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.
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 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

Japan Data Response

Japan GDP (Q2 2021 Preliminary)

Output only edged higher in the second quarter and won’t do much better this quarter as the Delta-driven fifth wave holds back consumer spending. But with the vaccine rollout still moving fast, a strong recovery in Q4 remains on the cards.

16 August 2021

Japan Economics Weekly

Hospitals under pressure, PM Suga looking vulnerable

While daily cases have shown tentative signs of levelling off in recent days, severe cases will continue to rise sharply for a while yet so the threat of tighter restrictions on economic activity remains. The Delta wave has also contributed to a further fall in PM Suga's already-low approval rating. Nailed on to win to be re-elected just a few months ago, the PM is now vulnerable to a challenge from rivals such as Kono Taro and Ishiba Shigeru should they chose to stand in next month's LDP leadership contest. We discuss how economic policy could change were Mr Suga to be usurped.

13 August 2021
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