

At the beginning of 2023, the Japanese government requires all industries to implement a comprehensive salary increase within the year. Toyota, a leading Japanese company, took the lead in setting an example and decided to pay 6.7 months of monthly salary as a bonus, and also increased wages for period workers and part-time workers.

The fiber chemical food distribution service union proposed a total salary increase target of about 6%; the electrical machinery union required member companies to increase their monthly salary by more than 7,000 yen (about 350 yuan), which was the highest level in 25 years; The JAM manufacturing industry trade union formed by the enterprise trade union as the center requires a monthly salary increase of 9,000 (about 450 yuan)…

Because there are too many good jobs, restaurant waiters cannot be recruited, and the monthly salary is 310,000 yen (15,600 yuan).

As a result, we have seen Japan’s excellent employment status.

Japan’s complete unemployment rate in June was 2.6%, and it has remained at such a low level for the past year and a half.

Relatively speaking, the United States is 3.6, China is 6.1, and Europe is 6.2.

Japan’s Ministry of Health, Labor and Welfare has an effective recruitment ratio, that is, how many positions a job seeker corresponds to, basically more than one. In many recruitment groups, there are far more recruitment inspirations than job application inspirations. It’s a bit like every year after the Spring Festival, factory owners in the Pearl River Delta hold recruitment signs and wait to be selected by workers.

Unemployment among young people in Japan is slightly higher at 3.7%.

There are more choices, and I want to have a good start.

Third, the Japanese started buying houses again.

Buying a house has been permanently removed from the life list by Japan’s “lost generation”.

But suddenly, contemporary Japanese seem to have figured it out. As a result, the price of new apartments in the 23 districts of Tokyo, Japan, broke through the 80 million yen mark for the first time after the real estate bubble burst in the 1990s.

Moreover, the main buyers in this round are not all wealthy people. According to Japan’s Sumitomo Group, “In a real estate development in Shinagawa District, Tokyo, half of the houses worth more than 100 million yuan were purchased by the company’s staff and families.”

Tokyoites are used to lotteries for new houses in some popular areas.

Prices are rising moderately, and wages are expected to rise. Of course, young people are willing to come out to work, buy houses, and improve their lives. Once this upward spiral of social expectations is formed, it will continue to profoundly change the state of society for a long period of time.

What sparked these seemingly minor changes were more important, long-term changes.

First, the reshoring of manufacturing has also occurred in Japan, and it is proceeding at a speed that has not been seen in the past 20 years.

A recent related domestic report is that Panasonic plans to transfer 40% of its air-conditioning production capacity in China back to Japan.

Before Panasonic, there were Canon, Toshiba, OK Electric, Omron, etc., and they also transferred part of their production capacity from China to Japan.

The return of industry has led to a surge in plant construction and equipment investment.

According to a survey released by the Japan Construction Industry Federation (Nikkenren, referred to as Nikkenren) on April 27, domestic construction orders in Japan will increase by 8.4% year-on-year in 2022, reaching 16.26 trillion yen (approximately RMB 833.8 billion). , hitting a new high in the past 20 years.

You must know that Japanese business owners have been reluctant to expand production for many years, especially small and medium-sized business owners. But in the general downturn in the world, Japanese industrial investment broke out.

Orders from manufacturing in the private sector surged 41.6% to more than 3 trillion yen, the highest in the past 20 years.

In particular, orders in the field of electrical machinery, centered on the construction of semiconductor factories, increased by 151.8%, exceeding 1 trillion yen.

Economist Koo Chao-ming pointed out that Japan’s balance sheet began to decline in the 1990s, and companies would not invest after making profits, but would use them to repay debts. Fewer people in society needed to borrow money.

However, today, when the global macro economy is sluggish and corporate investment is in a sharp decline, Japanese companies wake up from their sick beds with their eyes wide open and full of curiosity about the world.

In this sense, the rebound of Japanese social investment against the trend may be one of the most important economic phenomena in 2023.

Second, the renewed entrepreneurial trend.

In the past, Chinese people always wondered why companies like Alibaba and Tencent were not born in Japan?

There are many reasons, such as path dependence, which is already developed enough and does not feel necessary; another example, companies are conservative and unwilling to spend money on unknown things… In the end, they missed the Internet entrepreneurial boom.

What’s more important is the soil – in Silicon Valley, there are 10 teams behind every innovative idea; follow up.

Venture capital is one of the important indicators to measure a country’s industrial evolution.

The data shows that the proportion of venture capital investment in the United States is 0.64% of GDP, China has followed the trend in recent years, reaching 0.23%, while Japan is only 0.08%.

But just in 2022, Japan announced that it will build Tokyo into the largest startup center in Asia, and will increase venture capital investment tenfold within five years, reaching 10 trillion yen in ten years.

A lot of people and money are flowing into the technology industry from traditional financial institutions. For example, the Otemachi and Marunouchi areas, where many traditional financial institutions are located, happen to be the centers where financial technology start-ups gather.

The Tokyo branch of the Cambridge Innovation Center (CIC) said that the government’s enthusiastic support has triggered a shift in thinking in the labor market, and an entrepreneurial ecosystem is growing exponentially in Tokyo. “Previously, young people always sought employment in big companies, but now, more More and more talented people are considering entrepreneurship as their first career choice. This will have a snowball effect.”

Third, Japan has launched a global grabbing model.

Japan is not a country of immigrants. In the past, even professional talents basically adopted a policy of using them first and throwing them away after use. However, Japan has quietly made many big moves in attracting immigrants in recent years.

The latest one is to expand the range of long-term visas for foreigners with specific skills from 2 in the past to 11.

The 11 industries include construction, shipbuilding, building cleaning, manufacturing, automotive maintenance, aviation, hotels, agriculture, fishing, and food processing.

Japan’s visa this time can be regarded as a major change in the “national policy” . Experienced professionals in these industries can stay in Japan for a long time if they want to, and they can also bring their families with them. There is only one purpose, to retain all kinds of talents needed by Japanese industries.

In the past, Japanese industries were mainly matched with the United States. The United States was responsible for the most cutting-edge innovation and mastered the highest value-added parts, while Japan was responsible for the implementation of some key processes. As for mid-to-low-end end products, they were placed elsewhere in East Asia.

Today, Japan has started a new entrepreneurial boom, robbed talents around the world, and welcomed back strong manufacturing investment, slowly making up for every piece of wood in the industrial innovation cycle, and continuing to consolidate its position in the global mid-to-high-end industrial division of labor. The advantages.

This industry’s feedback to the economy and society is not only an extremely important force in Japan at present, but also corresponds to China’s original intention to build a modern industrial system.

Japan’s major or minor changes are even more meaningful if viewed in the context of the current international geopolitical and economic situation.

Japan’s second national fortune may be coming soon.

First, Buffett firmly bet on Japan’s weathervane significance.

Over the past six months or so, Buffett has been reducing his holdings in TSMC and BYD, and then increasing his holdings in the five largest conglomerates in Japan. This bet may last for 10 years or even longer.

The 93-year-old Buffett made a special trip to Japan in mid-April this year, and talked about his recent investment trends in an interview.

One of the reasons he gave was geopolitical tensions. TSMC is fine, but he thinks there are “better places” to deploy capital.

It is estimated that the reduction of BYD also includes the same considerations.

The direct reason for Buffett to invest in Japan is the high returns. He estimates that the investment in Japan only requires a cost of 0.25% or less to reap a 14% return, and the cost will not increase, but the return will still increase due to dividends. increase.

Buffett is not only a participant in the market, but also has a huge amount of funds, so he is destined to be a major creator of the market.

Now, foreign capital has restarted the mode of buying Japan. One of the circumstantial evidence is that the Nikkei index has regained 30 years of lost ground in one fell swoop.

Second, the new changes in Japan’s industry are more important in the game of great powers.

When “de-risking” became an increasingly urgent choice for the United States, the importance of Japan’s modern industrial system came to the fore.

In today’s European and American countries, if we talk about the completeness of key manufacturing industries, Japan undoubtedly occupies an important place. More importantly, when it comes to mid-to-high-end manufacturing, Japan is truly indispensable.

In the field of optics, the optical glass of Japan Sumita Optical is ahead of other counterparts in terms of manufacturing process and product categories. The optical glass produced by it for precision molding has the world’s highest refractive index, the world’s lowest forming melting point, and the world’s largest number of varieties.

70% of the world’s semiconductor materials are provided by Japan’s Shin-Etsu Chemical. Ajinomoto ABF film is an interlayer insulating material used in semiconductor packaging. Without it, no matter how good the chip is, it cannot be successfully packaged…

Such Japan is of course irreplaceable in the restructuring of the industrial chain in the United States.

As for some mid-end manufacturing in the United States, the cost-effectiveness of restarting in the United States is not high, and Japan is a good choice whether it is a new production place or a backup.

It is no exaggeration to say that in the new game, Japan is more important than the US-Soviet Cold War.

Third, it is no less a strategic opportunity than the Korean War.

No matter how strong Japan was in the last century, it was still a vassal of the United States. The so-called strongest navy in Asia is nothing more than a subsidiary support force of the US Pacific Fleet. Japan’s strong industrial capabilities are inherently deficient, and they are firmly grasped by the US…

Over the past few years, however, the United States has begun to loosen its leash on Japan. For example, he let go of Japan’s constitutional amendment, asked Japan to participate more in the overseas operations of the United States, and asked Japan to speed up the upgrading of its armed forces…

The reason is that the United States has great expectations for Japan’s future role in East Asia.

If someone notices that Poland used its geographical position during the Russo-Ukrainian War, both as a major transit country for supplies and armaments, and as the largest stakeholder in Ukraine, it has benefited a lot. It is not difficult to understand.

As a small example, how much the United States played sideways in the semiconductor war between Japan and South Korea, and how strong it is in supporting Japanese semiconductors today.

Nothing changes for no reason. Because of the Korean War, Japan got rid of the status of a defeated country in one fell swoop, and quickly embarked on the road to recovery, creating the Tokyo miracle.

As far as Japan is concerned, another great opportunity for national fortune may be coming.

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