A lull in economic conditions amid an overseas slowdown and yen appreciation

「During the interim consolidated accounting period, Japan's economy maintained a moderate recovery trend, while private consumption remained weak. Despite improvements in the income environment, supported by strong wage increases in the 2026 spring labor-management negotiations, higher summer bonuses and the government's measures to address rising prices, as well as favorable employment conditions, consumer sentiment showed signs of weakening due to heightened tensions in the Middle East and the impact of soaring prices.」

「The operating environment surrounding the group is expected to remain challenging, owing to the impact on inbound consumption of fewer visitors from China resulting from deteriorating Japan-China relations, as well as higher crude oil prices following the escalation of tensions in the Middle East at the end of February.」

「Attention should be paid to changes in the external environment, including the impact on inbound consumption from a decline in visitors from China amid worsening Japan-China relations and the rise in crude oil prices resulting from heightened tensions in the Middle East at the end of February.」

「During the first 6 months of the current consolidated fiscal year, Japan’s economy was on a gradual recovery trend. In the 2025 spring labor-management negotiations, companies implemented substantial wage increases in response to labor shortages and rising prices, bringing the wage increase rate to the low 5% range. The income environment has continued to improve, helped by higher bonus payments. However, personal consumption has been affected by a stronger inclination to save amid high prices, and the recovery in domestic demand lacks strength. There are also downside risks, particularly for manufacturing, following the increase in U.S. tariffs, requiring attention to changes in the external environment.」

「During the current consolidated fiscal year, the income environment improved as wage growth accelerated in the 2024 spring labor-management negotiations and the minimum wage was raised in October 2024. The economy is gradually recovering, supported by expanding inbound demand and other factors. However, the lack of significant growth in personal consumption owing to a stronger inclination to save amid high prices is a concern, and close attention must also be paid to changes in the external environment, including financial-market volatility and overseas policy developments.」

「During the first 6 months of the current consolidated fiscal year, the income environment improved as wage growth accelerated in the 2024 spring labor-management negotiations, and personal consumption began to recover. The economy is gradually recovering, supported by expanding inbound demand and other factors. However, attention must be paid to changes in the external environment, including financial-market volatility and overseas policy developments.」

「During the first 3 months of the current consolidated fiscal year, the income environment improved as wage growth accelerated in the 2024 spring labor-management negotiations, and personal consumption began to recover. The economy is gradually recovering, supported by expanding inbound demand and other factors. However, attention must be paid to changes in the external environment, including the effects of global monetary tightening, constraints on economic activity caused by heightened geopolitical risks, rising prices and volatility in financial and capital markets.」

「During the current consolidated fiscal year, COVID-19 was reclassified as a Category 5 disease under the Infectious Diseases Control Law in May 2023, easing restrictions on daily life and social activity and moving consumer activity toward normalization. The economy has shown signs of a gradual recovery. However, raw-material and energy costs have remained high because of yen depreciation against a backdrop of the Japan-U.S. interest-rate differential, trade deficits and the prolonged situation in Ukraine. Sharp domestic price increases have also contributed to continued uncertainty about the outlook.」

「During the first 3 months of the current consolidated fiscal year, COVID-19 was reclassified as a Category 5 disease under the Infectious Diseases Control Law, easing restrictions on daily life and social activity. The movement of people has returned, and economic activity is approaching normal levels. However, raw-material and energy costs have remained high because of yen depreciation against a backdrop of the Japan-U.S. interest-rate differential, trade deficits and the prolonged situation in Ukraine. Sharp domestic price increases have also contributed to continued uncertainty about the outlook.」

「During the first 3 quarters of the current consolidated fiscal year, the number of COVID-19 cases in the seventh wave declined from August onward, and the economy showed signs of recovery as restrictions on activities and entry were eased. However, the environment surrounding Japan remained uncertain because of the effects of soaring crude oil prices, rapid yen depreciation and rising prices.」

「During the first 6 months of the current consolidated fiscal year, Japan’s economy showed signs of recovery as the full lifting of priority preventive measures in March 2022 eased severe conditions. However, the environment surrounding Japan remained uncertain because of the increase in infections during the seventh wave of COVID-19, higher energy costs resulting from rising raw-material prices and the situation in Ukraine, and rapid yen depreciation caused by higher U.S. interest rates.」

「During the first 3 quarters of the current consolidated fiscal year, Japan’s economy showed signs of recovery as the full lifting of priority preventive measures in March 2022 eased severe conditions. However, the environment surrounding Japan remained uncertain, owing to higher energy costs resulting from rising raw-material prices and the situation in Ukraine, as well as the rapid yen depreciation caused by higher U.S. interest rates.」

「During the current consolidated fiscal year, Japan’s economy remained uncertain as personal consumption declined, particularly in face-to-face services, owing to the state of emergency declared during the fifth wave of COVID-19 and the sixth wave caused by the Omicron variant.」

「Regarding market trends in the food and food-service businesses, the group’s core businesses, the food market declined by approximately 10% year on year in April for the first time in 18 months, due to the backlash from the sharp increase in home-delivery food demand during the first state of emergency the previous year. It returned to 4% growth in May and has remained strong (Nikkei POS data, frozen prepared-food category). In the food-service market, sales across all food-service formats in May were 119.8% of the previous year (Japan Food Service Association, Food Service Industry Market Trend Survey), indicating a recovery. However, sales were still only 80.2% of the level two years earlier and had not yet returned to pre-pandemic levels. The effects continued from restrictions on restaurant operating hours and alcohol service under the state of emergency in major metropolitan areas and priority preventive measures in other areas.」

「During the first 3 quarters of the current consolidated fiscal year, Japan’s economy was expected to recover as social and economic activity gradually resumed while measures were taken to prevent the spread of COVID-19. However, the third wave of COVID-19 infections grew to a scale exceeding the second wave with the arrival of winter, and concerns about another economic deterioration, particularly in personal consumption, have re-emerged.」

「In external demand as well, exports have weakened against a backdrop of caution over the risk that concerns about a renewed conflict following the partial U.S.-China trade agreement could put downward pressure on the economies of both countries and the global economy, as well as concerns about geopolitical risks in the Middle East, North Korea and elsewhere.」

「Going forward, employment conditions are expected to remain favorable, personal consumption solid and corporate capital investment resilient. However, the risk of an economic downturn originating in overseas factors, particularly U.S.-China trade friction, remains, and conditions of persistent uncertainty about the economy are expected to continue.」

「During the current consolidated fiscal year, Japan’s economy recovered from the temporary downturn caused by natural disasters such as earthquakes and heavy rain the previous year, while capital investment and personal consumption remained firm. Overall, however, the economy lacked strength. Going forward, personal consumption is expected to remain resilient on the back of solid employment conditions, but uncertainty is expected to persist for the time being as the overseas economy continues to slow amid U.S.-China trade friction and capital-investment growth gradually loses momentum, particularly in manufacturing.」

「During the first 3 quarters of the current consolidated fiscal year, Japan’s economy was strongly affected by changes in conditions overseas, including U.S.-China trade friction. Stock prices fell in October, and the yen appreciated against the U.S. dollar in October and December. Under these conditions, business sentiment in manufacturing showed signs of deterioration, while leading economic indicators also remained weak, creating an outlook of growing concern.」

「In the near term, Japan’s economy is expected to follow a gradual recovery trend, supported by corporate capital investment and a recovery in personal consumption. However, concerns such as intensifying U.S.-China trade friction and higher energy prices are increasing uncertainty about the outlook.」

「During the first 3 quarters of the current consolidated fiscal year, Japan’s economy saw the yen weaken and exports remain firm, while import prices continued to rise. Domestically, low unemployment and year-on-year growth in total cash earnings continued against a backdrop of labor shortages, but consumer spending remained below the previous year and consumer sentiment stayed subdued.」

「In ordinary consumer spending, the inclination to save is strengthening, particularly among single-person households. Department stores are said to be performing well, but the strong stores are concentrated in major cities such as Tokyo and Osaka, and inbound demand is driving performance. Therefore, this cannot be attributed to increased disposable income among domestic consumers.」

「In ordinary consumer spending, real incomes remained sluggish, while adverse weather drove up fresh-food prices and dampened the desire to go out, resulting in weak everyday spending on daily necessities and food. Department-store sales, meanwhile, increased on the back of more inbound visitors and higher visit frequency among affluent consumers. Overall consumer sentiment is becoming increasingly uneven.」

「In ordinary consumer spending, incomes remained sluggish despite labor becoming increasingly non-regular, as many companies had decided as early as spring not to increase summer bonuses because of concerns about yen appreciation and U.S. economic policy. However, consumers’ focus on value and saving appears to be weakening, while department stores have seen notable increases in both the purchasing appetite and purchase frequency of affluent consumers, in addition to inbound visitors. Consumer sentiment therefore appears to be steadily improving.」

「During the cumulative first quarter of the current consolidated fiscal year, the Japanese economy saw a strong performance in the stock market as overseas economic prospects showed many positive signs. However, uncertainty about the outlook intensified because of the yen’s appreciation, while labor shortages became a constraint across industries.」

「During the first 3 quarters of the current consolidated fiscal year, Japan’s economy benefited from a number of positive factors, including economic recoveries in the United States and emerging economies, continued yen depreciation and rising stock prices under the “Trump trade,” continued lower crude oil prices, increased capital investment and improved employment conditions in Japan. However, the proportion of consumers inclined to spend is gradually shrinking as the number of elderly households and non-regular workers increases, strengthening the pressure from social structural changes weighing on domestic demand. Overall, the economy remained somewhat weak.」

「As overseas economies continue to alternate between expansion and contraction, the yen has remained strong, while exports have been sluggish. Overall, the economy remains in a pause.」