Today's Economy Watchers survey for May suggests that despite all the potential headwinds, the outlook for Japan's economy in the next 3M looks quite solid. With both the current and outlook scores coming in at around 50 last month, it looks likely that RGDP will be growing by 2-3% YoY.
The laggard sector right now is manufacturing. But the continuing weakness in industry in May was offset by better scores for non-manufacturing and the household sector. In particular, the Economy Watchers survey continues to point to a likely bounce in consumer sentiment over the next few months.
Two dynamics seem to be at work here. First, there's been some signs of a moderation in the recent sharp acceleration of inflation, and so a moderation of the cost of living squeeze which has been depressing consumer confidence. Second, services and the household sector are benefiting from the lifting of Covid-19 restrictions, a liberalisation that has occurred more slowly in Japan than in the other advanced economies, and so has further to run yet.