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2026-04-07 17:25:01
[Japan's Economy Flashes Yellow Lights as War Shocks Reach Small Shops] ⑴ The coincident index, a measure of the health of the Japanese economy, fell 1.6 points month-on-month to 116.3 in February, the first decline in two months, highlighting existing weaknesses in the economy before the impact of the war with Iran. ⑵ The decline was mainly due to reduced shipments of semiconductor chips and manufacturing equipment, as well as a drop in automobile production, casting doubt on the Bank of Japan's view that strong global demand would support exports. ⑶ Japan is almost entirely dependent on imports of oil and naphtha from the Middle East. As hopes for a swift end to the war fade, naphtha shortages will hit factory output, exacerbating the damage to the overall economy starting this quarter. ⑷ Data from the private think tank Tokyo Shoko Research Institute shows that in the fiscal year ending in March, the number of bankruptcies of paint companies rose 22.2%, the highest level in 23 years, mainly because small family-run businesses, already suffering from fierce competition and long-term labor shortages, are now facing soaring fuel costs and supply bottlenecks. (5) Due to the disruption of naphtha supply, major paint manufacturers have raised thinner prices by 70% to 80% since March, which has dealt a heavy blow to small paint operators. The institute said that fierce competition makes it difficult for small businesses to pass on the increased costs, and bankruptcies may increase further in fiscal year 2026.
