JPMorgan Econ FI-Japan A mixed picture of demand through 2Q-108760272

JapanEconomicResearch19June2024JPMORGANwww.jpmorganmarkets.comEconomicandPolicyResearchBenjaminShatil(81-3)6736-1730benjamin.shatil@jpmorgan.comTakuhoMorimoto(81-3)6736-6682takuho.morimoto@jpmorgan.comJPMorganSecuritiesJapanCo.,Ltd.Thedatathrough2Qarepaintingamixedpictureofdemand.Capexappearstoberecoveringafterstallingin1Q,butasustainedautosectordragisweighingonexportsandsentiment.FollowingaslipinsmallbusinesssentimentthroughMay,largemanufacturersreportedadeclineinconfidencethroughJune,andexportsslippedinmid2Q.Inthedetails:•Aprilcoremachineryordersdeclinedby2.9%m/msa,broadlyinlinewithourexpectations.Thisdecreasefollowssignificantgainsovertheprevioustwomonths,resultinginarunrateof36.9%3m/3msaar,suggestingsomeupsiderisktoourforecastfora3%q/qsaargainincapexthisquarter.•Mayexportvolumesfell1.4%m/msa,weakerthanourexpectationforamoderaterise,largelyreflectingadropinautoshipments.Thefalllastmonthleftoverallexportsdown2.1%3m/3msaar,andwhilethepaceofcontractionhasmoderated,thetradedataarecominginweakerthanourforecastfora10%q/qsaarriseinGDPexportsthisquarter.Importmomentumisrunningstronger,andthedataaresuggestingamodestlynegativecontributionto2QGDP.WewillrevisitourforecastwiththeJunedata.•Whileourbaselineremainsforexternaldemandtorecovermoderatelythroughmidyear,theriskisrisingthatfurtherhaltsinautoproductionandshipm...