When you look out across the globe at the various economies functioning within it and trying to navigate the choppy waters we've seen in recent years, Japan might be the most interesting test case of them all.
While those of us in the U.S. have obsessed about the potential of tamping down inflation while avoiding a recession — something the New York Times recently reported is increasingly likely due to the secret weapon that is productivity increases — something much stranger is going on with our Eastern ally.
Just a couple weeks ago, it was announced Japan had fallen into a recession for the second half of 2023, news that hit the same time it was confirmed the United Kingdom was similarly in recession. This news was greeted as particularly dour because analyst expectations were for some level of growth in the fourth quarter, staving off that dreaded "recession" label that comes with two consecutive quarters of contraction. There are also reports that 18 other countries could be flirting with a recession.
And while the recession in the U.K. has some pretty clear causes and effects and that country continues its battle against inflation, the other economic news in Japan didn't show such a clear through line. In fact, there are parts of it that are extremely positive.
Just yesterday, it was announced the Nikkei Stock Average hit a record high, surpassing levels seen in the late 1980s when Japan arose as a global economic superpower. The reason for the record boils down to strong profits across Japan's publicly listed companies, the Wall Street Journal reports.
But at the same time, the backdrop to this is sluggish consumer spending pushing the country into recession territory to begin with.
So what's the takeaway here? I think it serves as a good reminder to all of us that our top-level thinking on the strength of the economy and the strength of the global travel industry might not be as simple as we all hoped.
We might manage to get better-than-expected, top-line economic numbers while still managing to beat down the economic threat of inflation. But will creeping costs eat away at the benefit of a strong demand environment?
Or we might see a dip into a shallow recession, but other economic factors and savvy business practices might make that much more palatable to investors than expected.
The world is crazy. None of us know what will happen when we wake up tomorrow. The takeaway is I have no takeaway. The end.
Let me know what you think on LinkedIn or via email.
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