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Labour Market, Ind. Production & Retail Sales (Jun. 21)

Retail sales, industrial production and employment all rebounded strongly in June, pointing to a sizeable recovery in activity in between the Alpha- and Delta-driven coronavirus waves. That supports our view that the economy just about avoided a contraction in Q2 and entered Q3 on a stronger footing.
Tom Learmouth Japan Economist
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Japan Economics Weekly

Recovery will continue to disappoint

The slump in industrial output and the stagnation in real retail sales in May has prompted us to lower our estimate of Q2 GDP growth. While the easing of the lockdown in Shanghai will contribute to a rebound in motor vehicle output over coming months, the bigger picture is that supply shortages remain intense. And with external demand softening, Japan’s economy won’t recover as rapidly this year as most anticipate.

1 July 2022

Japan Data Response

Tankan (Q2), Labour Market (May) & Tokyo CPI (Jun.)

Today’s Tankan survey suggests that while the services sector is benefitting from the easing of virus restrictions, the outlook for the manufacturing sector is worsening. Meanwhile, the labour market didn’t tighten any further in May and inflation edged down in Tokyo in June, but we still expect the unemployment rate to fall further and underlying inflation to creep higher over coming months.

1 July 2022

Japan Data Response

Japan Industrial Production (May 2022)

The plunge in industrial output in May suggests that Japan’s recovery is disappointing yet again. The upshot is that it will take until the second half of the year for GDP to surpass its pre-virus level. Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

30 June 2022

More from Tom Learmouth

Japan Economics Update

Short-lived spike in underlying inflation on the cards

The surge in input prices caused by supply shortages is starting to show signs of filtering through into higher output prices. Combined with upwards pressure on services inflation from a “vaccine bounce” later in the year, we now expect underlying inflation to rise but only temporarily to a peak of around 1.0% y/y.

29 July 2021

Japan Economics Weekly

A coronavirus wave for each Olympic ring

While consumption remains a weak link, robust exports and capital spending in Q2 may have helped the economy just about avoid a double-dip recession. And while Japan will be in the midst of a fifth wave of coronavirus during the Tokyo Olympics which formally begin this evening, we still expect GDP to recover further in Q3. Economic activity is holding up well so far and the fast-moving vaccine rollout should allow restrictions to be eased towards the end of the quarter.

23 July 2021

Japan Chart Book

Vaccines should limit Delta damage

While infections are now rising sharply nationwide – particularly in Tokyo where the Delta variant has the strongest hold – most of the vulnerable population are now fully vaccinated so we doubt restrictions will have to be tightened any further. Admittedly, the current state of emergency only active in Tokyo (19% of GPD) could be extended to other areas. But most major urban areas are already under quasi-emergency measures. Declaring a full state of emergency – where measures are only slightly more draconian – wouldn’t be a major additional drag. And the mobility data suggest states of emergency hurt economic activity progressively less each time they are declared. Moreover, there are already signs that vaccines are weakening the link between cases, hospitalisations and deaths. That makes sense given that 62% of those aged over-65s are now fully vaccinated. The vaccination rollout remains rapid, with the government well on course to hit its target of fully vaccinating all adults who want the jab by end-November. As such, we still expect most domestic restrictions to be permanently lifted from late-Q3 onwards which should enable the economy to get back to its pre-virus level before the end of this year.

22 July 2021
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