Second lockdown will be less damaging than the first

The state of emergency declared in the Greater Tokyo area this week only entails mild restrictions on economic activity and we think it will soon be extended nationwide and made more draconian in virus hotspots. However, the impact on private consumption is likely to be much smaller than during the first state of emergency last April.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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Japan Economics Weekly

Omicron restrictions wouldn’t jolt BoJ into action

Even if Omicron proves more transmissible than Delta, its impact on Japan’s economy could vary substantially depending on how deadly it is, how well it evades vaccines, and PM Kishida’s appetite for draconian containment measures. With supply shortages already severe, fresh restrictions on Japanese manufacturers’ global supply chains coupled with a global shift in spending away from services and back towards goods could cause input price pressures to intensify further. However, we doubt any resulting boost to core goods inflation would do much more than simply offset a drag from energy inflation. As such, core inflation would stay well short of the BoJ’s 2.0% target, keeping rate hikes off the table.

3 December 2021

Japan Data Response

Labour Market & Industrial Production (Oct. 2021)

Employment fell sharply again in October despite the lifting of states of emergency declarations at the start of the month. However, it should rebound sharply across November and December in line with the revival in face-to-face service sector activity. And while industrial production only edged up in October, we think it too will rebound more strongly this month and next, potentially approaching its recent April peak in December.

30 November 2021

Japan Data Response

Japan Retail Sales (Oct. 2021)

Retail sales kept rising in October despite another drop in motor vehicles sales. With supply disruptions now starting to ease and mobility picking up, they should continue to increase.

29 November 2021

More from Marcel Thieliant

Japan Economic Outlook

Faster vaccine campaign allows rapid rebound

Japan’s lagging vaccine rollout has finally reached cruising speed, which should allow a rapid recovery in activity over the second half of the year. The labour market may soon be as tight as it was before the pandemic, but we expect this year’s jump in inflation to be short-lived. As such, the Bank of Japan will keep policy loose for the foreseeable future.

7 July 2021

Australia & New Zealand Economics Update

RBA to hike rates in early-2023

By tapering its bond purchases and watering down its commitment to keep its policy rate unchanged until 2024, the RBA is paving the way for interest rate hikes in 2023.

6 July 2021

Japan Economics Weekly

Manufacturing bottlenecks may be easing

The economic recovery stalled last quarter as the services sector was held back by virus restrictions and manufacturers suffered from chip shortages. However, with daily jabs now above the government's 1mn target and chip supply ramping up, activity is set for a strong rebound in the second half of the year.

2 July 2021
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