Any pickup in the economy, which had faltered due to the spread of novel coronavirus infections, appears to be at a standstill, with the nation's latest gross domestic product figure revised downward.
The government has drawn up a scenario of turning domestic demand upward by making the measures to cope with the infection compatible with social and economic activities. But there has been a stagnant mood growing in private consumption and investment in plant and equipment by private companies because of the impact of a resurgence in infections and so forth. Should a cautious view on the economic outlook prevail in the days ahead, it may take a long time for the economy to get back on a full-fledged recovery track.
"It is conceivable that the deterioration in corporate earnings as a result of the impact of the new coronavirus and a growing sense of uncertainty of the economic outlook lie behind [the figures]," Yasutoshi Nishimura, the minister in charge of economic revitalization and measures against the novel coronavirus, said at a press conference held after a Cabinet meeting on Tuesday.
Japan's real GDP, seasonally adjusted, for the April-June quarter was revised from an initial estimate of minus 27.8% made in August to minus 28.1% at an annualized rate.
The primary factor of the downward revision was a marked reduction in capital investment by private companies. That figure was revised from the initial estimate of minus 1.5% from the previous quarter to minus 4.7%, the same margin of decline recorded during the October-December quarter in 2019.
Capital investment shows the actual results of new establishments of plants and their reinforcements made by private companies, such as for creating new products and for augmenting production. As companies tend to reduce capital investment when they become uncertain over future demand, the revised figure has brought to the fore that a cautious view on the economic outlook has been spreading among corporations.
-- Raining on consumption
Private consumption, which accounts for more than half of GDP, was down 7.9%, which was revised slightly upward from the initial preliminary figure. Nonetheless, private consumption has currently been put on hold, due to a resurgence in infections since July.
According to a survey on household spending released Tuesday by the Internal Affairs and Communications Ministry, the average spending in real terms by households with two or more people stood at 266,897 yen in July, down 7.6% from a year earlier. The average spending in June showed an improvement of minus 1.2% from a year earlier, thanks to a uniform cash handout of 100,000 yen per person from the government. Household spending was affected in July by unseasonal weather, including a long spell of rainy weather, besides a tendency among people to refrain from going out.
The margin of drops in "spending on meals" and "spending on drinking" has contracted somewhat since the state of emergency was lifted, but the spending has hovered at low levels. Outlays on package tours, on airfare and on railway fares have continued to shrink by a range of 70% to 90%.
Also behind the contraction is the fact that workers' average wages have declined. According to a survey on monthly labor statistics released Tuesday by the Health, Labor and Welfare Ministry, the average monthly cash earnings by workers in July declined 1.3% from a year earlier, marking a year-on-year decline for four straight months. Declines in overtime pay greatly affected wages.
-- Current situations vary
The Economy Watchers Survey for August was released Tuesday by the Cabinet Office. The seasonally adjusted diffusion index -- with the current economic situation compared with the one taken three months earlier -- based on asking retail store managers and the like who are especially sensitive to the economy stood at 43.9 in August, or 2.8 points higher than July, showing a month-on-month improvement for four months in a row. The declining trend in the number of those infected with the coronavirus is said to have worked in the index's favor.
But the real feelings on the economic recovery among those surveyed differed.
"Sales of air-conditioners were brisk due to heatwaves coupled with an additional demand for them, thanks to an increase in telecommuting," said an official at a consumer electronics store in the Kinki region.
But an official at a manufacturer of foodstuff in the Tohoku region said, "Our sales in August were about half of those in the same month last year due to the cancellation of the Tanabata Festival and self-restraint on hometown visits during the Bon Festival holidays."
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