Policy tightening still a distant prospect

The Bank of Japan shocked no one in keeping its interest rate targets unchanged today, a status quo we think will last for years. The Bank also revised down its growth forecasts for the current fiscal year and signalled that policy will have to remain loose for a prolonged period.
Tom Learmouth Japan Economist
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Japan Economics Weekly

Restrictions may not last long, key Shunto approaching

With restrictions this week expanded to cover most of Japan’s economy, and surging infections already starting to cause staff shortages in some industries, GDP is only likely to tread water this quarter. But based on experience elsewhere, the Omicron surge may only last another couple of weeks before staff shortages ease and countermeasures start to be lifted again. Meanwhile, reports suggesting that Toyota’s labour union – sometimes seen as a bellwether in wage talks – will seek a sharp rise in bonus payments at this year’s Shunto could be an early sign that wage growth will pick up this year in line with PM Kishida’s wishes.

21 January 2022

Japan Data Response

Japan Consumer Prices (Dec. 2021)

Consumer price inflation reached a two-year high of 0.8% in December, but with energy prices set to fall back, we think that it will peak around 1% by mid-year.

21 January 2022

Japan Data Response

Japan External Trade (Dec. 2021)

Exports were broadly stable in December after a sharp rebound in November. We think they’ll continue to recover at a decent pace this year as external demand for capital goods continues to rise and motor vehicle exports resume their recovery once Omicron waves subside.

20 January 2022

More from Tom Learmouth

Japan Data Response

Japan Consumer Prices (Sep. 2021)

Headline inflation in September turned positive for the first time this year due to spikes in fresh food and energy inflation. As the drag from mobile phone tariffs fades in the first half of next year, underlying inflation will turn positive. However, we think it will struggle to break past 1%.

22 October 2021

Bank of Japan Watch

Bank to look through weaker yen and supply shortages

Sitting comfortably with continuity candidate PM Kishida in charge, the Bank of Japan won’t alter its major policy settings at its October meeting. And we doubt the Bank will respond with policy tweaks to the recent weakening in the yen, nor to continued supply chain disruptions.

21 October 2021

Japan Data Response

Japan External Trade (Sep. 2021)

    The sharp fall in exports in September suggests that supply shortages are severely hampering manufacturing activity in some sectors. However, we think exports will soon bounce back as supply shortages for car producers gradually ease and machinery exports continue to expand at a fast pace.

20 October 2021
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