The Japanese Cabinet Office recently downgraded its view on the economy for November, citing weak demand as a major factor. This is the first time in 10 months such a change has been made, with the view on capital expenditure also cut for the first time since December 2021. The statement from the Cabinet Office noted that “the pace of recovery is pausing” and that domestic demand, including corporate investment and consumer spending, lacks strength.
Despite business conditions and firms’ earnings continuing to improve, the strength of the corporate sector is not necessarily translating into wages and investment. The Cabinet Office highlighted this issue, stating that “domestic demand such as corporate investment and consumer spending lack strength,” while acknowledging risks from global monetary tightening and the Chinese economy.
The statement also emphasized the need for close attention to rising prices, the Middle East situation, and financial market fluctuations. Bank of Japan Governor Ueda commented on these issues in relation to their impact on economic growth in Japan.