Consumer spending to fall across Q3

The latest high-frequency data point to the relentless surge in new coronavirus cases starting to weigh heavily on consumer activity this month. And with full-blown emergency declarations to be expanded to cover around 80% of Japan’s economy from Friday, we now expect consumer spending to fall across Q3 which should cause GDP to once again tread water.
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 Chart Book

Strong Q4 still on the cards

With daily cases surging to unprecedented levels and states of emergency extended to mid-September this week, there may not seem to be much light at the end of the tunnel for Japan’s economy. However, we’re cautiously optimistic that a strong recovery is just around the corner. Japan’s vaccine coverage is now not far off the rates seen in DMs where most domestic restrictions have already been “permanently” lifted. PM Suga outlined this week that he’s targeting getting 50% of the population fully vaccinated by the end of this month, and 60% by end-September. The vaccine rollout has progressed rapidly over the past couple of months and is broadly on track to meet those targets. The UK’s vaccination rate was only 53% when the last domestic restrictions were removed in England. Hospitalisations and deaths have remained contained in the UK despite daily cases peaking as high as 50,000-a-day. Even in Singapore – where virus containment measures have been far more heavy-handed than in Japan – domestic and border restrictions are being eased now that the vaccination rate has reached 70%. Japan should get to 70% by around late-October. Even if the Japanese government did wait until then to remove most domestic restrictions, it would still come in time for GDP to rebound strongly next quarter.

20 August 2021

Japan Economics Weekly

Drag from emergency measures fading

While new virus cases and hospitalisations have hit record-highs this week, the rebound in services consumption in Q2 suggests that households are getting increasingly blasé about state of emergency declarations. One small downside risk are part shortages resulting from virus disruptions in Southeast Asian suppliers. But given that Japan is on track to reach vaccination levels that have prompted other large advanced economies to ease virus restrictions by the end of this quarter, any setback in manufacturing will probably be overwhelmed by a further recovery in services.

20 August 2021

Japan Data Response

Japan Consumer Prices (Jul. 2021)

While headline inflation rose in July due to a pickup in energy inflation, it’s far weaker than the figure initially reported for June due to the introduction of a new CPI basket this month knocking off 0.7%pts from the y/y rate. Blocking out that noise though we think inflation will temporarily spike over the coming months due to upwards pressure on goods prices from supply shortages and the release of pent-up demand in the services sector.

20 August 2021
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