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Services recovering, industry still ailing

This week’s activity data provided further evidence that supply shortages in the car sector are holding back the recovery. We expect car production to rebound this quarter as factories in Southeast Asia are reopening, but lingering chip shortages will remain a drag. As such, the onus rests on the services sector to drive the recovery for now, which is being supported by the end of curfews at bars & restaurants and should soon get an additional shot in the arm by the resumption of the Go To Travel campaign.
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

Labour Market & Industrial Production (Sep. 2021)

While employment fell sharply again in September it should rise strongly across Q4 as economic activity gets back to near normal now that most restrictions have been lifted. Meanwhile, the sharp fall in industrial production due to a plunge in car production in September suggests that GDP may have contracted in Q3, though manufacturing output is set to rebound strongly in Q4.

29 October 2021

Japan Economics Update

Policy tightening still a distant prospect

The Bank of Japan shocked no one in keeping its interest rate targets unchanged today, a status quo we think will last for years. The Bank also revised down its growth forecasts for the current fiscal year and signalled that policy will have to remain loose for a prolonged period.

28 October 2021

Japan Data Response

Japan Consumer Prices (Sep. 2021)

Headline inflation in September turned positive for the first time this year due to spikes in fresh food and energy inflation. As the drag from mobile phone tariffs fades in the first half of next year, underlying inflation will turn positive. However, we think it will struggle to break past 1%.

22 October 2021
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