Japan upgrades view of economy following lifting of Covid curbs

JAPAN’S government upgraded its monthly economic assessment in April, the first increase in 4 months, as the number of Covid-19 cases fell and pandemic restrictions were lifted.

The Cabinet Office said the economy is showing signs of picking up as the impact of the virus eases. It boosted the assessment of consumption and public spending, saying the former showed signs of recovery. 

Infections have fallen from a peak of more than 100,000 daily cases in early February to less than half that now as the Omicron wave subsides. Following the lifting of Covid restrictions in mid-March, the Jibun Bank Japan purchasing managers indices have been improving, as restaurants and bars open for longer and consumers feel more confident about venturing out. 

The assessment comes as the government is due to unveil a set of measures by the end of the month to cushion the blow from higher fuel bills and address voter concerns ahead of a summer election.

Still, the impact of the virus restrictions probably resulted in the economy contracting in the first 3 months of the year, according to a Bloomberg survey. Russia’s war on Ukraine, surging energy prices and the sudden weakening of the yen are also clouding the outlook for businesses, and have the potential to weigh on consumer spending. 

On the rapidly weakening currency, Finance Minister Shunichi Suzuki has recently been putting more emphasis on the potential for it to have negative impacts on the economy. Referring to the rise in import costs and the hit to the bottom lines of businesses that can’t pass on increasing costs, he said that “strong negative aspects” exist.