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PM Suga will struggle to keep up light-touch approach

Survey data suggest that surging coronavirus infections have done little to knock the economic recovery off course thus far. Such resilience amidst an increasingly severe public health situation has been possible because containment measures have so far been light and narrow. However, the lack of a decisive government response is proving increasingly unpopular so PM Suga may be unable to maintain his light-touch approach. We expect tighter restrictions to cause the recovery to stall next quarter.
- This will be the last Japan Economics Weekly for 2020. The next Weekly will be sent on Friday 8th Jan. 2021 -
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 Data Response

Japan Wages & Household Spending (May 2021)

While the further acceleration in wage growth in May was again largely down to favourable base effects, we think wage growth will stay elevated as the labour market tightens and vaccines fuel a further recovery in overtime pay. Meanwhile, the only modest drop in household spending in May suggests that consumer spending may have edged up last quarter.

6 July 2021

Japan Data Response

Bank of Japan Tankan (Q2 2021)

The further rebound in the Q2 Tankan supports our view that the economy’s disappointing start to the year won’t prevent vaccines driving a strong rebound in the second half of the year. And firms’ upbeat capital spending plans bolster our view that business investment will soon recover sharply.

1 July 2021

Japan Economics Focus

Transition to carbon neutral 2050 wouldn’t harm growth

Achieving net zero emissions in Japan in three decades is a difficult but achievable task. And while the most carbon-intensive sectors may face significant headwinds, overall we agree with PM Suga that economic growth wouldn’t have to be sacrificed to reach his goal of a carbon neutral 2050.

29 June 2021
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