Vaccine bounce not too far away

Japan’s now fast-moving vaccine rollout is set to gather more speed. PM Suga’s one-million-a-day goal could be hit on a 7-day average basis as soon as tomorrow. 18-to-64-year-olds have from today been able to fill vacant slots at large-scale vaccination centres. And workplace vaccinations are due to begin on Monday. Admittedly, the official figures on vaccine doses lag the announced injection numbers. But the latter are probably more up-to-date measure: additional doses are added retrospectively to the official figures as they are confirmed. The acceleration in jabs bolsters our view that the economy is set for a strong rebound later in the year. Some media reports suggest that the government may have Tokyo under a quasi-state of emergency until the Olympics finish in early August. But we were already expecting activity to remain subdued early in Q3 as local authorities are reluctant to rapidly lift restrictions while vaccine coverage is still low and the threat from the Delta variant remains. We think the vaccine-led rebound will accelerate around the middle of Q3 and continue through Q4 as the economy gets back to full health.
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Japan Economics Update

BoJ unlikely to lift interest rates anytime soon

The Bank of Japan today upgraded its assessment of inflation risks to “broadly balanced” for the first time since 2014. However, it reiterated its pledge to keep expanding the monetary base until inflation exceeds 2% and also signaled that it will keep interest rates low. With inflation set to fall well short of the BoJ’s 2% target for the foreseeable future, the Bank won’t be able to tighten policy.

18 January 2022

Japan Data Response

Japan Machinery Orders (Nov. 2021)

The rise in machinery orders in November supports our view that business investment recovered strongly across Q4. And private investment should continue to rebound strongly this year as firms look past a brief hit from Omicron.

17 January 2022

Japan Economics Weekly

Strict isolation rules could cause severe shortages

While we think Japan’s economy entered 2022 just above its pre-pandemic level, consumer spending will probably be knocked back this quarter by light-touch restrictions which are likely to be reimposed across most of the country within the next couple of weeks. Moreover, the added transmissibility of Omicron is likely to lead to a sizeable wave of staff absences in Japan. While PM Kishida is set to reduce the isolation period for coronavirus patients and their close contacts from 14 to 10 days, that would still be a strict isolation regime when compared with most Western countries. All told, we think Omicron will limit the economy to just a 0.2% q/q rise this quarter before a rebound in growth across Q2 and Q3.

14 January 2022

More from Japan Economics Team

Japan Economics Weekly

Bank of Japan likely to cap bond yields before long

The global surge in long-term interest rates means that 10-year JGB yields are now the highest they have been since the launch of negative rates in 2016. While we expect the Bank of Japan to widen the tolerance band around its 0% target next month, we would expect the Bank to rein in a further rise in yields with a fixed rate auction. Meanwhile, the January activity data are consistent with our view that the second state of emergency won't result in a renewed contraction in GDP in Q1.

26 February 2021
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