The May activity data were consistent with our below-consensus forecast of a 9% q/q drop in Q2 GDP. Consumption should rebound more forcefully over the coming months as households receive cash handouts and restrictions are eased. What’s more, we doubt that the authorities in Tokyo will respond to the resurgence in virus cases with another state of emergency. Even so, households will probably refrain from activities that involve close proximity to strangers, keeping spending well below pre-virus levels.
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