Japan upgrades view on regional economies for first time in 15 months

The Finance Ministry on Tuesday upgraded its overall assessment of Japan’s regional economies for the first time in 15 months, saying they are recovering from the fallout of the coronavirus pandemic.

Reflecting recent recoveries in consumer spending and auto output, regional economies “are gradually picking up, although they are still affected by the coronavirus, supply chain disruptions and rising raw material costs,” the January report said.

The previous report in October said the economies were recovering, although at a “slowing” pace due to a global semiconductor shortage and supply chain constraints caused by Southeast Asian countries suspending parts factories amid a surge in COVID-19 cases.

Finance Minister Shunichi Suzuki, in remarks conveyed to an online meeting of the heads of the ministry’s regional bureaus by his deputy, said that “the economies are expected to recover, but downside risks should be carefully watched.”

Daily coronavirus infections were low in Japan when it fully lifted a COVID-19 state of emergency on Oct. 1 last year. But the highly contagious omicron variant was confirmed in the country in late November and cases have since shot up, reaching record highs following the year-end and New Year holidays.

The latest report upgraded individual assessments for nine out of 11 regions, including the Kanto area, while maintaining the view for Tohoku.

The evaluation was downgraded for Okinawa, where omicron infections have surged ahead of other areas.

By component, the assessment of production was upgraded in five regions including Tokai, home to Toyota Motor Corp. The report said car output recovered thanks to improvements in semiconductor procurement.

The view for industrial output was downgraded in three regions including Shikoku, where some new shipbuilding contracts were postponed due to higher steel prices.

The assessments for consumer spending were raised in eight regions including Kanto, Tokai and Kinki, as customers increased at department stores and new car sales improved. The view was downgraded for Okinawa, however, due to the sharp rise in virus cases.

The evaluation for the employment situation was revised upward in five regions such as Kanto, Tokai and Kinki, as job offerings by manufacturers remained solid while improvements were seen in lodging and restaurant businesses.