Rising prices won’t prevent rebound in consumption

The weaker yen and higher energy prices will reduce the purchasing power of households a bit. But with the household savings rate still very high, this won’t prevent a strong rebound in services spending.
Marcel Thieliant Senior Japan, Australia & New Zealand 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 Marcel Thieliant

Japan Economics Weekly

Carmakers will struggle even after shortages abate

The disruptions to supply chains from Delta outbreaks across Southeast Asia that resulted in another big drop in car exports in September will ease soon. However, carmakers are responding with lower capital spending and are lagging their US and European counterparts in electric vehicle sales. The upshot is that the sector won’t return to former glory.

22 October 2021

Australia & New Zealand Economics Focus

Australia- Wage growth will approach 3% by end-2022

A renewed tightening of the labour market next year means that wage growth will accelerate further. That pick-up will be underpinned by a stronger minimum wage hike, the lifting of caps on public sector wage growth and more employees switching jobs. And if it is accompanied by faster underlying inflation, it should be enough to prompt the RBA to lift interest rates by early-2023.

21 October 2021

Australia & New Zealand Economic Outlook

Rising inflationary pressures to prompt tightening

Domestic demand is set to rebound from recent lockdowns and labour markets should remain tight. Meanwhile, soaring energy and food prices will keep inflation high for a prolonged period. To be sure, the Reserve Bank of Australia won’t respond to high headline inflation until wage growth picks up in earnest. However, with severe staff shortages and limited immigration, the bargaining position of workers is strong and we expect Australia’s wage growth to reach 3% by the end of next year. We expect the RBNZ to hike rates to 1.5% next year and the RBA to start lifting rates in early-2023.

14 October 2021
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