Government Maintains Economic Outlook for June but Cautions about Potential Increase in Foreign Interest Rates

The Japanese government stated in its monthly economic report for June that the Japanese economy is continuing to recover moderately, with signs of improvement in industrial production despite potential risks from elevated overseas interest rates on global growth. The report noted that the negative impact of a data-rigging scandal in the auto sector is decreasing, signaling a positive trend in the economy.

Following a contraction in the January-March period, Japan’s economy is expected to rebound in the current quarter to June, although rising prices of everyday goods are affecting consumer spending. Private consumption and exports are showing signs of pausing while business investments are increasing, indicating a mixed outlook for domestic demand.

The report mentioned that public investment was downgraded for the first time in eight months but remains firm. It highlighted that the Japanese economy continues to recover at a moderate pace, with concerns about inflation, global events like the situation in the Middle East, and fluctuations in financial markets.

The government is closely monitoring the yen’s weakness against the U.S. dollar, which could lead to increased import costs of energy and raw materials, affecting inflation. Despite concerns about high interest rates in the United States and Europe, the government raised its outlook on the global economy for the first time since May 2023, stating that overseas economies are showing signs of improvement.