Power shortages will bite hard this summer

The government’s power saving plan for the summer confirms Japan will face acute power shortages. The hardest hit regions will experience shortages in excess of 15% compared to 2010 levels, and several have been warned to prepare for rolling blackouts.

In the absence of power saving measures, we estimate this could shave between 3% and 4% from Q3 GDP. However, households and businesses managed to mitigate much of the impact of power shortages last year and should be even better prepared this year. On balance we estimate the drag on Q3 GDP will be around 1%.