Uncertainty from domestic economic conditions, foreign exchange rates, emerging-market economies and consumption tax increases

「At the same time, continued attention is required regarding risks that could put downward pressure on the economy, including concerns about a recession caused by the impact of U.S. trade policy and the effect of prolonged inflation on personal consumption. The outlook therefore remains uncertain.」

「Japan’s economic outlook is expected to remain resilient, led by domestic demand, supported by improvements in employment and income conditions and the effects of various policies. However, downside risks to the economy from the impact of U.S. trade policy are increasing, and there are concerns about the impact of continued inflation on personal consumption through weaker consumer sentiment. Greater attention must also be paid to the effects of volatility in financial and capital markets, and the environment surrounding companies remains uncertain.」

「During the interim consolidated accounting period, Japan’s economy was recovering gradually, but financial markets in Japan and overseas had shown unstable movements since this summer. The outlook remained uncertain, with continued concern that geopolitical risks could cause substantial volatility in the real economy and financial markets.」

「At the same time, downside risks in overseas economies, including the effects of global monetary tightening and concerns about the outlook for the Chinese economy, pose a risk of putting downward pressure on Japan’s economy. The outlook remains uncertain because of concerns about supply-chain constraints, the so-called 2024 problem, lower real income due to prolonged inflationary pressure restraining consumer sentiment, and worsening labor shortages.」

「During the nine-month period ended the third quarter of the fiscal year, Japan’s economic recovery continued after the COVID-19 pandemic. Wages and employment conditions improved, and inbound demand was supported by the weaker yen. Overseas economies, particularly that of the United States, which had been a concern because of rapid interest-rate increases, also remained generally firm despite mixed conditions. At the same time, there are concerns that prolonged inflationary pressure could reduce real incomes and restrain consumer sentiment, while worsening labor shortages and possible supply-chain constraints remain sources of concern.」

「During the six-month period ended the second quarter of the fiscal year, Japan’s economy continued to recover gradually, with economic activity improving mainly in service industries such as leisure, travel and food services as efforts to bring the COVID-19 pandemic to an end accelerated. Inbound demand also increased, partly due to the impact of the weaker yen. At the same time, there are concerns that prolonged inflation could reduce real incomes and restrain personal consumption, while higher interest rates in major countries could stagnate the global economy and lead to a downturn in Japan’s economy through weaker exports.」

「At the same time, prolonged inflation has strengthened households’ preference for saving, and weak real wages may prevent personal consumption from progressing as expected. In addition, there are negative factors, including the possibility that supply constraints will arise against a backdrop of a slowdown in the global economy due to higher interest rates and labor shortages, raising concerns that the economic recovery could lose considerable momentum.」

「During the nine-month period ended the third quarter of the fiscal year, Japan’s economy was gradually returning to normal, but many factors continued to hinder the domestic economic recovery, including the protracted situation in Ukraine, slowing overseas economies centered on the United States and Europe, downward pressure on corporate earnings from soaring raw-material prices and energy costs, the impact on foreign exchange and other financial markets of changes in monetary policy, and production constraints caused by shortages of semiconductors and components.」

「During the six-month period ended the second quarter of the fiscal year, Japan’s economy was expected to recover, led by personal consumption and inbound demand, as the seventh wave of COVID-19 subsided and policies were implemented to balance infection prevention with economic and social activity, including easing restrictions on personal conduct and entry restrictions for foreign tourists. However, rising energy prices stemming from the worsening situation in Ukraine and yen depreciation accompanying interest-rate hikes intended to curb inflation in the United States and Europe have allowed prices to continue rising unchecked, reducing real purchasing power. There are also concerns about downside risks to the economies of Japan and other countries, including the possibility that higher interest rates will slow the global economic recovery.」

「During the 1st quarter cumulative consolidated period, Japan’s economy began to recover moderately as the 6th wave of COVID-19 subsided. However, prices rose due to higher resource prices resulting from the worsening situation in Ukraine and the weaker yen caused by the widening interest rate differential with the United States and Europe. Recently, higher prices have reduced real purchasing power and weakened consumer sentiment, while corporate earnings have lost momentum due to rising costs, raising concerns over the impact on capital investment, employment and wages.」

「Japan’s economic outlook is on a recovery trend, particularly in personal consumption, as COVID-19 has slowed and activity restrictions have been eased. However, concerns have arisen that the shift toward tighter monetary policy in advanced economies could impede the global economic recovery. Surging global resource prices due to the worsening situation in Ukraine and turmoil in financial markets were also identified as factors that could weigh on the domestic economy, and conditions remain unpredictable.」

「Risks to economic conditions as efforts continue to prevent infections while maintaining economic activity include stagnation in the domestic and overseas economies due to the spread of the Omicron variant, as well as substantially higher import prices resulting from surging energy and raw material prices and a rapid depreciation of the yen. Concerns have arisen that the economy could deteriorate significantly.」

「Meanwhile, production activity had recently weakened, particularly in manufacturing, due to the global semiconductor shortage and parts shortages caused by the spread of COVID-19 in Southeast Asia. Concerns also arose over the impact on the economy of surging crude oil prices and raw material costs.」

「During the 1st quarter cumulative consolidated period, Japan’s domestic economy began to show signs of a gradual recovery as the vaccination rate among older people increased. Globally, demand recovered mainly in countries that were ahead in vaccine rollouts, and exports turned upward. However, inbound demand in Japan remained sluggish, and concerns grew that infections could spread again, triggered by the spread of variants and the holding of the Tokyo Olympics, creating a risk that economic activity could stagnate again. Uncertainty over the economic outlook therefore continued.」

「During the consolidated fiscal year, Japan’s economy remained in difficult conditions due to the impact of COVID-19, with no clear prospect of containment. Although signs of a gradual recovery emerged in Japan and overseas as socioeconomic activity resumed in stages, the economy repeatedly stalled again as infections resurged.」

「During the 3rd quarter cumulative consolidated period, there were signs of recovery due to government economic stimulus measures. However, as the renewed spread of COVID-19 remained unchecked around the year-end and New Year period, a state of emergency was declared in limited areas including the Tokyo metropolitan area, and performance continued to diverge between companies depending on their business models, leaving conditions uncertain.」

「Economic activity in overseas countries remains sluggish, and inbound demand has remained almost zero due to continued entry restrictions. Although government measures to stimulate demand, such as the GoTo campaign, are expected to support a recovery in spending on dining out, travel and leisure, concerns remain that worsening income conditions, including a higher unemployment rate and weaker wages, could prolong the period in which personal consumption remains below previous levels. The pace of economic recovery is therefore expected to be moderate.」

「After the lifting of the declaration in May, economic activity resumed and the economy began to move gradually, bringing the sharp downward trend to a halt. However, depending on the arrival of a 2nd or 3rd wave of COVID-19, economic activity could stagnate again, creating a downside risk to an economic recovery, and concerns remain over the impact on the recovery of corporate earnings, employment conditions, consumer activity and inbound demand.」

「The impact of this unprecedented disaster on the market environment for the Group’s core products remains unknown, and difficult conditions are expected to continue.」

「During the 3rd quarter cumulative consolidated period, stagnation in external-demand industries increased due to the global economic slowdown caused by US-China trade friction. Consumer spending also weakened, with the October 2019 consumption tax rate increase acting as a negative factor, and economic sentiment deteriorated. In addition, developments following the UK’s EU withdrawal, the increasingly tense situation in the Middle East and the spread of the novel coronavirus were viewed as factors of concern affecting Japan’s and the global economy.」

「During the 2nd quarter cumulative consolidated period, signs of stagnation began to emerge, particularly in manufacturing, due to the impact of US-China trade friction and a global slump in automobile sales and semiconductor-related sectors. The outlook for the economy became increasingly uncertain, with numerous concerns including a decline in consumption following the consumption tax increase, slower exports and weakening construction demand.」

「There are concerns that the future course of the economy will be heavily influenced by overseas developments, including US-China economic tensions, the increasingly tense situation in the Middle East and China’s excessive debt problem.」

「Meanwhile, the global economy remained uncertain due to developments in US-China trade issues, the outlook for the Chinese economy and uncertainty over overseas economies and policies.」

「During the 3rd quarter cumulative consolidated period, Japan’s economy continued to recover moderately in both domestic and external demand, surpassing the longest postwar Izanami economic expansion. However, the risks to the global economy from US-China trade friction remained immeasurable and had begun to cast a shadow over share prices and foreign exchange trends.」

「During the 2nd quarter cumulative consolidated period, Japan’s economy remained stalled as consumer sentiment weakened due to higher energy costs caused by rising crude oil prices and a succession of natural disasters, including typhoons and earthquakes, although construction and reconstruction demand provided support. The outlook for the economy also remained uncertain due to the impact of a bilateral trade agreement between Japan and the United States and intensifying US-China trade friction.」

「Meanwhile, concerns have arisen that higher US interest rates and US-China trade friction could weigh on economic sentiment across a range of industries.」

「Meanwhile, the outlook is expected to remain uncertain due to factors including uncertainty in overseas economies and heightened geopolitical risks.」

「While the economy continues to recover moderately, efforts to reform labor productivity efficiency, promoted by the government as a slogan, are strengthening pressure for wage increases as employment and productivity improve. At the same time, growing concerns over future pension issues and higher medical costs are increasing the public’s focus on protecting household finances, and attention is focused on whether higher wages will translate directly into consumption.」

「However, uncertainty over the outlook remains due to geopolitical risks, including the risk of a confrontation between the US administration and North Korea. Concerns have arisen that increased volatility in financial markets, including share prices and foreign exchange rates, could cause economic sentiment to deteriorate.」

「Meanwhile, financial markets remain unstable amid the UK’s EU withdrawal, expectations of higher US interest rates and geopolitical risks, particularly in East Asia. Foreign exchange rates and share prices are expected to remain major sources of volatility, and uncertainty over the outlook is expected to continue.」

「Japan’s economy is expected to continue recovering moderately as employment and income conditions improve and the virtuous cycle in the economy progresses. However, the outlook is expected to remain uncertain due to the impact of uncertainty in overseas economies and volatility in financial and capital markets.」

「During the 3rd quarter cumulative consolidated period, Japan’s economy was recovering moderately against a backdrop of improving corporate earnings and employment conditions. Overseas, however, uncertainty over the outlook for global politics and the economy increased, reflecting the UK’s EU withdrawal and both expectations and concerns regarding the policies of the new US administration. There were also concerns that major fluctuations in financial markets, particularly foreign exchange markets, could affect the real economy going forward.」

「During the 2nd quarter cumulative consolidated period, Japan’s economy remained unsettled due to risk-off moves in financial markets amid growing concerns over a slowdown in the global economy, as well as expectations of additional monetary easing by the Bank of Japan and a widening Japan-US interest rate differential.」

「The stronger yen and weaker share prices, against a backdrop of uncertainty over overseas economies including the UK’s EU withdrawal, raised concerns about weaker consumer sentiment, disruption in financial markets and the outlook for corporate earnings, and conditions remained weak.」

「Uncertainty is expected to persist due to foreign exchange fluctuations, signs of slowing growth in emerging-market economies such as those in Asia and the planned consumption tax increase.」