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Vaccination campaign, economic recovery and the Olympic Games: Japan sends mixed signals


The recent country’s authorities decision concerning the Olympic Games, which will be played behind closed doors, occur when Japanese economic situation is still deteriorated.

However, few positive cyclical signals have emerged. Economic agents, and consumers in particular, are regaining confidence.

Since the outbreak of the pandemic, the Services PMI has not managed to rise above 50, the threshold that separates economic expansion from contraction. The story is quite different in manufacturing.


TRANSCRIPT // Vaccination campaign, economic recovery and the Olympic Games: Japan sends mixed signals : July 2021

  1. The Olympic Games behind closed doors

It was a hard blow for Japan: with the resurgence of Covid-19 infections in the Japanese capital, the country’s authorities announced that the Olympic Games to be held between 23 July and 8 August would be played behind closed doors. Initially limited to Tokyo, other regions have begun to say the events will be closed to the public. This decision is especially regrettable from a sporting perspective. Economically, it will obviously have negative consequences for local companies.

2. Acceleration in vaccination campaign and positive cyclical signals

These new measures occur when Japan’s economic situation is still deteriorating, even though a few positive cyclical signals have emerged. First, economic agents, and consumers in particular, are regaining confidence. Although confidence index are still below pre-crisis levels, they have been on an upward trend ever since they bottomed out in spring 2020. Second, the pace of vaccinations has accelerated very rapidly since the month of May. About 30% of the Japanese population have received at least one dose of the vaccine, compared to only 4% in mid-May. Yet given its belated start, the vaccination rate is still low compared to Europe (nearly 45%) and especially the United States (more than 50%).

3. Slow recovery in the services sector

On the corporate front, the situation is still tough as well. Investment by Japanese companies has picked up recently, but it is still low compared to pre-crisis levels. Since the outbreak of the pandemic, the Services PMI has not managed to rise above 50, the threshold that separates economic expansion from contraction. In the manufacturing sector, there has been a much stronger improvement in the economic situation, although Manufacturing PMI declined to 51.5 in June, from 53 in May. The Tankan index for Q2 2021 continues to improve for the big manufacturing companies, while the index for non-manufacturing companies rose slightly into positive territory for the first time since early 2020.

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