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What does Kishida’s victory mean for Japan?

Incoming PM Kishida has provided mixed signals on fiscal policy, pledging a large near-term stimulus while retaining ambitious medium-term consolidation plans. Given that he blamed deregulation for widening inequality, structural reforms will move further down the agenda. Meanwhile, his stance on China is hawkish: it’s likely that he’ll push back against further integration and support decoupling.
Tom Learmouth Japan Economist
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Japan Economics Weekly

Respite for BoJ doesn’t weaken case for a policy tweak

Pressure on the Bank of Japan’s Yield Curve Control framework eased this week. On the campaign trail for the Upper House election, where inflation has emerged as a key concern, Prime Minister Kishida said that monetary tightening would do more harm than good. Even more welcome for the BoJ, pressure emanating from the bond market has dropped back too. It had to buy less than a tenth as many JGBs this week as last. Some might feel that this reduces the need to shore up the policy framework. But a respite provides a window in which to make it more resilient.
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.  

24 June 2022

Japan Data Response

Japan Consumer Prices (May 2022)

While inflation didn’t rise any further in May, it will remain above the BoJ’s 2% target until early-2023, while underlying inflation will approach 2%. However, the Bank won’t respond with tighter policy. 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.  

24 June 2022

Japan Data Response

Japan Flash PMIs (Jun. 2022)

The PMIs suggest that supply shortages are still holding back manufacturing output and adding to price pressures. On a more upbeat note, the surveys also point to a strong pick-up in consumption as the economy rebounds from the Omicron wave and international tourists return. 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.  

23 June 2022

More from Tom Learmouth

Japan Economics Weekly

States of emergency may end before LDP election

Reports this week that PM Suga is keen to end emergency declarations before leaving office on Wednesday are good for our view that output will rebound strongly to above pre-virus levels in Q4. Crucially, high vaccine coverage should ensure the lifting of most restrictions is permanent this time around. While the LDP leadership contest is set to be a close-run thing, Kono Taro remains the favourite. Were he to become PM, Mr Kono would be likely to distance himself from Abenomics and instead pursue an economic policy agenda more focused on deregulation and raising household incomes.

24 September 2021

Japan Data Response

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.

24 September 2021

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
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