Japan & China Economic Updates

Given China's and Japan's status as two of the world’s biggest and leading economies, traders, analysts, and even consumers may be interested in tracking key events in these Asian countries. So, from China to Japan, here is the latest economic news and its effect on the Asian markets:

Japan’s Tightening Labor Market

Data from Japan released today, Tuesday, January 30, revealed a tightening labor market in December, as manpower shortage seems to be the culprit. The unemployment rate in the world’s third-largest economy hit a record low, the lowest since January 2023. It fell to 2.4%, while the employment rate rose for the 17th time in a row to 380,000 from the year before, as manufacturing, lodging, and food services marked the biggest gains.

How Is Japan Tackling Inflation?

In addition to monitoring labor statistics, traders may find it valuable to observe Japan's inflation rate and its impact on the employment sector and the overall state of the Japanese economy which had to tackle inflation and a deadly earthquake earlier this year. 

Japan's Finance Minister, Shunichi Suzuki, suggests that a “swift” approval of the $763 billion fiscal 2024 budget is necessary to address the current inflationary pressures. This decision involves implementing more salary hikes and providing assistance to areas affected by Japan's tumultuous New Year earthquake.

In addition, Suzuki mentioned that the Japanese government “will further normalize [its] spending toward the goal of achieving a surplus in the primary budget balance in fiscal 2025.” He contends that such a choice will “open up the future” and will aid in restoring the Japanese economy’s equilibrium.

How Can This Affect the Bank of Japan (BoJ)?

It might not come as a surprise to learn that the latest Japanese economic updates and events can have a direct impact on the decisions of the country’s Central Bank, the Bank of Japan (BoJ).

The BoJ is scheduled to meet for the first time this year on Monday-Tuesday, January 22-23 to decide on Japan’s monetary policy’s trajectory in the near future. 

Among the main factors the Central Bank is anticipated to closely monitor is Japan's labor market, with a particular emphasis on examining signs of a positive cycle that links increasing wages to demand-driven price hikes.

According to some economists the BoJ “wants to see tighter supply-demand conditions that buoy labor compensation before it scraps negative rate.” 

Furthermore, according to Mitsubishi UFJ Morgan Stanley analyst, Shuji Tonouchi, “with the prospect that the labor shortage will not be resolved in the near future, companies are strongly feeling the need to secure human resources.” Accordingly, he contends that “more companies will be willing to raise wages in the upcoming pay negotiations or hike salaries more than last year.”

Interestingly, Japan’s Prime Minister, Fumio Kishida, vowed today (Tuesday) that Japan’s wages will be raised above inflation in 2024 as he stated that Japan “must take all possible steps to raise incomes above the price hikes this year.” 

China’s Property Sector Continues Dragging the Economy Down 

It is no secret that China’s economy has had a tumultuous 2023 with factors from rising unemployment to a weakening property market dragging the world’s second-largest economy down and taking a toll on its equity market.

For what seems to be less-than-optimistic news for China, many market experts seem to believe that this recessionary spiral is likely to continue through 2024. 

As such, to address the aforementioned issues, especially the challenges in the property sector, China's Vice Premier He Lifeng called on city authorities on Monday to implement measures formulated by national policymakers to alleviate the challenges facing the nation's struggling property market.

Lifeng additionally urged swift support measures to address these concerns, concurrently exerting pressure on local authorities to take action against the diversion of funds, commonly referred to as pre-sale funds, currently held in escrow accounts. (Source: Bloomberg)

How Are the Chinese Markets Reacting?

Perhaps unsurprisingly, the aforementioned hurdles not only took a toll on the Chinese economy but also deterred many investors from its equity markets as they seemed to be fleeing to overseas stocks.

Hong Kong’s Hang Seng index opened Tuesday’s trading 3% lower in January, while Chinese stocks fell. Only time will tell what else lies on the horizon for the Chinese market.

Conclusion 

In conclusion, the economic situations in China and Japan are pivotal, with Japan addressing a tightening labor market and inflation concerns through fiscal measures, monitored closely by the Bank of Japan. 

Meanwhile, China grapples with challenges in its property sector, prompting calls for decisive action. The global impact of these developments is evident as investors closely watch the shifts in Asian markets.