90 ‘Keiki’ – Japan’s Economic Climate Indicator
The Japanese term ‘keiki’ describes the level of economic activity. A ‘good keiki’ represents a positive economic cycle: goods and services sell well, companies generate higher profits, employees receive better wages, increased consumption occurs, and sales improve further. Conversely, ‘bad keiki’ indicates the opposite cycle, where economic activities stagnate and lose momentum.
The economy undergoes alternating periods of expansion (growth) and contraction (decline), known in Japanese as the Keiki Cycle, Keiki Fluctuation, or Keiki Wave. Several theories explain this cyclical pattern, with the most prominent linking it to fluctuations in corporate inventory levels (not stock prices). The cycle works as follows: When goods sell well, companies increase production, leading to inventory buildup. However, if demand falls below expectations, firms cut back production. This reduces profits for suppliers of raw materials and components, creating a ripple effect across industries. As production stagnates, the economy enters recession. This inventory-driven cycle is internationally recognized as the Kitchin Cycle, named after economist Joseph Kitchin, who first theorized it in 1923.
Japan’s economic recovery began in February 2002, marking the start of a 73-month expansion period – the longest continuous growth recorded since World War II. (Officially designated in July 2022, the Cabinet Office confirmed May 2020 as the cyclical trough.) According to the Cabinet Office’s August 2024 monthly economic report, the domestic economic climate (keiki) is currently “showing slow recovery with some areas of stagnation.” However, the future economic outlook remains uncertain.
91 GDP
The total value added (calculated by subtracting intermediate inputs such as material costs from the production value of goods and services) produced within a country during a specific period is called GDP (Gross Domestic Product). A sustained increase in GDP is comparable to a company’s year-over-year profit growth. The economic growth rate, which measures the percentage change in GDP from the previous year, is one of the most important indicators for assessing economic conditions.
Even when an economy shows no real improvement in production or services, a 5% rise in commodity prices can artificially inflate Nominal GDP by 5%. To eliminate this distortion, economists adjust GDP for price fluctuations—resulting in Real GDP.
During Japan’s high economic growth period (1955-1973), the economy achieved an average annual growth rate of approximately 10%. In recent decades, however, growth rates have declined significantly. Japan maintained its position as the world’s second-largest economy (after the United States) until 2009, when it was overtaken by China, falling to third place. In 2023, Germany surpassed Japan, relegating it to fourth position globally. According to the Annual Report on National Accounts released by Japan’s Cabinet Office in December 2023, the country’s nominal GDP per capita stood at $34,064 – the lowest among G7 nations. While the weak yen significantly impacted this figure, it also reflects Japan’s prolonged economic stagnation.
