Risk of Economic Downturn Grows Stronger(Oct 2015)

◆Risk of Economic Downturn Grows Stronger: The government revised its monthly economic outlook downwards for the first time in one year in its October report (issued Oct. 14). If the 2015 Jul-Sep period GDP growth rate falls into negative numbers, this would represent the second quarter in a row of negative GDP growth. It is therefore possible that Japan’s economy may be declared to be officially in recession.

◆Five risk factors facing Japan’s economy: Risk factors for the Japanese economy are: (1) The downward swing of China’s economy, (2) Tumult in the economies of emerging nations in response to the US exit strategy, (3) A worldwide decline in stock values due to geopolitical risk, (4) The worsening of the Eurozone economy, and (5) The Triple Weaknesses – a weak bond market, weak yen, and weak stock market due to loss of fiscal discipline. Our outlook places emphasis on China’s business cycle, a question of the greatest concern at this time for those involved in the financial markets, and we provide an in-depth analysis of the situation. We believe that the bottom falling out of China’s economy can be avoided for some time. China does not have a truly Capitalist system. Hence the problem can probably be delayed for the next year or two. Moreover, personal consumption in China is determined by real estate prices rather than stock prices, and real estate prices appear to have bottomed out. The other factor here is that the main driver of the world’s economy remains the US, so even if China’s economy slows down a bit, the negative influence on Japan’s economy is fairly limited.