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Hospitals under pressure, PM Suga looking vulnerable

While daily cases have shown tentative signs of levelling off in recent days, severe cases will continue to rise sharply for a while yet so the threat of tighter restrictions on economic activity remains. The Delta wave has also contributed to a further fall in PM Suga's already-low approval rating. Nailed on to win to be re-elected just a few months ago, the PM is now vulnerable to a challenge from rivals such as Kono Taro and Ishiba Shigeru should they chose to stand in next month's LDP leadership contest. We discuss how economic policy could change were Mr Suga to be usurped.
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 Weekly

Another disappointing quarter

Strong activity data for June confirm that the economy entered Q3 on a relatively strong footing. But while vaccinations are limiting the number of severe cases and deaths, daily coronavirus cases have surged beyond previous peaks in the Greater Tokyo area this week. That’s prompted the government to expand Tokyo’s state of emergency declaration to the surrounding prefectures and Osaka. As such, the recovery in consumer spending will probably be knocked back yet again in August. We’re revising down our Q3 forecasts and pushing more of the rebound into Q4 and 2022.

30 July 2021

Japan Data Response

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.

30 July 2021

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
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