Uncertainty over the outlook due to yen appreciation, falling stock prices, slowing global growth and political uncertainty

「Due to spillover effects from policy changes by major powers, including heightened tensions in the Middle East, Japan's economy is expected to remain in an environment that is difficult to predict.」

「Although disposable income is rising, real disposable income remains weak due to higher prices, and consumers are becoming increasingly inclined to economize. The most recent Consumer Price Index for September, excluding fresh food and published by the Ministry of Internal Affairs and Communications, rose 2.9% year on year. However, real wages have declined year on year for 8 consecutive months since the beginning of this year, and the situation in which they have failed to keep pace with rising prices continues.」

「Japan's economy is expected to see increased demand from growth in inbound tourism and wage increases, leading to a shift from a preference for saving to more selective consumption. However, it is also necessary to monitor the effects of a slowdown in overseas economies and unpredictable changes in economic policy, including tariff increases by the Trump administration in the United States.」

「The Consumer Price Index (the all-items index published by the Ministry of Internal Affairs and Communications) has continued to rise by around 2% year on year each month. However, real wages adjusted for price increases turned positive year on year in June for the first time in 27 months and are beginning to establish a positive trend.」

「Although wage levels are rising through base-pay increases and other measures, real wages have continued to decline due to higher prices. Domestic consumers remain highly focused on protecting their household finances, making it difficult to say that consumption will continue to expand steadily.」

「Following the reclassification of COVID-19 and the lifting of restrictions on activity, consumer sentiment in Japan became more positive, demand for dining out and tourism, including inbound tourism, recovered substantially, and retailers such as department stores and convenience stores continued to post solid sales growth. Economic activity is returning to normal. Meanwhile, raw material prices and energy costs remain high, the yen has weakened further, and manufacturing costs continue to rise, including due to higher labor costs.」

「During the cumulative first three months of the current consolidated fiscal period, the Japanese economy remained on a recovery trend. Consumer sentiment in Japan became more positive, partly as a result of COVID-19 being reclassified as a Class 5 infectious disease, while demand for dining out and tourism, including inbound tourism, recovered substantially. Retail businesses such as department stores and convenience stores also continued to post solid sales growth. Meanwhile, raw material prices and energy costs remained high, the yen depreciated further, and manufacturing costs continued to rise due to higher labor costs and other factors.」

「Restrictions on daily activities and social activity related to COVID-19 that had continued for an extended period have largely been lifted, economic activity has returned to near-normal levels, and consumption is expected to recover. Meanwhile, raw material and energy costs remain high,」

「Although the yen's depreciation was partly corrected from October onward, raw material and energy costs rose sharply and manufacturing costs increased substantially under the influence of the weaker yen, driven by the Japan-US interest-rate differential and the trade deficit, as well as the Ukraine crisis, and price increases were implemented across a wide range of industries. In addition, the Bank of Japan revised its yield curve control (YCC) operations at the end of the year, increasing volatility in interest rates and foreign exchange markets and making the economic outlook even more difficult to predict.」

「Against a backdrop of global monetary tightening, the sharp depreciation of the yen resulting from the Bank of Japan's continued monetary easing, together with higher crude oil prices caused by Russia's invasion of Ukraine, has driven up raw material and energy costs. Manufacturing costs, particularly for domestic companies, have risen substantially, and price increases have been implemented across a wide range of industries.」

「During the cumulative first three months of the current consolidated fiscal period, the Japanese economy showed signs of increased activity as the movement of people began to recover through domestic travel and trips home, and as the entry of foreign nationals resumed. Corporate earnings also began to improve in some industries, including tourism and department stores, which had been under severe pressure during the restrictions. Increased spending on leisure and dining out is driving household consumption. Meanwhile, affected by the weaker yen and higher crude oil prices, raw material and energy costs have surged, and companies' manufacturing costs have risen significantly,」

「Although all priority preventive measures to prevent the spread of disease had been lifted by the end of the fiscal year, the recovery remained sluggish. In addition, the situation involving Russia and Ukraine has further increased uncertainty about the outlook.」

「Meanwhile, following a decline in COVID-19 cases in October, partly as a result of steady vaccination efforts, the state of emergency was lifted nationwide. Restrictions on restaurants, food-service businesses and events were gradually eased, the resumption of normal operations progressed, and economic activity also began to pick up gradually. However, many industries have not necessarily recovered to their previous levels, and the economy has not yet escaped its uncertain conditions.」

「Meanwhile, the food-service industry, including izakaya pubs and restaurants, has remained in an increasingly difficult situation as restrictions on nighttime business and bans on serving alcohol have continued for an extended period.」

「Although COVID-19 vaccinations have begun in Japan, the time required to contain the virus remains fluid, and social activity will have to be balanced with economic activity for the time being. Even after the virus is contained, a return to daily life exactly as it was before appears unlikely, and purchasing and consumption patterns based on a new lifestyle are expected to emerge.」

「As the infections continued unabated and concerns grew about the collapse of the healthcare system, the Go To campaign introduced as an economic measure also had to be suspended temporarily, leaving the economy in an uncertain outlook.」

「During the cumulative first six months of the current consolidated fiscal period, the Japanese economy remained in a situation where there was no sign of the COVID-19 pandemic subsiding and economic activity had to remain restricted to prevent infections.」

「Although countries around the world implemented lockdowns (city closures) and sought to contain the spread of COVID-19, the outbreak initially appeared to have been brought under control. However, infections began spreading again after economic activity resumed, and with no clear prospect of containing the virus, it continues to create significant uncertainty about future corporate earnings and the global economy.」

「Against this backdrop, a novel coronavirus emerged and spread in China, disrupting global manufacturing supply chains and causing a further economic downturn. As the virus spread worldwide, countries around the world were forced to implement lockdowns (city closures).」

「Although the announcement of a Phase One US-China trade agreement has brought signs of improvement, it continues to create uncertainty about future corporate earnings and the global economy, including due to other geopolitical risks.」

「US-China trade friction, with repeated retaliatory measures, remains without any clear path to resolution. Together with other geopolitical risks, it is a concern for exporters, while the downturn in the Chinese economy, through stagnation in external demand, is weighing on economic conditions and creating uncertainty over future corporate earnings and the global economy.」

「US-China trade friction, with repeated retaliatory measures, remains without any clear path to resolution. Together with other geopolitical risks, it is a concern for exporters and creates uncertainty over future corporate earnings and the global economy.」

「Amid lower growth forecasts in the global economic outlook due to uncertainty over the outlook for the global economy, including the rise of protectionism, Japan's economy is entering a phase in which it must address trade policy, exchange-rate issues and exit strategies for monetary policy.」

「Corporate trends have also been reflected to some extent in lower stock prices due to the intensification of US-China trade friction and US interest-rate hikes, and the view has become more widespread that conditions weighing on the global economy will also affect Japan.」

「US-China trade friction also remained difficult to foresee, becoming a concern for exporters and creating uncertainty over future corporate earnings and the global economy.」

「US-China trade friction has also become a concern for exporters, creating uncertainty over future corporate earnings and the global economy.」

「Toward the end of the period, higher crude oil prices and the stronger yen and lower stock prices had an impact, while uncertainty over the outlook, including the protectionist trade policies of the US administration, began to dampen business sentiment and raised concerns about the potential impact of US-China trade friction on the global economy.」

「In addition, uncertainty over the outlook, including uncertainty in overseas political and economic conditions and rising geopolitical risks, has become a new concern for corporate management.」

「During the first six months of the current fiscal year, Japan's economy continued to recover gradually and business confidence improved, reflecting the expansion of exports and production supported by the global economic recovery and the weaker yen. However, consumers had little sense of an economic recovery and personal consumption remained sluggish, while companies continued to face difficult conditions as labor shortages prevented them from passing higher labor and other costs on to selling prices. In addition, heightened tensions surrounding North Korea and political instability created further uncertainty over the economic outlook and became new concerns for corporate management.」

「During the first quarter of the current fiscal year, Japan's economy continued to recover gradually and business confidence improved, but strong consumer frugality and labor shortages made it difficult for companies to pass higher labor and other costs on to selling prices. In addition, exchange rates remained volatile amid global political instability, but after the United States and Europe signaled a reduction in monetary easing, the long-term interest-rate differential with Japan widened and the yen was expected to remain weak, creating favorable conditions for export-related companies.」

「Rising labor costs due to labor shortages and concerns about shrinking sales operations have begun to weigh on business sentiment. In addition, food and daily necessities were expected to become more expensive due to higher crude oil prices and the weaker yen, households remained strongly inclined to economize, and difficult conditions continued. With many uncertainties surrounding the outlook for the global economy, companies continued to face challenging management decisions amid major changes in the business environment, driven by caution over uncertainty.」

「Although signs of a gradual economic recovery were seen due to improvements in the employment environment resulting from the Government's economic policies and the weaker yen and higher stock prices since November, households remained strongly inclined to economize amid soaring vegetable prices and rising gasoline prices, and difficult conditions continued. In addition, with many uncertainties surrounding the outlook for the global economy, companies continued to face challenging management decisions amid major changes in the business environment, driven by caution over uncertainty.」

「As the continuing strength of the yen increased uncertainty over the outlook, particularly for exporters, business confidence deteriorated and difficult conditions continued. In addition, the global economic slowdown resulting from the global economic slowdown and political instability became a risk factor that could put pressure on corporate earnings.」

「As the stronger yen and lower stock prices increased uncertainty over the outlook, particularly for exporters, business confidence deteriorated and difficult conditions continued. In addition, the global economic slowdown resulting from the global economic slowdown and political instability was a risk factor that could put pressure on corporate earnings.」