Japan inflation seen weak despite export boom as COVID hits consumption: Reuters poll

  • 8/13/2021
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TOKYO, Aug 13 (Reuters) - Japan"s export boom extended into in July but consumer prices likely fell, a Reuters poll showed, highlighting the divergence between manufacturers benefiting from robust global demand and retailers suffering from a resurgence in COVID-19 infections. The mixed batch of data will likely highlight the challenge policymakers face in combating a spike in Delta variant cases, without choking off a fragile economic recovery. Exports likely surged 39.0% in July from a year earlier after a 48.6% spike in the previous month, according to analysts polled by Reuters, though the figures are inflated by the base effect of last year"s pandemic-induced slump. "Exports will remain strong with capital and IT-related goods serving as main drivers thanks to robust global demand for capital expenditure," said Kenta Maruyama, an economist at Mitsubishi UFJ Research and Consulting. Imports likely rose 35.1% in July from a year earlier partly due to rising raw material costs, the poll showed. In a sign of weak domestic demand, Japan"s core consumer prices likely fell 0.4% in July from a year earlier, according to the poll. The drop is partly due to a change in the base year for the consumer price index (CPI) that gives a heavier weighting to cellphone charge fees, which have fallen sharply recently. Analysts expect the base-year change to shave about 0.7 percentage point off core CPI. Under the new base year, core consumer prices fell 0.5% in June, according to the government, compared with a 0.2% gain under the old base year. "Japan won"t see inflation accelerate as much as in the United States and Europe with service-sector firms under strain from the pandemic," said Takeshi Minami, chief economist at Norinchukin Research Institute. Core machinery orders, meanwhile, likely shrank 2.8% in June, falling for the first time in four months in a worrying sign for capital expenditure, the poll showed. The government will release the trade and machinery orders data at 8:50 a.m. on Aug. 18 (2350GMT, Aug. 17). The consumer price data is due out 8:30 a.m. on Aug. 20 (2330GMT, Aug. 19). Reporting by Daniel Leussink and Leika Kihara; Editing by Simon Cameron-Moore Our Standards: The Thomson Reuters Trust Principles.

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