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What would a 5-year yield target mean for Japan?

If the Bank of Japan shortened the duration of its yield target, the impact on economic activity and inflation would probably be small but it could improve the long-term health of insurers and pension funds. It’s not clear though what could prompt such a policy shift and we expect the Bank to stick to its 10-year target for the foreseeable future.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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Japan Data Response

Japan External Trade (Jul. 2022)

Japan’s trade deficit widened to a record high in July but it should start to shrink over the coming months as supply shortages and commodity prices continue to ease. Asia Drop-In (25th Aug.): What’s the economic impact of a weak yen? What does the latest China-Taiwan flare-up mean for decoupling? How ugly are conditions in China’s real estate sector? Join economists from across our Asia services for this regular briefing on the region’s big investment stories. Register now.

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Japan Data Response

Japan GDP (Q2 2022 Preliminary)

Japan’s economy grew in Q2 driven mainly by private consumption, though the overall figure disappointed mainly due to fluctuations in stockbuilding that won’t last. The recovery should persist through Q3 and Q4, though the pace will slacken a bit, as strong investment momentum is offset by a more subdued consumption outlook. We expect GDP to return to its pre-virus trend before long.

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Japan Economics Weekly

Demographic woes persist, tourists waiting at the gate

An exodus of long-term migrants contributed to the 0.6% fall in Japan’s population last year but with border controls loosened since March net migration is bouncing back strongly. Even so, we still see GDP growth settling around 0.5% over the longer-term as a shrinking workforce offsets productivity gains. Meanwhile, Japan remains a highly popular tourist destination and once the onerous procedural requirements for entry are lifted, probably sometime in Q4, tourist arrivals and spending should rebound strongly.

12 August 2022

More from Marcel Thieliant

Japan Economics Weekly

Vaccine boost, surging manufacturing profits

Services spending finally showed signs of life last quarter, underlining that the vaccine boost is finally filtering through. Another reason to be confident about the outlook is that consumer price inflation remains subdued while capital goods prices are rising the most in decades. That means that households’ purchasing power isn’t being eroded by soaring living costs as in many other advanced economies, while the profit margins of Japanese manufacturers have reached record highs despite soaring input costs.

18 February 2022

Australia & New Zealand Economics Update

Australia - Slump in fertility need not slow population growth

The sharp drop in the fertility rate during the pandemic has already started to reverse. And even if it is sustained, the government will be able to offset a slower natural increase with higher net migration. The upshot is Australia will remain one of the fastest growing advanced economies.

14 February 2022

Australia & New Zealand Economics Weekly

Border reopening won’t ease labour shortages much

The full reopening of the border will prompt more Australians to make holidays overseas. The key point though is that it sends a powerful message that the worst of the pandemic is now behind us, which should also give a shot in the arm to the ailing domestic tourism industry. By contrast, we doubt that the opening of the border will ease labour shortages as much as most anticipate.

11 February 2022
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