(MaceNews) – Here are the key Japanese political and economic events for the coming week.
The BOJ Tankan survey for the September quarter, due on Wednesday, is expected to show a slight pickup in business sentiment and solid capital investment plans but the move among Japanese carmakers to export their vehicles at a discount to the U.S. market is set to squeeze their profit margins while rising wages amid labor shortages is a headache for smaller firms.
On Saturday, the ruling conservative Liberal Democratic Party will elect its new leader who will replace the outgoing Prime Minister Shigeru Ishiba. After less than a year in power, the veteran LDP politician has stepped down to take the blame for leading the ruling coalition to crushing defeats in general elections, first in the all-important lower house in October and then in the upper house in July.
Five contenders are vying to win a majority of the total 590 votes, 290 from LDP members of parliament (one vote per MP) and 295 from about the 910,000 rank and file (the latter to vote by the end of Friday). If none of the candidates wins majority votes, the top two will compete in a runoff. Whoever wins a majority of the 342 votes, the same 290 LDP lawmakers and 47 votes that represent all of the 47 prefectures.
Shinjiro Koizumi, a reform-minded Minister of Agriculture, Forestry and Fisheries, is leading the pack with 33% support from eligible voters who are LDP supporters, according to the latest poll conducted from Sept. 26-28 by the Nikkei business daily and its affiliate TV Tokyo that was released in the early hours of Monday.
Koizumi, a 44-year-old blueblood politician, is the youngest of the five and is considered more liberal than others. His father, former Prime Minister Junichiro Koizumi pushed for the privatization of the postal delivery and financial services monopoly while in office from 2001 until 2006.
Coming in second in the Nikkei/TV Tokyo poll is Sanae Takaichi who gained 28% support. Takaichi, 64, is known to have right-wing views on Japan’s wartime aggression and is opposed to changing the law to allow women to keep their maiden names when they register marriage. She has held several cabinet portfolios in the past including the minister of economic security.
Chief Cabinet Secretary Yoshimasa Hayashi, 64, came in third with 20% support while Toshimitsu Motegi, 69, formerly an LDP secretary-general (the number two post), was far behind with 6% and Takayuki Kobayashi, 50, had just 3%. Both Hayashi and Motegi have served as foreign minister and they have been careful about expressing their personal opinions about key diplomatic and military issues.
None of the five candidates has a strong view over monetary or fiscal policy. They are all saying the economy has to grow with higher tax revenues in order to finance rising social security costs and programs to transform the economy. They tend to agree that the government may need to issue more debt to balance the annual budget.
The Nikkei also said Takaichi won the largest support with 34% when all the voters polled were counted, followed by Koizumi with 25% and Hayashi with 14%.
– Monday, Sept. 29
c.1815 JST (0915 GMT/0515 EDT) The Cabinet Office releases the government’s monthly economic report for September. It is expected to maintain its long-held view that Japan’s economy will continue recovering at a moderate pace.
– Tuesday, Sept. 30
0850 JST (2350 GMT/1950 EDT Monday, Sept. 29) The Ministry of Economy, Trade and Industry releases August industrial production, outlook for September, October.
Mace News median: -0.9% m/m (range: -1.2% to +0.1%) vs. July revised up to -1.2% from -1.6%; -0.9% y/y (range: -1.1% to +1.7%) vs. July revised up to -0.4% from -0.9%
Japan’s industrial production is forecast to post its second straight drop, down 0.9% on the month in August, following a 1.2% slip (revised up from -1.6%) as U.S. trade rows with the rest of the world are taking their toll on global and domestic growth. That would be a seventh fall in 12 months.
August trade data sent out an alarming signal that Japanese export volumes marked their first year-on-year dip in five months, down 3.9%. Export values were nearly flat, down 0.1%, for the fourth consecutive decline. Lower shipments of construction/mining machines and semiconductor-producing equipment to the United States was largely offset by gains in construction/mining machines and computer chips to the European Union.
Previously, Japanese automakers’ pre-emptive strike to slash the prices for their U.S. customers to cover higher Trump duties appeared to be helping them protect their market share but consumers may be turning more cautious about spending amid softer jobs data.
The monthly survey by the Ministry of Economy, Trade and Industry released last month indicated that output would slump 1.7% in August and slip a further 0.3% in September.
The ministry could downgrade its assessment if August output posts a sharp drop.
Last month, it repeated that industrial output was “taking one step forward and one step back.” The last change was made in the July 2024 report, when it upgraded its view.
From a year earlier, factory output is expected to have slipped 0.9% after falling 0.4% in July (revised up from -0.9%) and rising 4.4% in June.
– Tuesday, Sept. 30
0850 JST (2350 GMT/1950 EDT Monday, Sept. 29) The Ministry of Economy, Trade and Industry releases August retail sales.
Mace News median: +0.8% y/y (range: +0.6% to +1.1%) vs. July revised up to +0.4% from +0.3%; +1.2% m/m (range: +0.7% to +1.4%) vs. July -1.6%
Japanese retail sales are forecast to show a modest 0.8% rise on the year in August after slowing sharply to a meager 0.4% gain in July. The pickup reflects a rebound in department store sales in reaction to a year earlier slump caused by rain storms. It is also seen propped up by demand for summer clothing and beverages but relentless heat waves dampened appetite for autumn clothing.
Nationwide subsidies have cut fuel prices in recent months, exerting slight downward pressures on overall retail sales while demand for drugs and cosmetics stays intact.
On the month, retail sales are expected to mark a 1.2% rebound on a seasonally adjusted basis, after slumping 1.6% in July.
Last month, the Ministry of Economy, Trade and Industry maintained its assessment after downgrading it for the first time in eight months in the June report, saying retail sales were “taking one step forward and one step back,” instead of being “on a gradual pickup trend.”
Department store sales posted their first year-on-year increase in seven months in August, up 2.6%, mainly in payback for store closures during stormy weather a year earlier and one more holiday this year. Inbound spending marked its sixth straight drop but the pace of decrease decelerated as the yen stabilized after firming on year and hurting the purchasing power of visitors from other countries.
– Wednesday, Oct. 1, 2025
0850 JST (2350 GMT/1950 EDT Tuesday, Sept. 30) The Bank of Japan releases quarterly survey on business sentiment, plans and inflation outlook for the June quarter.
Mace News medians: large mfg sentiment 15 vs. 13 in June; large non-mfg 33 vs. 34; small mfg 2 vs. 1; small non-mfg 14 vs. 15
FY2025 large firm capex plans +11.3% y/y (+9.8% to +11.7%) vs. +11.5 in June; FY2025 small firm capex plans -1.5% (-4.2% to -0.9%) vs. -5.6%
The Bank of Japan’s quarterly Tankan business survey is forecast to show confidence picked up slightly among manufacturers, big and small, in the September quarter in light of trade deals between Washington and its (formerly) close allies while non-manufacturers were a tad more cautious amid sticky inflation that has left consumers wary of spending.
The outlook remains uncertain due to President Turmp’s erratic policymaking patterns. In addition, the move among Japanese carmakers to export their vehicles at a discount to the U.S. market is set to squeeze their profit margins and rising wages amid labor shortages is a headache for smaller firms.
The U.S.-Japan accord has lowered the “reciprocal” tariff rate to 15% on most U.S. imports of Japanese goods including automobiles and auto parts (50% on iron and steel), down from Trump’s original plan to slap 25% duties on Japan, but the figure is still much higher than the 2.5% rate imposed by the United States before the second Trump administration.
The median forecast for the Tankan diffusion index on business conditions. The percentage of firms reporting improvement minus that of firms reporting deterioration. The figures for the previous quarter are in the parentheses.
–Large manufacturers: 15 (13)
–Large non-manufacturers: 33 (34)
–Smaller manufacturers: 2 (1)
–Smaller non-manufacturers: 14 (15)
Major firms are expected to project their plans for business investment in equipment and software would rise a combined 11.3% on the year in fiscal 2025 ending in March 2026, little changed from +11.5% planned in the June quarter but up sharply from +3.1% (the first estimate) in March. Capex plans are generally supported by demand for automation amid labor shortages as well as government-led digital transformation and emission control.
Smaller firms are expected to continue revising up their combined capital spending plans to just a 1.5% decrease after having lifted their plans to -5.6% in June from -10.0% (the first estimate) in March. Small and medium firms tend to have conservative plans at the start of each fiscal year and revise them up later.
– Friday, Oct. 3
0830 JST (2330 GMT/1930 EDT Thursday, Oct. 2) The Ministry of Internal Affairs and Communications releases August jobs.
Mace News median: 2.4% (range: 2.3% to 2.4%) vs. over 5-year low of 2.3% in July, 2.5% from March to June
Japanese payrolls are expected to post their 37th straight rise on year in August amid lingering shortages of construction workers, truck drivers and system engineers among many other categories.
The seasonally adjusted unemployment rate is forecast to remain low and stable at 2.4% after hitting a more than five-year low of 2.3% in July and having stayed in a tight 2.4% to 2.5% range in the previous six months. The 2.3% rate in July is the lowest since 2.2% recorded in December 2019 in the early phase of the pandemic.
The government continues to describe employment conditions as “showing signs of improvement” in its latest monthly economic report. Wage growth has lagged behind sticky inflation that is now easing from above 3%. Real wages edged up 0.5% on year in July after falling in the previous six months while total nominal wages jumped a preliminary 4.1% (base wages were up a slower 2.5%).
Both government and Bank of Japan policymakers are watching whether high wage hikes at large firms are filtering through to small businesses.
– Saturday, Sept. 4
TBA – The Liberal Democratic Party elects its new leader.