New Bank of Japan Governor unlikely to lift rates

The Bank of Japan left policy settings unchanged today and while a new Prime Minister could appoint a more hawkish BoJ Governor, we expect the Bank to keep interest rates unchanged for years.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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Japan Economics Weekly

Omicron restrictions wouldn’t jolt BoJ into action

Even if Omicron proves more transmissible than Delta, its impact on Japan’s economy could vary substantially depending on how deadly it is, how well it evades vaccines, and PM Kishida’s appetite for draconian containment measures. With supply shortages already severe, fresh restrictions on Japanese manufacturers’ global supply chains coupled with a global shift in spending away from services and back towards goods could cause input price pressures to intensify further. However, we doubt any resulting boost to core goods inflation would do much more than simply offset a drag from energy inflation. As such, core inflation would stay well short of the BoJ’s 2.0% target, keeping rate hikes off the table.

3 December 2021

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

More from Marcel Thieliant

Japan Economics Focus

What does deglobalisation mean for Japan?

There are good reasons to think that the natural stalling in globalisation underway won’t do much damage to Japanese manufacturers. And while an abrupt severing of supply chains between China on the one hand and the US and its allies on the other would be highly disruptive, Japanese firms would benefit in the long-run as they could step into the breach. Perhaps the biggest risk is that a more nationalist China focused on raising self-sufficiency makes it increasingly difficult for Japanese firms to operate there.

21 September 2021

Australia & New Zealand Economics Update

Australia- Shipping costs to boost inflation next year

Soaring shipping costs will exacerbate the impact of the weaker exchange rate on import price inflation. Indeed, we expect underlying inflation to return into the RBA’s 2-3% target next year.

20 September 2021

Japan Economics Weekly

Struggling to generate inflation even now

While inflation in most advanced economies is now well above central banks’ targets, it is still negative in Japan. This is largely due to idiosyncratic factors that should fade by the middle of next year. Even so, inflation won’t reach the Bank of Japan’s 2% target anytime soon.

17 September 2021
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