Japan’s economy on brink of technical recessionーNHK WORLD-JAPAN NEWS
Let’s look at the upcoming business and economic stories we’ll track in the week ahead. On Tuesday, the US Labor Department will release the consumer price index for July. The June reading rose 2.7% from a year earlier. Officials said costs increased for products with the most exposure to President Donald Trump’s tariff policy. And on Friday, Japan’s Cabinet Office will announce GDP data for the April to June quarter. Japan’s economy shrank an annualized 0.2% in the January to March period from the previous 3 months. The last time GDP contracted was in the first quarter of 2024. Siki Saudi of Miso Research and Technologies expects it to have shrunk slightly again in the April to June period. Real GDP for the quarter is estimated to have declined slightly by 0.1% quarteron quarter. Japan’s economy is expected to post negative growth for two consecutive quarters which would meet definition of so-called technical recession. However, the magnitude of decline is limited and there’s no need for excessive pessimism. We do not believe it entered full-fledged recession. Suiki is projecting a 0.4% quarteronquarter decline in capital investment. She says some manufacturers appear to have adopted a more cautious stance due to growing uncertainty about the impact of US tariff policy. On the other hand, Suki anticipates a slight increase in personal consumption, which accounts for 50% of Japan’s GDP. She says that would likely be thanks to demand for summer clothing and air conditioners amid abnormally hot weather. But she doesn’t think the spending trend will continue. Strong summer bonus payment likely contributed to to positively to consumer spending in June. On the other hand, real wage remain negative in an ear mainly due to raising price of food products. The surging price of everyday food items such as rice appears to be strengthening households tendency to cut back on spending. Looking ahead to next year, Tsuki says Japan’s economy will be trimmed as a result of the latest trade deal with the US that took effect Thursday. It imposes a baseline 15% tariff on Japanese products. This represents the mitigation of the around 0.2% points in the negative impact on real GDP with the border impact including the employment income and capital investment which estimated at around minus0.3%. Suiki adds that if Trump had followed through on his threat of 25% tariffs, there would have been a real risk of Japan’s economy entering a full-blown recession. I’m Yanakarie, and that wraps it up for this week’s Bispicks.
Japan’s forthcoming GDP data is expected to show that the economy contracted for a second straight quarter as uncertainty over US tariffs put the brakes on capital investment. #japan #business #economy
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