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Japan Consumer Prices (Aug. 2021)

Headline inflation stayed negative in August as a boost from Go To Travel base effects was offset by a major drag from fresh food inflation. But looking through one-off factors such as Go To and April’s mobile phone tariffs cuts, we think inflation will temporarily spike over the coming months due to upwards pressure on goods prices from continued supply shortages and the release of pent-up demand in the services sector in Q4.
Tom Learmouth Japan Economist
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Japan Economics Weekly

Recovery will continue to disappoint

The slump in industrial output and the stagnation in real retail sales in May has prompted us to lower our estimate of Q2 GDP growth. While the easing of the lockdown in Shanghai will contribute to a rebound in motor vehicle output over coming months, the bigger picture is that supply shortages remain intense. And with external demand softening, Japan’s economy won’t recover as rapidly this year as most anticipate.

1 July 2022

Japan Data Response

Tankan (Q2), Labour Market (May) & Tokyo CPI (Jun.)

Today’s Tankan survey suggests that while the services sector is benefitting from the easing of virus restrictions, the outlook for the manufacturing sector is worsening. Meanwhile, the labour market didn’t tighten any further in May and inflation edged down in Tokyo in June, but we still expect the unemployment rate to fall further and underlying inflation to creep higher over coming months.

1 July 2022

Japan Data Response

Japan Industrial Production (May 2022)

The plunge in industrial output in May suggests that Japan’s recovery is disappointing yet again. The upshot is that it will take until the second half of the year for GDP to surpass its pre-virus level. Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

30 June 2022

More from Tom Learmouth

Japan Economics Update

Japan’s LNG shielded from Europe price spike for now

Japan’s reliance on fixed, long-term contracts for its natural gas supply should limit the impact on consumers of the recent surge in gas spot prices currently being felt most acutely across parts of Europe.

22 September 2021

Japan Chart Book

Next PM will benefit from vaccine booster

The race to become the new LDP leader – and with it PM – formally began on Friday. With Delta cases plunging and the vaccination rate having caught up with many other advanced economies, whoever wins should be able to lift domestic restrictions and ride a strong recovery in Q4. Kono is by the far the most popular of the four candidates with the LDP-supporting public and, along with Kishida, currently has the most support amongst LDP lawmakers. (See Chart 1). Ishiba Shigeru – a rival to Kono in the popularity stakes who announced last week that he will not stand – is backing Kono, as is outgoing PM Suga. Ex-PM Abe’s long-term rival Ishiba has criticised Abenomics for favouring corporate profits over wages, and Kono appears to have absorbed some of his new supporter’s thinking in demanding this week that “we must shift our focus toward boosting household income, from corporate profits”. Kono has suggested a lower corporate tax rate for firms that distribute a high share of their income to their workers. And like all the other candidates, Kono has pledged to compile a stimulus package – to focus on renewable energy and 5G – which would provide another tailwind to the recovery over the coming months. We expect output to return to pre-virus levels in Q4 and to return to near its pre-virus path around the middle of next year.

20 September 2021

Bank of Japan Watch

PM frontrunner Kono may favour sharper taper

Dug in for an extended hold, the Bank of Japan won’t alter its major policy settings at its September meeting. Further ahead though, PM Suga’s successor – to be elected in two weeks’ time – may look towards prodding the Bank into shrinking its balance sheet.

16 September 2021
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