Rising prices won’t prevent solid rebound in Q2

The renewed drop in industrial production and the weakness in retail sales volumes in April has raised concerns that Japan’s recovery will continue to disappoint. However, with consumer prices rising far less than elsewhere, Japan isn’t facing a cost-of-living crisis. Indeed, high frequency data suggest that consumption picked up pace in May as the Omicron wave subsided. The upshot is that we’re sticking to our upbeat forecasts for GDP growth for this quarter and next.