The Old Economies Strike Back Thus Helping Najibnomics
The impact of Abenomics on Japan’s economy is gradually beginning to be felt. Annual GDP growth in the first quarter has been revised upward, to 4.1%, exceeding market expectations and providing a strong indication that the Japanese economy is finally recovering, after two decades of stagnation. Consumer spending is particularly robust, as wages show signs of upward movement.
Moreover, the currency depreciation in the wake of the Bank of Japan’s efforts to increase the annual inflation rate to 2% is expected to benefit exporters, though a substantial effect on the trade balance is yet to be seen, probably owing to higher import costs. In particular, thermal electricity plants have replaced the country’s nuclear plants – offline since the Great East Japan Earthquake in 2011 – and the weak yen has hit the import bill for oil and gas hard.
Japan’s growth revival comes at a time of increasing economic uncertainty in much of the developing world. For example, Japan’s trade statistics for May indicate that exports to the United States increased at a double-digit pace year on year, to around ¥5.1 trillion, while exports to China were sluggish, reaching ¥4.8 trillion. Indeed, the US has overtaken China as Japan’s main export market, as America’s economy, too, recovers from half-a-decade of sluggishness.
For most of the twenty-first century, emerging markets’ rising importance – and, with it, a reordering of the global economy and international relations – has been conventional wisdom. But, today, it is the two largest “old” economies – Japan and the US – that are showing signs of increasing vitality. Japan is seeking to revive its economy through Abenomics. The US economy’s road to recovery is being built on the shale-gas revolution, a revived manufacturing sector, and a decline in the US budget deficit in GDP terms.
The “old” economies appear to be returning to the spotlight. If current trends continue, they may well become the next new thing. When the old economies strike back thus helping Najibnomics.
Japan and US are the top 5 Malaysia trading partners including China. The increased exports to Japan and US will increase the economic growth of Malaysia.