Weak domestic consumption, declining exports weigh on Japan’s services and manufacturing sectors

Tourism and real estate are two of the few sectors in Japan that have gained from Abenomics, and are the few positive spots in the economy, according to DBS Bank. Since 2013, home prices in the country started rising again. Condo sales prices in Tokyo rose by an average of 3% y/y in the last three years.

The borrowing costs for mortgage loan takers have dropped because of the decline in long-term interest rates, which are due to the central bank’s qualitative and quantitative easing, added DBS Bank. Investment demand from foreign buyers was stimulated by the cheap property valuation.

Meanwhile, the number of foreign tourists arriving in Japan has increased over two-fold in the past three years, boosting the tourism sector. The annual growth rate of the sector expanded to 47% in 2015 from 24% in 2013. Weaker yen has made Japan very attractive as a travel destination for foreign tourists.

However, the size of tourism and real estate sectors continue to be very small. Moreover, the growth registered in both the sectors is not sufficient to strengthen the overall economy. The key services and manufacturing sectors have been weighed on by declining exports and weak domestic consumption, according to DBS Bank.

“GDP growth registered just 0.6% on average in 2013-15, and is expected to remain subpar at 0.5% this year”, noted DBS Bank.