Another disappointing quarter

Strong activity data for June confirm that the economy entered Q3 on a relatively strong footing. But while vaccinations are limiting the number of severe cases and deaths, daily coronavirus cases have surged beyond previous peaks in the Greater Tokyo area this week. That’s prompted the government to expand Tokyo’s state of emergency declaration to the surrounding prefectures and Osaka. As such, the recovery in consumer spending will probably be knocked back yet again in August. We’re revising down our Q3 forecasts and pushing more of the rebound into Q4 and 2022.
Tom Learmouth Japan Economist
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Japan Economics Update

Rising prices won’t prevent rebound in consumption

The weaker yen and higher energy prices will reduce the purchasing power of households a bit. But with the household savings rate still very high, this won’t prevent a strong rebound in services spending.

26 October 2021

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

More from Tom Learmouth

Japan Data Response

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.

30 July 2021

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
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