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Washington Bureau Chief Denny Gulino had the same title at Market News for 18 years.
Similar experience undergirds our service in Ottawa, London, Brussels and in Asia.
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–Some Economists Project Q2 GDP Dip as Effects of Mideast Conflict on Consumption, Capex to Become More Pronounced
By Max Sato
(MaceNews) – Japan’s government is sticking to its gradual economic recovery scenario after the January-March GDP data confirmed a steady recovery from a mild slump two quarters earlier but officials continued to warn about the drag from surging import costs and shortages of naphtha and other key materials.
In its monthly report for May released Tuesday by the Cabinet Office, the government maintained its assessment, saying that the economy is “recovering at a moderate pace but the impact of the situation in the Middle East needs a close attention.”
Prime Minister Sanae Takaichi has been trying to ease the dampening effects of the blockade of the Strait of Hormuz, the crucial passage for oil and gas exports from the Persian Gulf, by facilitating increased crude oil purchases from other regions and reviving subsidies to cap the price hikes for gasoline and other fuels.
But the public approval ratings of the Takaichi administration have gradually slid from exceptionally high levels scored when she took office last October. There are growing concerns among voters amid reports of acute supply shortages of naphtha, crucial for producing plastics and resins that are used in many consumer and industrial goods ranging from vehicles and appliances to paint and food packages.
Data released last week showed the economy grew 0.5% on quarter, or an annualized 1.7%, in the January-March quarter, accelerating from a slight 0.2% rebound in the last three months of 2025 on the 0.6% contraction in July-September, the first drop in six quarters. The Q1 GDP growth was driven by rebounds in both net exports and public works as well as sluggish but resilient private consumption and a modest gain in business investment in equipment and software amid the artificial intelligence boom.
Looking ahead, however, some economists expect the economy to shrink slightly in the April-June quarter (data due Aug. 17) as the Iran war that broke out in late February has already triggered a spike in energy prices and caused shortages of petrochemical products and building materials. Factory production is constrained, construction is being delayed and retailers are being forced to raise prices.
In its near-term outlook, the government remains focused on the lingering geopolitical risks in the Gulf region, saying “The improvement in the employment and income conditions and the effects of various (fiscal) policies are expected to support a moderate recovery while the impact of the situation in the Middle East needs a close watch.” It left out its warning about the effects of the protectionist U.S. trade policy as Japanese auto and metal makers have largely weathered stiff tariffs while being supported by solid demand from Europe.
The government maintained its core assessment of global growth. “The world economy continues to show gradual recovery while some regions are showing weakness,” it said, “However, the uncertainty over the global economy including the situation in the Middle East continues.” Last month, it said the uncertainty was “growing.”
After downgrading the U.S. economy for the first time since May 2025 in the March report, the government has maintained its assessment of the world’s largest economy, saying it is “expanding moderately, although showing weakness in some areas.” The official views are also unchanged on other major economies: The Eurozone is “showing signs of a pickup” and China is “slowing gradually.”
In other areas, the government upgraded its view on South Korea, saying its economy is “recovering gradually” (vs. “picking up” in the April report). It also described the UK economy as “picking up,” an upgrade from its previous statement that the pace of pickup was “more gradual.”
Key points from the monthly report:
The government maintained its core assessment of private consumption that accounts for about 55% of the GDP, saying that it is “showing signs of a pickup.” Last month, it added that softer consumer sentiment needs a close watch.
Real average household spending remained weak in March, marking a fourth straight year-on-year decline, down 2.9% (a nominal 1.3%) after a 1.8% dip in February, but the sharper-than-expected slump was exaggerated by a volatile category of vehicles and related goods, which pushed down overall spending by 2.82 percentage points. Excluding home maintenance and repairs and other volatile items like vehicles and gift money, the core measure fell by a smaller 1.3% (up 0.3% in nominal terms) after falling 2.3% in the prior month.
Overall, consumers have been cautious about spending beyond necessities amid depressed real wages, trimming expenditures on eating out and paying less gift money at ceremonies, while they have shelled out higher dental bills in recent months. There is also a widespread move to switch to more affordable mobile communications plans.
In the January-March quarter, real average expenditures by households with two or more people recorded a slight 0.7% rebound on quarter in the consumption trend index after tanking 3.2% in October-December and rising 1.3% previously. The CTI slipped 1.3% on the month in March vs. +0.9% in February and +0.3% in January.
The government continues to describe industrial production as being “flat.”
Japan’s industrial production for April, due on May 29, is forecast to post a 1.0% drop on the month in April for a third straight drop after slipping a revised 0.4% in March. The effective blockade of the Strait of Hormuz by Washington and Tehran is expected to have continued to dampen factory output by squeezing the availability of naphtha, the crucial raw material for producing plastics and resins that are used in most consumer and industrial goods ranging from vehicles and appliances to paint and food packages.
The monthly survey by the Ministry of Economy, Trade and Industry released last month indicated that output would remain depressed, down 0.7% on the month in April after adjusted for the data’s upward bias, as the Iran war impact lingers and despite plans to raise output of computer chips and vehicles. The METI projected that production would rebound 2.2% in May.
The government maintained its assessment of exports, saying they are “largely flat.”
Trade data released last week showed Japan’s export values rose 14.8% on the year in April for an eighth consecutive monthly increase, reaching ¥10.5 trillion, the second-highest level on record, after hitting a record high in March. The double-digit gain was led by shipments of computer chips, non-ferrous metals and engines, as largely seen in recent months.
Exports to the key U.S. market marked the second straight year-on-year rise, led by semiconductor-producing equipment and construction machinery. Those to Europe remained above year earlier levels for ninth straight month, backed by continued solid demand for vehicles, engines and construction machinery. Shipments to China were up for a second month in a row, reflecting needs for memory chips and non-ferrous metals, as the world’s second largest economy is picking up gradually from the slump caused by its property market problems.
Other details:
The government’s assessment of key components of the economy in the monthly economic report:
Private consumption is “showing signs of a pickup but softer consumer sentiment needs a close watch” (unchanged; upgraded in September 2025; downgraded in February 2024).
Business investment in equipment and software is “picking up” (unchanged; upgraded in April 2026; downgraded in November 2023).
Housing construction “has a weak undertone” (unchanged; upgraded in August 2024; downgraded in August 2025).
Public investment is “solid” (unchanged: upgraded in April 2026; downgraded in December 2025).
Exports are “largely flat” (unchanged; upgraded in February 2025; downgraded in July 2025).
Imports are “largely flat” (unchanged; upgraded in May 2025; downgraded in November 2025).
Industrial production is “flat” (unchanged; upgraded in May 2024; downgraded in Oct 2024).
Corporate profits are “showing signs of improvement but the Mideast situation needs a close watch” vs. “showing signs of improvement despite the effects of the U.S. trade policy” (wording changed for the first time in three months; upgraded in February 2026; downgraded in August 2025).
Business sentiment is “largely flat but firms are cautious about their outlook and thus the situation in the Middle East needs a close watch” (unchanged; upgraded in December 2023; downgraded in April 2025).
The pace of increase in bankruptcies is “largely flat” (unchanged; upgraded in January 2025; downgraded in January 2023).
Employment conditions are “showing signs of improvement” (unchanged; upgraded in June 2023; downgraded in May 2020).
Domestic corporate goods prices have been “rising recently” vs. “rising gradually” (wording changed for the first time in six months; last changed in November 2025).
Consumer prices are “rising moderately” (unchanged; last changed in March 2026).
By Max Sato
(MaceNews) – Here are the key Japanese events for the coming week.
The preliminary GDP data for the January-March quarter released last week showed the economy has overcome a temporary contraction recorded in July-September last year, thanks to rebounds in net exports and public works as well as sluggish but resilient private consumption and a modest gain in business investment in digitization.
This week, consumer inflation in Tokyo, a leading indicator of the national trend, is expected to remain tame in May, staying below the Bank of Japan’s 2% target in all three key measures, as the government is trying to mitigate the impact of rising energy costs with subsidies. The unemployment rate is also seen low and steady at 2.7% in April while the pace of job creation has slowed in recent months. Depressed real wages for a majority of employees are expected to have led to sluggish retail sales.
Government policymakers may be underestimating the shortages of naphtha and other raw materials that are key to business and consumer spending. In April data, the effective blockade of the Strait of Hormuz by Washinton and Tehran is forecast to have continued to dampen factory output by squeezing the availability of naphtha, the crucial raw material for producing plastics and resins that are used in most consumer and industrial goods ranging from vehicles and appliances to paint and food packages.
Tuesday, May 26
1400 JST (0500 GMT/0100 EDT Tuesday, May 26) The Bank of Japan releases its own core CPI measures including the one that is designed to strip off the effects of fiscal measures (utility and fuel costs have been capped by subsidies) and other one-off factors like mobile phone charge discounts. It reflects the board’s hope to keep inflation expectations around 2% alive that would allow the bank to continue raising interest rates gradually as part of its policy normalization.
The latest government data released last week showed that Japan’s consumer inflation moderated at a faster pace than expected in April as processed food price markups continued easing after domestic rice shortages were resolved last year and free private high school education took effect at the start of fiscal 2026. These factors overwhelmed the effect of a smaller drop in overall energy costs that was caused by the phaseout of three-month electricity and gas heating subsidies.
The year-on-year increase in the core CPI (excluding fresh food) slowed sharply to 1.4% after unexpectedly accelerating to 1.8% in Mach from 1.6% in February. In March, the Iran war drove the national average retail gasoline price to a record high in mid-month, just before renewed subsidies took effect to cap fuel price markups. The core rate remains the slowest since +0.8% seen in March 2022.
The annual rate of the total CPI also eased to 1.4% in April after rising to 1.5% from 1.3%, also the smallest gain since March 2022, when it was 1.2%. A month later the total CPI rate jumped to 2.5% and the core CPI to 2.1% as the world was hit by the full impact of Russia’s invasion of Ukraine that triggered a surge in energy and commodities prices amid supply disruption concerns.
Tuesday, May 26
TBA – The Cabinet Office releases the government’s monthly economic report for May. The April report was released shortly after 1735 JST (0835 GMT/0435 EDT) when economic ministers ended their brief monthly meeting.
Last month, the government continued to expect a gradual economic recovery, backed by strong demand for investment in artificial intelligence, while Tokyo stock markets kept flirting with record highs on hopes of an end to the Iran war that would allow reopening of the Strait of Hormuz, crucial for oil and gas exports from the Mideast Gulf states.
But cabinet ministers also repeated their warning about elevated costs for energy and tighter supply of refined petroleum products, particularly naphtha, the source for ethylene, propylene and benzene among others. These petrochemicals are essential for producing plastics and resins that are used in most consumer and industrial goods ranging from vehicles and appliances to paint and food packages.
In the April report, the government maintained its core assessment, saying that the economy is “recovering at a moderate pace but the impact of the situation in the Middle East needs a close attention.”
Friday, May 29
0830 JST (2330 GMT/1930 EDT Thursday, May 28) The Ministry of Internal Affairs and Communications releases May Tokyo CPI.
Mace News median: total CPI +1.6% y/y (range: +1.5% to +1.7%) vs. April +1.5%; core CPI (ex-fresh food) +1.5% (range: +1.4% to +1.7%) vs. April +1.5%; core-core CPI (ex-fresh food, energy) +1.9% (range: +1.6% to +2.0%) vs. April +1.9%
Consumer inflation in Tokyo, a leading indicator of the national trend, is expected to be mostly steady in May, staying below the Bank of Japan’s 2% target in all three key measures, as fuel subsidies that were renewed in late March have capped gasoline prices while free daycare services in the Tokyo metropolitan area that took effect last year and had a full impact in April also helped. Overall energy costs showed a smaller dip after the phaseout of three-month electricity and gas heating subsidies that ended in March.
The core measure (excluding fresh food) is forecast to show a 1.5% rise on year after the annual rate eased to a four-year low of 1.5% in April from 1.7% in March, well below the recent peak of 3.6% hit in May 2025 when processed food price hikes were sharp in the aftermath of domestic rice shortages. The annual rate of the total CPI is expected to edge up to 1.6% from 1.5% in April and 1.4% in March. The year-on-year increase in the core-core CPI (excluding fresh food and energy) is seen steady at 1.9% after moderating to the rate in April from 2.3% in March.
At its last meeting on April 27-28, the Bank of Japan’s nine-member board decided in a 6 to 3 vote to leave the target for the overnight interest at 0.75% after leaving it unchanged in an 8 to 1 vote at its previous meetings in March and January and conducting its first rate hike in six meetings in December by raising it by 25 basis points (0.25 percentage point) to a 30-year high in a unanimous vote.
The bank pointed to upside risks to inflation, given that underlying CPI inflation is approaching the bank’s 2% target and firms’ behavior is shifting more toward raising wages and prices.
In its quarterly Outlook Report issued after the meeting, the bank brought forward the timing of hitting the 2% inflation target, saying “between the second half of fiscal 2026 and fiscal 2027,” underlying CPI inflation and the rate of increase in the core CPI (excluding fresh food) should increase gradually and will be “at a level that is generally consistent with the price stability target.” For years, the bank continued to peg the timing to “the second half of its projection period” (in this case, from fiscal 2026 through fiscal 2028).
Friday, May 29
0830 JST (2330 GMT/1930 EDT Thursday, May 28) The Ministry of Internal Affairs and Communications releases the April unemployment rate.
Mace News median: 2.7% (range: 2.6% to 2.7%) vs. 2.7% in March, 2.6% in February, an 18-month high of 2.7% in January, a 5-month low of 2.4% in July, 2.5% from March to June 2025
It is well below the rates in other major economies as labor shortages continue in the sectors with long work hours and lower pay, notably daycare, medical, transport and construction. Last year, unemployment was stuck at 2.6% from September to December after rising to the level in August from a five-month low of 2.4% in July.
Payrolls likely posted a third straight rise after marking a rare year-on-year drop in January. The increase has been led by gains in both regular and non-regular positions, after the total number of employed unexpectedly posted its first year-on-year drop in 42 months in January for one-off factors. In March, the number of employed posted a modest 30,000 rise on year, led by hotels, restaurants and telecommunications firms while manufacturers, construction firms and medical service providers trimmed workers.
The government continues to describe employment conditions as “showing signs of improvement” in its latest monthly economic report for April, unchanged since the last upgrade for the category in June 2023.
Friday, May 29
0850 JST (2350 GMT/1950 EDT Thursday, May 28) The Ministry of Economy, Trade and Industry releases preliminary April industrial output, the outlook for May, June.
Mace News median: –1.0% m/m (range: -2.2% to +0.4%) vs. March revised up to -0.4% from -0.5%; +0.6% y/y (range: -0.5% to +2.3%) vs. March revised up to +2.4% from +2.3%
The effective blockade of the Strait of Hormuz by Washinton and Tehran is expected to have continued to dampen factory output in Japan in April by squeezing the availability of naphtha, the crucial raw material for producing plastics and resins that are used in most consumer and industrial goods ranging from vehicles and appliances to paint and food packages.
Industrial production is forecast to post a 1.0% drop on the month in April for a third straight drop after slipping a revised 0.4% in March.
Last month, the monthly survey by the Ministry of Economy, Trade and Industry indicated that output would remain depressed, down 0.7% on the month in April after adjusted for the data’s upward bias, as the Iran war impact lingers and despite plans to raise output of computer chips and vehicles. The METI projected that production would rebound 2.2% in May.
In the March report, the ministry maintained its assessment that industrial output was “taking one step forward and one step back.” The last change was made in the July 2024 report, when it upgraded its view.
Friday, May 29
0850 JST (2350 GMT/1950 EDT Thursday, May 28) The Ministry of Economy, Trade and Industry releases preliminary April retail sales.
Mace News median: +1.7% y/y (range: +0.2% to +3.1%) vs. March revised down to +1.4% from +1.7%; +1.3% m/m (range: -0.8% to +1.4%) vs. March revised down to +1.0% from +1.3%
Japanese retail sales are forecast to post a modest 1.7% rise on year in April after a downwardly revised 1.4% gain in March, thanks to solid demand for clothing and luxury goods at department stores, the recent pickup in vehicle purchases and continued strong drugs/cosmetics sales, offsetting the effects of falling fuel prices caused by subsides aimed at alleviating the drag from the Mideast conflict.
Last month, the Ministry of Economy, Trade and Industry maintained its assessment after upgrading it in the January report, saying retail sales are “on a gradual uptrend.” This view is unlikely to be changed in the April report.
Friday, May 29
1400 JST (0500 GMT/0100 EDT Thursday, May 28) The Cabinet Office releases the May Consumer Confidence Survey.
WASHINGTON (MaceNews) – In a White House ceremony attended by many dozens, Kevin Warsh Friday pledged to lead a “reform-oriented Federal Reserve” as the Dow industrials reached a new intra-day high.
After being sworn in by Justice Clarence Thomas, whom Warsh called ‘a brilliant and independent thinker,” the new Fed chief said, “Chairman Greenspan was the first to tell me and show me what this role demands.” He said he would take on the job “with energy and purpose.”
President Trump had preceded Warsh at the podium, in the first White House swearing in of a Fed chief since the Reagan administration, that he wanted the man he appointed to be independent” and to “do your own thing,” seemingly signaling an end of the long White House assault on the central bank- at least for now.
Trump also pointedly suggested that when the economy is booming, the Fed should not “go crazy” with rate hikes. Markets are indeed currently pricing in rate hikes sometime in the future, after many quarters of having looked forward to more rate cuts.
Shortly before the ceremony began, Fed Gov. Chris Waller told a Frankfurt, Germany audience that not only did he want the Fed to drop its easing bias in its policy statements but that he “can no longer rule out rate hikes further down the road,” although not in the near term.
Warsh told the White House crowd of past and present congressional and business leaders as well as Cabinet officers that, “America can be more prosperous” as well as seeing its place in the world be “more secure.” He continued, “to fulfill this mission I will lead a reform-oriented Federal Reserve.” He’ll be “learning from past successes and mistakes both.”
He also said his tenure will be one of ‘escaping static frameworks and models “and upholding clear standards of integrity and performance.”
Now that Fed Chair Warsh, to be voted by the Fed Board to head the policy-setting Federal Open Market Committee, can prepare for the committee’s next meeting in 25 days, there are many questions raised by his past remarks:
By Max Sato (MaceNews) – Here are the key Japanese events for the coming week. The preliminary GDP data for the January-March quarter released last
WASHINGTON (MaceNews) – In a White House ceremony attended by many dozens, Kevin Warsh Friday pledged to lead a “reform-oriented Federal Reserve” as the Dow
— Balance Sheet Policy Due To Come Into Focus As Warsh Takes Charge By Steven K. Beckner (MaceNews) – As the Jerome Powell era gives
0830 JST (2330 GMT/1930 EDT Thursday, May 21) The Ministry of Internal Affairs and Communications releases April CPI.Mace News median: total CPI +1.8% y/y (range:
0850 JST (2350 GMT/1950 EDT Wednesday, May 20) The Cabinet Office releases March and January-March machinery orders.Mace News median: core orders -13.2% m/m (range: -20.0%
–Long Global Semiconductors Seen as Most Crowded Trade By Vicki Schmelzer NEW YORK (MaceNews) – Global fund managers sharply reduced cash and dove into equities
0850 JST (2350 GMT/1950 EDT Wednesday, May 21) The Ministry of Finance releases April trade.Mace News median: exports +9.4% y/y (range: +8.5% to +10.0%) vs.
By Max Sato (MaceNews) – Here are the key Japanese events for the coming week. The first quarter GDP data is expected to show the
Contact Mace News President
Tony Mace tony@macenews.com
to find a customer- and markets-oriented brand of news coverage with a level of individualized service unique to the industry. A market participant told us he believes he has his own White House correspondent as Mace News provides breaking news and/or audio feeds, stories, savvy analysis, photos and headlines delivered how you want them. And more. And this is important because you won’t get it anywhere else. That’s MICRONEWS. We know how important to you are the short advisories on what’s coming up, whether briefings, statements, unexpected changes in schedules and calendars and anything else that piques our interest.
No matter the area being covered, the reporter is always only a telephone call or message away. We check with you frequently to see how we can improve. Have a question, need to be briefed via video or audio-only on a topic’s state of play, keep us on speed dial. See the list of interest areas we cover elsewhere
on this site.
—
You can have two weeks reduced price no-obligation trial for $199. No self-renewing contracts. Suspend, renew coverage at any time. Stay with a topic like trade while its hot and suspend coverage or switch coverage areas when it’s not. We serve customers one by one 24/7.
—
Tony Mace was the top editorial executive for Market News International for two decades.
Washington Bureau Chief Denny Gulino had the same title at Market News for 18 years.
Similar experience undergirds our service in Ottawa, London, Brussels and in Asia.
