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Calls for more draconian restrictions growing

The number of new virus cases hit record highs this week as the Delta variant is now spreading widely. While the vast majority of the elderly are now fully vaccinated and deaths have remained low, the number of hospitalisations has surged. With the government acknowledging that the medical system risks being overwhelmed, calls for a nationwide state of emergency or a “hard” lockdown have grown louder, which poses downside risks to our forecast that the economy will merely tread water this quarter.
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

Japan Data Response

Japan Wages & Household Spending (Jun. 2021)

The weakness in wage growth in June reflected both a slowdown in regular pay and a drop in summer bonuses. But with the labour market set to tighten and corporate profits on the mend, we think that wage growth will rebound before long.

6 August 2021

Australia & New Zealand Data Response

Australia - International Trade (Jun. 2021)

Given that most of the rise in exports last quarter was driven by higher commodity prices, net exports probably provided another big drag on GDP growth in Q2. But we think that won’t last much longer.  

5 August 2021

Australia & New Zealand Economics Update

Three key points about New Zealand’s labour market

While the unemployment rate is now back at its pre-virus low, a range of indicators suggest that there is still some slack in the labour market. We think the unemployment rate may eventually fall to 3.5%. However, mounting staff shortages will act as a brake on activity until the border reopens next year.

5 August 2021
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