On Track for Steady Recovery
Japan continues to demonstrate economic resilience.
Japan’s economy is poised for continued moderate recovery, fueled by increasing private consumption, favorable financial conditions and the government’s economic measures. Despite global economic challenges in 2023, exports and industrial production have remained relatively stable due to a reduction in supply-side constraints. Corporate profits have remained high, reflecting an overall improvement in business sentiment. Japan's stock market made historic gains in 2023.
The tourism sector in Japan has been a standout performer, demonstrating steady growth in 2023. The country welcomed around 22.3 million visitors from January to November 2023, according to Japan National Tourism Organization. The boost in tourist arrivals was supported by a resumption in international flights to 80% of pre-pandemic levels, as demand from Southeast Asia, North America, Europe and Australia grew.
Looking into 2024, Japan’s economy is expected to sustain growth, primarily driven by robust domestic demand. The yen, having weakened in 2023, may strengthen against the US dollar if the Bank of Japan rapidly normalizes its monetary policy, according to financial services group Nomura. Promising sectors include semiconductor production equipment exports, benefiting from the bottoming of the inventory cycle and peaking U.S. interest rates. Domestically, growth opportunities are evident in sectors such as systems and applications, real estate and food, says Nomura.
While the positive trajectory is encouraging, the Japanese economy faces headwinds from the slowdown in foreign economies, global monetary tightening and concerns about the Chinese economy. Additionally, geopolitical tensions and market volatility continue to be downside risks.
In navigating uncertainties, corporate leaders are adopting innovative strategies to sustain growth. Akihiro Teramachi, Chairman and CEO of THK, emphasizes the importance of flexibility and having the right mindset in capitalizing on business opportunities amid the ongoing wave of change. THK’s approach involves integrating hardware and digital technologies into manufacturing processes and end-products, particularly for the automotive, robotics, semiconductor and electronic component sectors. The company’s linear motion components, for example, can be incorporated into electric cars, making them energy-saving, energy-efficient, compact and powerful. Such solutions could have a substantial impact on the growth of Japan’s automotive industry.
Beyond profits, businesses are recognizing the significance of corporate social responsibility. Soy sauce maker Kikkoman, with a history spanning over 300 years, is committed to being a good corporate citizen. Honorary CEO and Chairman of the Board Yuzaburo Mogi highlights the company’s dedication to working with local communities for the long term. Kikkoman has pledged a total of US$5 million to the University of Wisconsin to advance research into sustainable crop cultivation and the environmental conditions of the Great Lakes water system.
In the face of global challenges, Japan’s economy remains resilient, fortified by the dynamism of its corporations and a sustained commitment to innovation.