Government maintains view of ‘weak’ recovery from COVID-19, wary of rising material costs

The government has maintained its view that the economic recovery after the coronavirus pandemic shows “weakness”, while expressing caution about the impact before the recent rise in raw material costs, including oil prices raw.

“The Japanese economy continues to show weakness in the recovery, although the serious situation due to the novel coronavirus is gradually easing,” the Cabinet Office said Thursday in its overall assessment for November, retaining its view for the second consecutive month.

By component, the bureau improved its view of private consumption for the first time in 13 months, saying it is showing “upturns, as some weakness persists,” after describing it as showing “some weakness. new weakness “in the previous month.

The improvement reflected an improvement in consumer confidence after the government on October 1 lifted COVID-19 states of emergency across Japan, under which people were asked to refrain from non-essential outings , and on November 1 relaxed its attendance limit of 10,000 spectators for large-scale events.

Despite the improvement in consumer spending, the overall assessment was retained as the positive factor was offset by a worsening outlook for exports and industrial production due to disruptions in supply chains that constrained manufacturers Japanese automobiles to cut production.

Exports in November were “almost stable”, revised down for the second consecutive month, due to a slowdown in China’s economic recovery and lower exports of auto-related products, he said. he indicates. The previous month, the government had said they were “increasing at a slower rate”.

The outlook on industrial production was lowered for the first time in two months, with the report saying the recovery “appears to be on a pause” in part due to weak exports of production machinery to Asian countries.

A Cabinet Office official said that although new car sales continue to decline amid the protracted global semiconductor drought, spending on restaurants and leisure activities such as cinemas and concerts is currently showing a decline. modest recovery.

Looking ahead, the bureau said the economy is expected to recover as “economic and social activities move towards normalization,” but full attention should be paid to further increasing downside risks as ” because of “constraints on the supply side and commodity prices”.

The official said the effect of rising raw material costs, which are feared to squeeze Japanese company profits, “may become more visible in profit reports for the October-December period for listed companies “.

He added that the impact of such cost increases on consumers should also be watched closely, as electricity bills are expected to rise further and many companies, including manufacturers of consumer staples, have announced increases. prices that could reduce their purchasing power.

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