MNI INTERVIEW: Japan Can Weather Pandemic Lockdowns: Sekine

Japan can weather the current pandemic lockdowns through support measures even as the services sector and related jobs come under more pressure and the global economic outlook is uncertain, a former Bank of Japan chief economist told MNI.

Toshitaka Sekine, now a professor at the School of International and Public Policy at Hitotsubashi University, said even with the state of emergency extensions to more prefectures in Japan, there is no sign of a deviation from a recovery path, though everything is not "all right" with the economy.

"The face-to-face services will continue to be weighed down by restrictions, but the economy will not deviate from a recovery path," Sekine said. But Sekine voiced concern over the outlook for jobs while noting support as the government has decided to extend subsidies to businesses until the end of the year.

Japan has faced a slow rollout of vaccines that has sparked concerns over the timeline for lockdowns to ease, as reported: MNI INSIGHT: Covid-19 Vaccine Rollout Pace Erodes BOJ Outlook.

Also see: MNI INTERVIEW: Japan Needs An Adaptive Inflation Review: Sekine.

TRADE AND THE FED

Surveying global trade and support measures, Sekine said earlier sharp rebounds among major trading partners and the continued easy policy by the U.S. Federal Reserve are still mostly positive factors, albeit not as robust.

"Both exports and production had rebounded from their declines on the back of a recovering overseas economies, mainly the U.S. and China. Looking ahead, it is unlikely that they will increase at their previous pace, but they will not fall sharply," Sekine said.

But he voiced concern over the impact on Japan's exports of weaker trade in Southeast Asia caused by the spread of coronavirus. "I wouldn't say that overseas demand is fully okay, and Japan's exports will be influenced by their weaker economic growth."

In July, the BOJ said in its Outlook report that said the impact of rising international commodity prices will be offset by higher exports for now.

He added that there is only a small risk the global economy will deteriorate sharply due to tightening by the U.S. Federal Reserve.

"The recent rise in inflation rate in the U.S. is transitory like Federal Reserve officials said and the risk is small that the Fed will tighten its policy immediately as U.S. inflation rate measured by trimmed mean didn't rise so much," Sekine said. He said that Fed has been cautiously communicating its views to the market.