Japan’s retail sales rose 4 % year-on-year in July, driven by strong automobile demand and a notable rebound in department stores, supported by favorable weather and a steady stream of foreign visitors spending in Japanese storefronts. Industrial production, however, managed only a 0.1 % month-on-month increase, reflecting stagnation in manufacturing due to ongoing supply chain challenges. Japan imports virtually all of its oil and natural gas, making it acutely sensitive to geopolitical tensions in the Middle East that keep energy and import costs elevated, squeezing manufacturers’ margins. For investors, the divergence between strong consumer spending and weak industrial output creates a sector-level split, with companies exposed to domestic consumption, tourism, and services appearing better positioned than manufacturers facing flat production volumes alongside elevated input costs.
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