Political instability in the United States and Europe and geopolitical risks in East Asia

「The situation in the Middle East became increasingly tense following US military action against Iran, strengthening downward pressure on the global economy amid concerns about the impact on crude oil prices and international logistics.」

「Meanwhile, long-term interest rates rose due to stagnation in the supply chains for resources and materials and declining credit assessments of government bonds, while continued yen depreciation drove up the prices of all manner of goods, placing pressure on people's lives.」

「In Europe and the United States, governments with policies differing from those of their predecessors came to power one after another, increasing uncertainty about the future policies and diplomacy of each country.」

「The Noto Peninsula earthquake struck on New Year's Day, making for a sombre start to the year. However, the prolonged yen depreciation and the more open atmosphere following the end of the COVID-19 pandemic increased the number of foreign tourists visiting Japan, while relatively mild weather continued, resulting in substantial improvements in the performance of Japan's tourism, travel, transportation and dining industries.」

「Meanwhile, in addition to Russia's invasion of Ukraine, the new conflict in the Gaza Strip in Palestine, stagnation in the global economy caused by rising prices, and geopolitical risks disrupting logistics have combined to expand concerns about the outlook.」

「During the cumulative third quarter, new COVID-19 infections, which had increased again around the year-end and New Year holidays, continued to decline toward spring, and personal consumption trended significantly higher. Various restrictions related to measures to prevent the spread of COVID-19 were eased, and the performance of the dining, travel and transportation industries and other sectors began to recover to pre-COVID levels. Meanwhile, Russia's invasion of Ukraine showed no signs of a resolution, and price increases for a wide range of goods and services continued amid rising energy prices and yen depreciation.」

「During the cumulative second quarter, Japan's economy saw personal consumption trend upward from late summer into early autumn as vaccination rates rose and infections became less severe. However, new infections worldwide began to spread rapidly again, and disruption to the global economic supply chain continued. In addition, Russia's invasion of Ukraine showed no signs of a resolution, while surging crude oil and natural gas prices and yen depreciation triggered by US interest-rate hikes led to continued price increases for a wide range of goods and services.」

「At the same time, the yen was sold as global inflation continued while Japan maintained its low-interest-rate policy, causing the foreign exchange market to move further toward yen depreciation. The resulting surge in the prices of primary energy sources such as crude oil and natural gas was accompanied by repeated price increases for a wide range of goods.」

「Russia's invasion of Ukraine triggered a global energy crisis, causing crude oil and natural gas prices to surge.」

「The economic impact of the Beijing Winter Olympics held in February was limited, while Russia's invasion of Ukraine triggered a global energy crisis, causing crude oil and natural gas prices to surge.」

「During the cumulative second quarter, Japan's domestic economy saw consumption related to dining and travel become more active as the number of new COVID-19 infections fell sharply, while sporting and other events were held. Domestic economic conditions partially recovered to pre-COVID levels. Overseas, however, concerns about the outlook spread as new COVID-19 variants became prevalent.」

「During the cumulative first quarter, Japan's economy faced a situation in which the spread of COVID-19 infections was accelerating rapidly, requiring measures including repeated declarations of a state of emergency, the issuance and extension of priority preventive measures in major cities, and the rapid vaccination of younger people.」

「In April, another state of emergency was declared and measures were taken to expand medical capacity and accelerate vaccinations. However, restrictions on nonessential outings and requests for restaurants to close at night continued to affect people's lives, while reports of the spread of newly emerging variants heightened concerns about the outlook for people's lives and economic conditions.」

「During the cumulative second-quarter period, the Japanese economy showed some recovery as a result of the government's economic measures while the spread of the novel coronavirus continued, but another rapid expansion of infections toward year-end caused severe damage to the food service, events and travel industries.」

「During the cumulative first-quarter period, the Japanese economy entered a situation of rapid deterioration because of the worldwide spread of the novel coronavirus.」

「During the cumulative third-quarter consolidated period, the Japanese economy had continued to experience deterioration in business sentiment, particularly in manufacturing, because natural disasters such as Typhoon No. 19 that occurred the previous summer and the consumption tax increase implemented in October pushed the economy down, while exports declined and willingness to invest in equipment fell against a backdrop of a slowing global economy resulting from changes in overseas conditions. However, the worldwide spread of the novel coronavirus from the beginning of the year led to a state of rapid and severe deterioration in April, as a state of emergency was declared and restrictions on going outdoors, voluntary suspension of business across a broad range of industries to avoid contact with people, and requests to suspend operations were implemented nationwide.」

「During the cumulative second-quarter consolidated period, the Japanese economy was pushed down by natural disasters such as Typhoon No. 19 and the consumption tax increase implemented in October. Manufacturing-led deterioration in business sentiment continued because exports declined against a backdrop of a slowing global economy resulting from changes in overseas conditions, and companies' willingness to invest in equipment declined.」

「During the cumulative first-quarter consolidated period, the Japanese economy saw a downturn in the performance of export-related industries, particularly manufacturing, because of U.S.-China trade friction, Japan-Korea issues and the UK's withdrawal from the EU, although the construction and tourism industries remained firm ahead of the Tokyo Olympics.」

「During the cumulative third-quarter consolidated period, corporate earnings remained high and employment conditions and personal consumption continued to recover, but the lack of a tangible sense of economic recovery and signs of stagnation became apparent in the Japanese economy.」

「Corporate earnings and employment conditions continued to improve and the economy maintained a gradual recovery trend, but uncertainty about the outlook persisted as the global economy was affected by the prolonged U.S.-China trade friction and instability in the operation of the U.S. administration.」

「During the cumulative first-quarter consolidated period, the Japanese economy continued to recover gradually as corporate earnings and employment conditions improved, but its outlook became uncertain amid concerns about the impact of overseas economies, including U.S.-China trade friction.」

「Since the beginning of the year, the economy has remained in a situation of continued uncertainty about its outlook amid rising tensions in the global economy resulting from U.S. protectionist policies.」

「During the cumulative third-quarter consolidated period, the Japanese economy maintained a certain level despite a trend toward yen appreciation and falling stock prices, driven by growing expectations of a reduction in the Bank of Japan's monetary easing and concerns about U.S. protectionist policies from the beginning of the year. Corporate earnings remained high, and the recovery trend is believed to have continued as employment and income conditions improved.」

「Although concerns remain over the outlook for Japan's economy because of political instability in the United States and Europe and heightened geopolitical risks in East Asia, corporate earnings have remained strong and the recovery trend has become more apparent.」