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Japan’s Economy: Monthly Outlook (Oct 2020)

With private sector demand marking time, economic recovery is being led by exports, but downside risk is increasing

Keiji Kanda

Akane Yamaguchi

Wakaba Kobayashi


◆Japan’s economy continues in a gradual recovery, but private sector demand is marking time. Personal consumption was seen to be marking time through the first half of October, while exports, which were leading the economic recovery, continued recording growth through September, helped along by the appearance of pent-up demand. However, downside risk is increasing for exports, with the spread of the COVID-19 infection spreading again in Europe and becoming more serious. If exports to Europe suffer a downturn, its effects will likely appear most noticeably in the transport equipment and electrical machinery industries.

◆With spread of the COVID-19 infection expected to move into the long-term, the improvement in business conditions for most industries will be gradual for the time being. There are concerns that the risk of employment adjustments and bankruptcies may increase for some industries, such as accommodations, and eating & drinking services. In consideration of the current condition of these industries, additional economic measures may be required, including the extension of various measures that will expire in FY2020. At that time, it will also be necessary to fine-tune the system, making appropriate emphases, such as prioritizing benefits and considering new support measures, while narrowing down the support targets based on the status of COVID-19 infections and economic conditions.

◆In a comparison of retail prices and unit purchase price in food and beverages, after the coronavirus crisis, households seem to have become more high-price-oriented, (the so-called “petite luxury” or enjoyment of simple things). Changes such as the increase in home-related demand caused by the coronavirus crisis, and the growing tendency toward “petite luxury” in the area of food and drink while eating out decreases, are expected to continue in the post-corona era. Responding to changes in the structure of consumption caused by the coronavirus crisis will enhance corporate sustainability since doing so looks ahead to the economic and social structure ten years from now.

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