Daily Management Review

Recovery of Japan's economy is postponed


06/30/2017


Industrial production in Japan declined more rapidly in May than it was in the aftermath of the devastating earthquake in March 2011, while stocks reached their highest level in almost a year, suggesting that the nascent economic recovery may die before it recovers.



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pixabay
Household expenses also fell in May, as a result of which the Bank of Japan's 2% target seemed to be unattainable. Energy costs were the only driver of that small inflation, which further emphasized the fragility of Japan's economic recovery.

The recent decline in oil prices and stubbornly slow wage growth could further exacerbate prospects and force the Bank of Japan to reduce its promising inflation forecasts next month, analysts say.

According to an economist at the Tokyo Tokaj Research Center, it seems that production entered a period of stagnation. "If production is weak, consumer spending is unlikely to be strengthened. The bank of Japan may have to lower consumer price forecasts", the expert said.

Industrial production in May declined by 3.3%, the decline surpassed forecasts, as car and construction equipment manufacturers reduced production volumes due to high inventories, according to data from the Ministry of Commerce on Friday.

While producer forecasts for June suggest that in April-June production will grow by 2% or more, production may peak after the current quarter, as some producers of capital goods order fewer details from abroad, a spokesman for the Ministry of Commerce said.

Reducing production volumes would be bad news for Japanese politicians who pinned their hopes on strong foreign demand, increasing corporate profits, wages and, ultimately, consumption.

source: reuters.com






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