The Bank of Japan (BOJ) has revised its economic outlook upwards for six regions, including Kanto-Koshinetsu, as per the quarterly Sakura report released on Thursday. This upgrade is attributed to robust domestic demand and a resurgence in inbound tourism. Despite a slowdown in overseas recovery and inflation pressures, assessments for Tokai, home to Toyota Motor (NYSE:) Corp., Kinki, and Kyushu-Okinawa remain steady.
Private consumption, a pivotal component of Japan’s economy, continues to demonstrate resilience amidst these challenges. The BOJ and economists emphasize the necessity for sustainable wage growth to maintain a price and wage cycle in the face of inflation. To mitigate inflation’s impact on households, the government is currently developing a new economic package.
The Sakura report also highlighted the positive impact of strong auto exports on the economy, facilitated by easing parts shortages which have enabled automakers to increase production.
In addition to increased inbound demand from tourists, other factors contributing to the upgraded economic assessments include higher service consumption such as travel and food, recovery in corporate production, and firm capital investment. Even with rising prices, demand remains strong from both foreign and domestic customers. However, due to increased accommodation rates, consumers are shifting towards cheaper private brand products and reducing unnecessary purchases.
Yoshiki Okamoto, the Sapporo Branch Manager, noted that tourism is driving personal consumption. He also mentioned the construction of a large-scale plant in Hokkaido for developing and mass-producing cutting-edge semiconductors. This signals firms’ business fixed investment amid rising growth expectations.
The insights from the Sakura report will inform the BOJ’s policy-setting meeting later this month. Future economic conditions will hinge on improvements in employment and income situations, corporate wage increases, and securing human resources with voices advocating for wage increases within successful companies.
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