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GDP to rebound in Q3 despite restrictions in Tokyo

While new infections in Tokyo have picked up, the fourth state of emergency in the capital is partly a political move designed to placate fears that the Tokyo Olympics will trigger yet another virus wave. With the health situation in other prefectures less problematic and the bulk of the elderly vaccinated by the end of the month, we assume that other prefectures will stick to light touch quasi-emergency measures.
Marcel Thieliant Senior Japan, Australia & New Zealand 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 Marcel Thieliant

Australia & New Zealand Economics Weekly

RBA’s central scenario may signal rate hikes soon

The RBA began shifting the stance of monetary policy this week by watering down its commitment to keep rates on hold for the foreseeable future. The Bank’s central scenario is still consistent with rates remaining on hold until 2024, but the Bank has consistently underestimated the pace of the economic rebound. The Bank will probably revise up its forecasts again in August and we think it will start to hike rates in early-2023.

9 July 2021

Japan Economics Weekly

Pandemic unlikely to herald period of higher inflation

With producer prices rising at their fastest pace in years and goods shortages showing no signs of easing, the risks to inflation seem to be tilted to the upside. However, we aren’t convinced that a prolonged period of stronger consumer price inflation is on the cards and only expect underlying inflation to average 0.7% next year.

9 July 2021

Japan Economic Outlook

Faster vaccine campaign allows rapid rebound

Japan’s lagging vaccine rollout has finally reached cruising speed, which should allow a rapid recovery in activity over the second half of the year. The labour market may soon be as tight as it was before the pandemic, but we expect this year’s jump in inflation to be short-lived. As such, the Bank of Japan will keep policy loose for the foreseeable future.

7 July 2021
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