The article explores the poor growth figures of Japan as well as the dismal improvement in the Gross Domestic Product (GDP). According to Obe (2014), the economic downturn that was witnessed in 1997 was mainly fuelled by an increase in sales tax. Even though Mr. Abe’s government was fully conscious of the cause, austerity measures were not put in place.
In order to cushion the current economic turmoil, over $50 billion stimulus package has been dispatched by the government. Frontloading of the expenditure phase is expected to kick off from the month of April to September 2014 (Obe, 2014).
The export volume has dwindled over the past 12 months, largely due to the weak yen. This implies that exporters cannot significantly benefit from export trade due to the unfavorable foreign exchange rates.
It is prudent to mention that Japan’s export engine heavily depends on the strength of the Yen. As it stands now, the nation’s consumers have found it quite cumbersome to bear the brunt of economic stagnated growth. The last quarter mark of 2013 gave a clear indication that the country’s economy was going to perform below the expectation due to the 1 % annualized growth rate (Obe, 2014).
The article relates a number of economic concepts discussed in the course materials. First, the concept of the Gross Domestic Product (GDP) stands out as the main topic being addressed in the article. The author observes that the rise in sales tax has heavily contributed to the minimal improvement of Japan’s Gross Domestic Product (GDP). The term “growth rate” has also been used in the article to expound the slow pace at which Japan’s economy is expanding.
For instance, the rise in sales tax from 5 percent to 8 percent in the current financial year is expected to trigger a further economic chill or sluggish growth rate. Although GDP growth did not drop in value, it experienced a marginal improvement over the last financial year. The author argues that the slight growth in the GDP index may have been contributed by the high demand for more costly products.
GDP was also affected by a gross surge in imports. ‘Gains from trade’ is also another concept that can be derived from the article. As already mentioned, expensive goods brought a lot of gains to local traders. It is apparent that the quality of goods sold is a major consideration for local consumers in Japan.
Apart from the economic concepts learned in the course, there are other perspectives and deeper insights that can be identified from the news article. For example, a weak Japanese Yen has led to unfavorable foreign exchange (Forex), especially in the export market. Another typical economic term that can be identified in the article is household spending. The latter grew modestly by a margin of about 0.5 %.
Although the impact of supply on GDP has not been discussed in the article, it is a crucial factor that may either hamper or boost the economic growth of any economy. For a country like Japan, export trade is the chief economic mainstay. However, the country did not supply adequate exports in foreign markets during the previous fiscal year.
This led to reduced cash inflow from foreign exchange. The 0.7 percent drop in exports during the third quarter of 2013 was a major economic blow for Japan. Factors such as real wages, asset prices, consumer confidence, and interest rates should be used to compute the aggregate demand in order to obtain the actual Gross Domestic Product of an economy.
Reference
Obe, M. (2014). Japan growth figures disappoint; gross domestic product increase comes in well below expectations. Wall Street Journal (Online). Web.