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Strict isolation rules could cause severe shortages

While we think Japan’s economy entered 2022 just above its pre-pandemic level, consumer spending will probably be knocked back this quarter by light-touch restrictions which are likely to be reimposed across most of the country within the next couple of weeks. Moreover, the added transmissibility of Omicron is likely to lead to a sizeable wave of staff absences in Japan. While PM Kishida is set to reduce the isolation period for coronavirus patients and their close contacts from 14 to 10 days, that would still be a strict isolation regime when compared with most Western countries. All told, we think Omicron will limit the economy to just a 0.2% q/q rise this quarter before a rebound in growth across Q2 and Q3.
Tom Learmouth Japan Economist
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Japan Data Response

Japan Industrial Production (May 2022)

The plunge in industrial output in May suggests that Japan’s recovery is disappointing yet again. The upshot is that it will take until the second half of the year for GDP to surpass its pre-virus level. 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.  

30 June 2022

Japan Data Response

Japan Retail Sales (May 2022)

The disappointing rise in retail sales in May poses downside risks to our upbeat forecasts for consumption growth in Q2. 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.  

29 June 2022

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

More from Tom Learmouth

Bank of Japan Watch

Shrinking balance sheet won’t lead to tighter policy

While Omicron is likely to intensify input price pressures, most Japanese firms will continue to absorb those costs in their margins, ensuring inflation stays well below the Bank’s 2% target. And in contrast to the Fed, a gradual shrinking of the BoJ’s balance sheet won’t lift long-term yields in Japan. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

12 January 2022

Japan Data Response

Japan Wages & Household Spending (Nov. 2021)

Wage growth fell to zero in November due a slump in bonus payments, but it should accelerate as the labour market tightens and the recent reopening feeds into a renewed recovery in overtime and bonus payments. Meanwhile, the small fall in household spending in November poses a slight downside risk to our view that consumer spending rebounded strongly in Q4.

7 January 2022

Japan Data Response

Japan Consumer Prices (Nov. 2021)

Headline inflation picked up in November due to another acceleration in energy inflation and a further rise in fresh food inflation. Underlying inflation remained weak, and while it will accelerate over the coming months it’s unlikely to break past +1.0% y/y.

24 December 2021
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