Labour Market, Ind. Production & Retail Sales (Jun. 21)

Retail sales, industrial production and employment all rebounded strongly in June, pointing to a sizeable recovery in activity in between the Alpha- and Delta-driven coronavirus waves. That supports our view that the economy just about avoided a contraction in Q2 and entered Q3 on a stronger footing.
Tom Learmouth Japan Economist
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Japan Economics Weekly

Carmakers will struggle even after shortages abate

The disruptions to supply chains from Delta outbreaks across Southeast Asia that resulted in another big drop in car exports in September will ease soon. However, carmakers are responding with lower capital spending and are lagging their US and European counterparts in electric vehicle sales. The upshot is that the sector won’t return to former glory.

22 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

Bank of Japan Watch

Bank to look through weaker yen and supply shortages

Sitting comfortably with continuity candidate PM Kishida in charge, the Bank of Japan won’t alter its major policy settings at its October meeting. And we doubt the Bank will respond with policy tweaks to the recent weakening in the yen, nor to continued supply chain disruptions.

21 October 2021

More from Tom Learmouth

Japan Economics Update

Short-lived spike in underlying inflation on the cards

The surge in input prices caused by supply shortages is starting to show signs of filtering through into higher output prices. Combined with upwards pressure on services inflation from a “vaccine bounce” later in the year, we now expect underlying inflation to rise but only temporarily to a peak of around 1.0% y/y.

29 July 2021

Japan Economics Weekly

A coronavirus wave for each Olympic ring

While consumption remains a weak link, robust exports and capital spending in Q2 may have helped the economy just about avoid a double-dip recession. And while Japan will be in the midst of a fifth wave of coronavirus during the Tokyo Olympics which formally begin this evening, we still expect GDP to recover further in Q3. Economic activity is holding up well so far and the fast-moving vaccine rollout should allow restrictions to be eased towards the end of the quarter.

23 July 2021

Japan Chart Book

Vaccines should limit Delta damage

While infections are now rising sharply nationwide – particularly in Tokyo where the Delta variant has the strongest hold – most of the vulnerable population are now fully vaccinated so we doubt restrictions will have to be tightened any further. Admittedly, the current state of emergency only active in Tokyo (19% of GPD) could be extended to other areas. But most major urban areas are already under quasi-emergency measures. Declaring a full state of emergency – where measures are only slightly more draconian – wouldn’t be a major additional drag. And the mobility data suggest states of emergency hurt economic activity progressively less each time they are declared. Moreover, there are already signs that vaccines are weakening the link between cases, hospitalisations and deaths. That makes sense given that 62% of those aged over-65s are now fully vaccinated. The vaccination rollout remains rapid, with the government well on course to hit its target of fully vaccinating all adults who want the jab by end-November. As such, we still expect most domestic restrictions to be permanently lifted from late-Q3 onwards which should enable the economy to get back to its pre-virus level before the end of this year.

22 July 2021
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