Welcome to Issues in Japan.
This time, I would like to present a tentative summary of experts' analyses and insights on the current situation and outlook for the Japanese economy.
Overseas economies are generally recovering, although with variations among countries and regions, as the effects of Covid-19 Pandemic gradually abate.
In developed countries, economic activities are resuming with progress in vaccination and public health measures targeted to the spread of the Omicron strain.
Emerging countries and resource-rich countries are also recovering on the whole as vaccination progresses.
Under these circumstances, the Japanese economy is clearly picking up.
Exports and production have continued to increase, despite the impact of supply constraints.
Although there are concerns about downward pressure on personal consumption due to the expansion of the Omicron strain effects, it has been clearly picking up since early autumn last year.
The year-on-year change in consumer prices (excluding fresh food) has been slightly positive, reflecting the rise in energy prices and other factors, although the impact of the reduction in cell phone communication charges has been seen.
Looking ahead, the Japanese economy is expected to recover under the gradual easing of the effects of Covid-19 pandemic and supply constraints.
The year-on-year rate of change in the CPI is also expected to expand, as the price shift of rising raw material costs will proceed gradually and the impact of the decline in cell phone communication charges will be removed.
● Risk Factors for the Economy
The following points are noteworthy as uncertainties surrounding this outlook.
The first is the Chinese economy, which is both the "world's market" and the "world's factory."
There is a risk that the spread of Omicron strains under the zero-coronavirus policy will put downward pressure on the global economy and lead to prolonged global supply constraints and upward pressure on prices.
The second point is the pricing behavior of companies.
There is uncertainty in both directions as to how the rising cost of raw materials will be passed on to selling prices.
The third point is the change in households' preference for holding cash and deposits.
The balance of household cash and deposits has continued to increase, reaching 1,072 trillion yen.
This means an increase of 44 trillion yen compared to the trend before the Covid-19 Pandemic. As the effects of the infection gradually abate, it is expected that pent-up demand will become apparent, leading to increased economic activity.
The fourth point is investment trends, particularly among small and medium-sized enterprises.
The balance of cash and deposits has been increasing for both large and small companies, but unlike large companies, the balance of net interest-bearing debt for small and medium companies has been decreasing, and has not increased since 2018.
That's all for now.
I have presented a tentatively summarized analysis and insights from experts on the current state and outlook of the Japanese economy.
For detailed information please visit the following:
https://youtu.be/bNWyROo9hcs
Thank you for your visit and interest.
