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TOKYO, Jan 18 (Reuters) – Japan raised its production view for the first time in more than a year in a January report, while flagging looming risks that the outbreak of the Omicron variant of COVID-19 could chill the nascent recovery in the consumer-led economy.
Analysts in the latest Reuters poll have downgraded their forecast for Japan’s gross domestic product in January-March, although some say the extent of Omicron’s impact remains uncertain and depends on the severity of the restrictions imposed. by the coming government. Read more
“The economy is showing recovery moves as the severe conditions due to the coronavirus are gradually easing,” the government said in the monthly report approved by Prime Minister Fumio Kishida’s office on Tuesday.
The report, however, listed the COVID-19 outbreak as a downside risk to the economy that requires “full attention” for the first time in four months given the recent rapid spread of the Omicron variant.
On Monday, governors of Tokyo and surrounding prefectures said they were seeking to reinstate some restrictions, including shorter dine-in hours in the metropolitan area, which were previously lifted in September. Read more
Besides the coronavirus, authorities also noted supply chain constraints and trending commodity prices as downside risk factors, unchanged from the previous month’s report.
The government raised its production assessment for the first time since November 2020, reflecting a strong auto-led rebound in factory output. Read more
“The growth in transport machinery production has started to positively affect other manufacturers, such as plastic products,” a government official said at a press briefing ahead of the cabinet’s approval.
The government changed its view on wholesale inflation by adding a reference to the “slowing pace of increase” given the month-on-month decline in December, although the gain of a year on year remained close to a record level. Read more
Despite a gradual acceleration in inflation, the government maintained its assessments of consumer prices and other key economic elements such as exports, private consumption and employment.
On the Omicron variant, authorities are wary of its potential damage to consumption, as the Delta variant last year caused a bigger-than-expected contraction in the third quarter. Read more
“So far, the spread of Omicron has not had a significant effect on private consumption,” the official said, citing data on high-frequency spending and foot traffic earlier this month.
But given past episodes of coronavirus spread, the latest outbreak may lead to lower household spending on face-to-face services such as restaurants and travel, he added.
Reporting by Kantaro Komiya; Editing by Raju Gopalakrishnan
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