BOJ Reduces Economy Assessment:

 https://mainichi.jp/english/articles/20210526/p2g/00m/0bu/078000c

Article:

TOKYO (Kyodo) -- The government downgraded on Wednesday its key assessment of Japan's economy for the first time in three months as consumption was further dampened under the extended state of emergency over the coronavirus pandemic.

The Japanese economy shows "further" weakness in some components and remains in a severe situation due to the coronavirus pandemic, the Cabinet Office said in its monthly report for May describing the overall situation for the Japanese economy, but added there are continued signs that it is picking up momentum.

In the previous month, the report said the economy showed weakness in some components but did not use the word "further."

Ideas:

Consumer spending will continue to remain below pre-pandemic levels for a while, most likely through the summer and even into the fall until there are enough people vaccinated and there are no more variant outbreaks and or emergency measures.

Yes, as reported in many articles and reports, manufacturing and exports seem to be coming back but.

But because the spring of 2020 was so bad, the news of record levels of exports need to be tempered with the idea of how bad in was a year ago.

An economy is very complex, and all sectors or industries don't grow or change exactly the same way. 

While the manufacturing industry might be doing much better, the service sector industries/companies are not doing so good

It might take months or even a year or more for them to get back to pre-pandemic levels.

Article:

By component, the office revised downward its view on consumer spending, the first downgrade in three months.

With people asked to stay home and restaurants and bars to close early under the nation's third state of emergency over the virus since late April, it said consumption "shows weakness further recently, especially in service spending."

In April, the report said private consumption had shown "a weak tone recently."

Amid a fourth wave of infections triggered by highly contagious virus variants, the third emergency initially declared for Tokyo, Osaka and two other prefectures was scheduled to end on May 11.

Ideas:

To be fair and honest, even before the pandemic, consumer spending in Japan consumer spending was./has always been a challenge for the Bank of Japan and the Japanese government.

The Bank of Japan has been trying different strategies to boost inflation to the 2 percent level, which is a good benchmark for any economy, which shows a solid amount of economic activity, including a good level of consume spending.

But it hasn't been able to reach the 2 percent inflation goal in 7+ years of trying.

Yes spending in the services sectors or part of the economy is the major challenge for the Japanese economy now, because in the services sector, it might require face to face meeting such hotels, restaurants, stores, or any other business where customers and company service employees need to meet.

Article:

But the government has extended it to next Monday and expanded areas under the restrictive measures to 10 prefectures. With the virus spread showing no signs of abating, it plans to make a final decision later this week on whether to extend the emergency into June, a senior government official said.

"Consumption began to decline in mid-April and plunged to quite a low level during the Golden Week holidays" from late April to early May, usually one of the busiest times of the year for the tourism sector, a government official told reporters.

"Spending on goods has been relatively solid, but that on services remains sluggish," the official added.

Ideas:

Consumer spending on goods or products can easily be done online, for many products, and even going to a store might not be that much of a challenge, especially if its done when there are not a lot of other customers in the store or at times which are not peaking shopping times.

Of course many food supermarkets now have either delivery services and or unique pickup type services to help the customers.

The idea is to minimize contact with as many people as possible, so get your in-store shopping done early if you have to do to a physical store or late night if the store is open.

Of course, maybe many stores now have a presence or online platform which customers can use instead of going to the physical store.

But that doesn't work for many small stores and shops as they don't have the resources or need an online presence.

The challenges of course remain for all of the services not related to food or goods, which can possibly be bought online.

For example restaurants, hotels, tourism businesses, movie theaters etc. which require more face to face interactions and or where a larger group of people/consumers can be in contact.

Article:

The monthly report also downgraded its view on corporate business assessments for the first time in four months, saying they "appear to be pausing" in recovery, while "some severe aspects still remain."

As for exports, the office retained its evaluation but adopted a different wording. It said that exports "continue to increase moderately," compared with the phrase "increasing at a slower pace" in the April report.

Assessments on other major components were unchanged, with the latest report saying that business investment and industrial production are "picking up."

Looking forward, the government said the economy is expected to continue picking up but warned "full attention should be given" to a further increase in downside risks due to the spread of virus infections in Japan and abroad.

Ideas:

Exports appear to be improving at a steady rate. But again, it must be understood just how bad spring 2020 was. So if we see a 30 percent plus increase from month to month from a year ago, it has to be tempered with the idea, that is just showing an increase from spring 2020, not spring 2019 before the pandemic.

It can never be assumed that business investments are always going to go up in a linear fashion like a line on a graph.

Business investments, like any other economic activity is subject to human interaction, meaning business sentiment. If the businesses feel the economy looks good six months down the road, the they might invest some, but if the economy doesn't look so good six months down the road they might hesitate or wait until they feel the economy is going to look better.

Have a nice day and be safe!