By Max Sato
(MaceNews) – Japan’s government Thursday maintained its view on the domestic economy, which is at a delicate stage of crawling out of the pandemic-caused slowdown, with a mixed picture of sluggish consumption against solid production and exports, 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 last month, when it downgraded its assessment for the first time in three months.
Last week, the government said it was easing some restrictions on economic activity in Tokyo and other prefectures, effective June 20, but decided to retain slightly less strict COVID-19 emergency measures until July 11.
Bars and restaurants in those areas are still required to close by 8 p.m. They can now serve alcohol but must stop by 7 p.m., the same rule set by the government earlier this year.
As for overseas economies, the government maintained its overall view that they are “picking up” amid severe conditions during the pandemic. In May it upgraded its views on Britain, South Korea, Taiwan and Indonesia, after revising up its assessment of the U.S. economy in April.
On the near-term outlook, the government repeated its recent statement, 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 made only minor changes to the details in the report, upgrading its view on housing construction, which is now “firm,” instead of being “flat.”
It noted producer prices are “rising,” a step forward from the previous state of “rising moderately” in light of the recent pickup in global energy and commodities markets. However, with no signs of a substantial pickup in domestic inflation, the official line is that consumer prices are flat, a view adopted in March 2020.
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 the Internet has been robust and purchases at supermarkets solid as people are generally avoiding eating out and traveling while cooking more at home. There is uncertainty over whether Japan can stop the spread of coronavirus inflections amid its relatively slow vaccine rollout. Expenditures on services remains weak.
Business confidence is mixed. Restrictions on economic activity have dented total output while there are hopes that vaccinations will facilitate the reopening of the economy.
The Economy Watchers Survey sentiment index for Japan’s current economic climate posted the second straight monthly drop in May, down 1.0 point at 38.1 on a seasonally adjusted basis, after slumping 9.9 points to 39.1 in April and rising 7.7 points to 49.0 in March.
Looking ahead, the Watchers outlook index, which shows sentiment about the situation two to three months ahead, marked the first month-on-month rise in three months, up 5.9 points at 47.6 in May after slipping 8.1 points to 41.7 in April.
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” vs. “flat on the whole” (the first upgrade in five months; 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 “marking time in the process of picking up while tough conditions remain” (unchanged: upgraded in 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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