Skip to content

John Wickham and Thomas Bolland

Post World War II Japan's economy has been closely linked with the United States. Although a much smaller population Japan’s GDP per Capita in dollars matched the U.S. in 1987. Japan’s GDP per Capita in dollars remained ahead of the U.S. until 2000, only dropping below the U.S.’s GDP per Capita in dollars in 1998. Since 2000, Japan has seemingly struggled to raise its GDP per Capita above $43,0000, its highest point in the 1990’s, only being able to have it at $48,000 for 2011 and 2012, until sharply dropping of to $34,000 in 2015. What this graph doesn’t show is the immense volatility that Japan experienced when when seemingly growing and over taking the U.S. in GDP per Capita in dollars during the late 1980s and late 1990s.

When looking at the percentage change of GDP per capita, Japan is significantly more volatile than the United State. While Japan saw GDP growth between 1980 and 2000 where it surpassed the United States for GDP per capita. However, in 2001, the United States overtook Japan in largest GDP growth. However, this should come as no surprise as Japan saw their GDP per capita dip to -12.61 percent from it peak of 47.24 percent in 1987. This trend has continued to follow the stagnated japan economy as the growth percentage dropped to a new low in 2013 reaching -16.76 percent. This trend after all is indicative of the japanese economy since it ben to stagnate around 1998. Japan’s GDP made a come between 2004 and 2012 where Japan saw a slightly less volatile GDP percentage growth rate ranging from 8% to negative 4% and back. However in 2013 the japanese economy reverted back to it’s negative trend with a GDP percentage growth of -16% but interestingly enough spiked back to 12% in 2016. At this point it is tough to predict what will happen to the japanese economy due to its extreme volatility.

13

John Wickham and Thomas Bolland

Not Seasonally Adjusted

When analyzing economic data it is imperative that one takes into consideration the seasonal nature of economics. Seasonality is the characteristics of a time series that exhibits predictability and regular occurrence on a yearly basis. Seasonality incorporates major holidays, school scheduling, weather, and agricultural changes among other factors. By taking  these factors into consideration and adjusting the graph to remove seasonal bias, a much clearer picture emerges about growth.

Seasonally Adjusted

This is imperative to understand the change in the value of US Imports. The two charts displayed show the growth of the value of US imports between 2010 and 2017. The first chart, which is not quarterly seasonally adjusted, displays osciliations between quarters. The trend of the unadjusted graph shows that Quarter 1 is the lowest in value, Quarter 3 is the highest in value with minimal growth during Quarters 2 and 4. The reason for this is the Financial reporting factor because industries attempt to increase sales to make their respective financial reportings look better.  When viewing the seasonally adjusted graph, it is much easier to show the upward trend of the value of United States imports over the last seven years. Following the recession of 2008, there was a significant spike in the value of value of imports, stopping in 2012. Since 2012, minus a slight fluctuation between 2014 and 2016, the value of goods imported have plateaued. The chart suggests that this will be the trend for the near future as the value of imported goods has steadied out.

Comparing the two graphs, the importance of seasonal adjustment become clear. Without seasonal adjustment, the overall long-run growth trend would be muted by the seasonal effects on the value of imports. In addition season adjustment allows comparison between different graphs over various periods of time. However, there is a downside to seasonal adjustment. There is no precise way to determine seasonal adjustment since it is based off hypothesis data. In addition to that, if the seasonal adjustment is incorrect, then the data becomes flawed and will lead to a false conclusion. However, on the whole, seasonal adjustment is need to determine long-term growth trends.