By Max Sato
(MaceNews) – Japan’s government Monday maintained its view that the domestic economy is headed for recovery, noting business confidence is improving amid the uncertainty caused by the recent surge in coronavirus infections in many countries, according to its monthly report released by the Cabinet Office.
The government said “signs of a pickup remain in place, although weakness is growing in some areas,” a statement adopted in May, when it downgraded its overview for the first time in three months.
Solid exports and industrial production are leading the pickup from the 2020 slump caused by the global pandemic. Semiconductor shortages are limiting automobile production and shipments while demand for electronic parts and devices as well as production machinery remains strong.
As for overseas economies, the government maintained its overall view that they are “picking up” amid severe conditions during the pandemic.
It revised up its views on the euro zone and Germany for the first time in a year as COVID-19 restrictions are being eased, while making its first upgrade of India in four months. This follows upward revisions on Britain, South Korea, Taiwan and Indonesia in May and on the U.S. economy in April.
On the near-term outlook, the government repeated its recent statement on Japan, saying, “The pickup in the economy is expected to continue, supported by the effects of the policies and improvement in overseas economies.”
But it also warned about the impact of developments in coronavirus infections on domestic and global growth.
Key points from the monthly report:
The government upgraded its assessment of business confidence for the first time in four months, following the July 1 release of the Bank of Japan’s quarterly Tankan survey. It now says business sentiment is “showing movements of picking up, although some severe aspects remain.” Previously, it had said sentiment was “marking time in the process of picking up while tough conditions remain.”
Japanese firms in many industries reported their sentiment improved sharply in June from three months earlier on recovering global demand and accelerated vaccinations, but some sectors were cautious about their outlook amid fears of coronavirus variants wreaking havoc, according to the Tankan, which was conducted from May 27 until June 30.
The government repeated that private consumption, which accounts for about 55% of the gross domestic product, “has been in a weak tone, particularly in the service sector,” after downgrading its view for the first time in three months in May.
Spending on goods continued growing above 2019 levels while expenditures on services remained below those levels, according to patterns shown in credit card records for June. As some Japanese regions gradually eased restrictions on economic activity, spending on movies and concerts is increasing. Heavy rains dented some consumption in recent weeks.
Other details:
The government’s assessment of key components of the economy in the monthly economic report:
Private consumption “has been in a weak tone, particularly in the service sector” (unchanged; downgraded in May 2021; upgraded in October 2020).
Business investment is “picking up” (unchanged; upgraded in April 2021; downgraded in November 2020).
Housing construction is “firm” (unchanged: upgraded in June 2021; downgraded in September 2019).
Exports are showing a “continued increase at a slow pace” (unchanged; upgraded in December 2020; downgraded in March 2021).
Industrial production is “picking up” (unchanged; upgraded in November 2020; downgraded in April 2020).
Corporate profits are “picking up as a whole while weakness is seen among non-manufacturers” due to the impact of COVID-19 (unchanged; upgraded in February 2021; downgraded in April 2020).
Business sentiment is “showing movements of picking up, although some severe aspects remain” vs. “marking time in the process of picking up while tough conditions remain” (upgraded for the first time since March 2021; downgraded in May 2021).
Employment conditions are improving with some soft spots (unchanged; upgraded in September 2020; downgraded in May 2020).
Consumer prices are flat (unchanged; downgraded in March 2020).
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Contact this reporter: max@macenews.com.
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