Ishiba could clear path for Kono to become PM

Kono Taro is emerging as the favourite to succeed Mr Suga as PM. While Kishida and Takaichi are viewed as safer hands by LDP party elders, the outspoken Kono’s popularity with the public gives him the edge on the eve of a general election where the ruling coalition fears losing seats. And if rumours that Ishiba Shigeru will not stand and instead back Mr Kono turn out to be true, then that would leave neoliberal reformer Kono as the clear frontrunner. While we expect a relatively large supplementary budget to be compiled in October regardless of who wins, each of the four main contenders are likely to take differing approaches to structural reform.
Tom Learmouth Japan Economist
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Japan Economics Weekly

States of emergency may end before LDP election

Reports this week that PM Suga is keen to end emergency declarations before leaving office on Wednesday are good for our view that output will rebound strongly to above pre-virus levels in Q4. Crucially, high vaccine coverage should ensure the lifting of most restrictions is permanent this time around. While the LDP leadership contest is set to be a close-run thing, Kono Taro remains the favourite. Were he to become PM, Mr Kono would be likely to distance himself from Abenomics and instead pursue an economic policy agenda more focused on deregulation and raising household incomes.

24 September 2021

Japan Data Response

Japan Flash PMIs (Sep. 2021)

September’s flash PMIs suggest that while the services sector is bouncing back as the delta wave has ebbed, the manufacturing sector is suffering from weaker demand and mounting supply shortages.

24 September 2021

Japan Data Response

Japan Consumer Prices (Aug. 2021)

Headline inflation stayed negative in August as a boost from Go To Travel base effects was offset by a major drag from fresh food inflation. But looking through one-off factors such as Go To and April’s mobile phone tariffs cuts, we think inflation will temporarily spike over the coming months due to upwards pressure on goods prices from continued supply shortages and the release of pent-up demand in the services sector in Q4.

24 September 2021

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Japan Data Response

Japan Wages & Household Spending (Jul. 2021)

Wage growth recovered in July and it should strengthen further over the coming months as the labour market tightens and vaccines fuel a further recovery in overtime pay. Meanwhile, the drop in household spending in July supports our view that consumer spending will fall across Q3.

7 September 2021

Japan Data Response

Labour Market & Industrial Production (Jul. 2021)

While the Delta wave may reverse some of July’s jump in employment, we think vaccines will allow employment to surpass its pre-virus level by the end of this year. Meanwhile, the fall in industrial production in July suggests that supply shortages remain a constraint for firms in certain sectors, though manufacturing output is still on course to rise across Q3.

31 August 2021

Japan Economics Weekly

Delta may soon peak, Kishida seeks to replace Suga

The government this week expanded state of emergencies to nearly all prefectures and consumers are responding to the surge in virus cases with renewed caution. We’ve therefore pencilled in a renewed fall in consumer spending this quarter. However, there are early signs that the Delta wave is peaking in Tokyo and we still expect a strong rebound in consumption in Q4 as the majority of the population will be vaccinated by then. Meanwhile, former Minister of Foreign Affairs Kishida Fumio will run against PM Suga in next months’ LDP leadership election but his chances of winning are slim.

27 August 2021
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