Japan more upbeat on consumption, exports in June economic report

TOKYO — Japan's government struck a cautiously optimistic tone in its June monthly economic report released on Monday (June 29), noting positive moves in private consumption and exports while calling for continued vigilance on Middle East risks to its economy.

The Cabinet Office kept its headline assessment unchanged, saying the economy was "recovering moderately". 

It also stressed that the impact of the Middle East situation must "continue to be watched closely", signalling that uncertainty had not fully lifted despite the US-Iran deal announced in mid-June.

On private consumption, the government dropped a warning about weak consumer sentiment that was in its May assessment, saying spending now "shows movements of picking up". 

High-frequency data suggested sentiment has been recovering since April, marking a stark improvement in the wake of the US-Iran agreement, a Cabinet Office briefer told reporters.

On exports, the government upgraded its view for the first time since February 2025, to "showing movements of picking up recently" from "almost flat". 

The Cabinet Office cited rising global demand for AI infrastructure as the key driver.

Shipments of semiconductors, chip-making equipment and other electronics have been solid not just to the US but also to Asian markets in recent months, the briefer said.

On bankruptcies, the government upgraded its assessment to "broadly flat" from "increasing", reflecting recent data showing the trend had stabilised, despite the Bank of Japan's interest rate hike to a 31-year high this month.

On prices, the Cabinet Office kept its view that consumer prices were "rising moderately". 

The briefer the Middle East conflict would likely continue to put inflationary pressure on wholesale and consumer prices.

All other assessments, including business investment, industrial output and employment, were unchanged from May.

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