My subscription
My Subscription All Publications

2% inflation wouldn’t be enough for rate hike

While the war in Ukraine will lift Japanese inflation to the Bank of Japan’s 2% target, continued weakness in wage pressures and underlying inflation mean that the Bank won’t respond with a rate hike. And while Governor Kuroda’s successor may be more hawkish, we don’t foresee tightening next year either.
Tom Learmouth Japan Economist
Continue reading

More from Japan

Japan Data Response

Japan External Trade (Jul. 2022)

Japan’s trade deficit widened to a record high in July but it should start to shrink over the coming months as supply shortages and commodity prices continue to ease. Asia Drop-In (25th Aug.): What’s the economic impact of a weak yen? What does the latest China-Taiwan flare-up mean for decoupling? How ugly are conditions in China’s real estate sector? Join economists from across our Asia services for this regular briefing on the region’s big investment stories. Register now.

17 August 2022

Japan Data Response

Japan GDP (Q2 2022 Preliminary)

Japan’s economy grew in Q2 driven mainly by private consumption, though the overall figure disappointed mainly due to fluctuations in stockbuilding that won’t last. The recovery should persist through Q3 and Q4, though the pace will slacken a bit, as strong investment momentum is offset by a more subdued consumption outlook. We expect GDP to return to its pre-virus trend before long.

15 August 2022

Japan Economics Weekly

Demographic woes persist, tourists waiting at the gate

An exodus of long-term migrants contributed to the 0.6% fall in Japan’s population last year but with border controls loosened since March net migration is bouncing back strongly. Even so, we still see GDP growth settling around 0.5% over the longer-term as a shrinking workforce offsets productivity gains. Meanwhile, Japan remains a highly popular tourist destination and once the onerous procedural requirements for entry are lifted, probably sometime in Q4, tourist arrivals and spending should rebound strongly.

12 August 2022

More from Tom Learmouth

Japan Economics Weekly

BoJ may get less dovish, GDP to fall in Q1

PM Kishida’s two new Bank of Japan policy board nominations could push the Bank in a slightly less dovish direction, but it won’t make much difference to policy decisions over the next year. A more meaningful shift may come early next year if the Prime Minister opts to install a more hawkish BOJ leadership when Governor Kuroda and his deputy governors Amamiya and Wakatabe step down. But we expect inflation to fall well below target next year, so a policy rate hike probably won’t be on the table by then.  

4 March 2022

Japan Data Response

Japan Labour Market (Jan. 2022)

Employment fell back yet again in January after a strong rebound in December. But while employment might have fallen a bit further in February due to the Omicron wave, it should soon bounce back fast and push the unemployment rate down to 2.5% by the end of the year.

4 March 2022

Japan Data Response

Japan Retail Sales & Industrial Production (Jan. 2022)

The falls in both retail sales and industrial production in January confirm that the Omicron surge has knocked back the recovery. We think consumer spending will fall across this quarter, but it should rebound sharply in Q2.

28 February 2022
↑ Back to top