Japan

Japan Data Response

Labour Market & Industrial Production (Oct. 2021)

Employment fell sharply again in October despite the lifting of states of emergency declarations at the start of the month. However, it should rebound sharply across November and December in line with the revival in face-to-face service sector activity. And while industrial production only edged up in October, we think it too will rebound more strongly this month and next, potentially approaching its recent April peak in December.

30 November 2021

Japan Data Response

Japan Retail Sales (Oct. 2021)

Retail sales kept rising in October despite another drop in motor vehicles sales. With supply disruptions now starting to ease and mobility picking up, they should continue to increase.

29 November 2021

Japan Economics Weekly

Government seeks to revive soggy chip industry

The breakdown of PM Kishida’s new supplementary budget released today showed that ¥600 billion has been allocated to reviving semiconductor manufacturing in Japan. The centrepiece of the plan is a new TSMC factory in Kumamoto Prefecture that will produce the mid-range chips critical for car production. Given recent supply disruptions caused by chip shortages, beefing up local production makes strategic sense. We think the government’s new interventionist approach to stimulating mid-range chip production may succeed, but plans to make inroads into high-range chip production are likely to fall flat.

26 November 2021

Key Forecasts

Main Economic & Market Forecasts

%q/q(%y/y) unless stated

Latest

Q4 2021

Q1 2022

Q2 2022

Q3 2022

2021

2022

2023

GDP

-0.8 (1.3)

2.1 (0.6)

1.4 (3.1)

0.9 (3.6)

0.8 (5.2)

(2.0)

(3.9)

(2.0)

Private Consumption

-1.1 (0.7)

2.5 (1.0)

1.2 (3.5)

1.0 (3.6)

1.0 (5.8)

(1.5)

(4.2)

(2.0)

Consumer Prices

(0.1)

(0.5)

(0.4)

(1.1)

(1.0)

(-0.3)

(0.8)

(0.2)

Unemployment Rate (%, average)

2.8

2.5

2.4

2.4

2.4

2.7

2.4

2.4

Policy Rate (%)

-0.10

-0.10

-0.10

-0.10

-0.10

-0.10

-0.10

-0.10

Monetary Base (¥ Tr, average)

651

655

665

675

685

655

695

715

10 yr JGB, end period (%)

0.07

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOPIX, end period

1,984

1,950

1,988

2,025

2,063

1,950

2,100

2,200

¥/$, end period

114.1

115

115.0

115.0

115.0

115.0

115.0

115.0

¥/Euro, end period

128.6

132.3

132.3

132.3

132.3

132.3

132.3

132.3

¥/£, end period

152.1

155.3

155.3

155.3

155.3

155.3

155.3

155.3

Sources: Bloomberg, Thomson Reuters, Capital Economics


Government seeks to revive soggy chip industry

Japan Economics Weekly

3 December 2021

Our view

With the latest Delta wave having ebbed and the bulk of the population now fully vaccinated, the conditions for a sustained recovery in consumer spending are finally in place. Admittedly, supply shortages are a downside risk to the recovery in output and will also lift inflation a bit further. Even so, Japan will continue to buck the trend of soaring inflation seen elsewhere. The Bank of Japan is therefore set to keep policy loose for longer, even as other central banks start to tighten, leaving the onus on fiscal policy to support the economy. The upshot is that the yen should weaken further against the dollar.

Latest Outlook

Japan Economic Outlook

Conditions for strong recovery finally in place

With the Delta wave having ebbed and the majority of the population now fully vaccinated, we expect a strong rebound in domestic demand over the coming months. But the inflation concerns that hang over other major developed economies won’t materialise and the Bank of Japan will keep policy loose for the foreseeable future.

7 October 2021