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Economy Watchers Survey (Feb.)

The plunge in the Economy Watcher’s Survey (EWS) in February to its lowest level since the 2011 tsunami suggests that the intensified spread of the coronavirus will cause consumer spending to fall sharply this month. Household-related activity, business conditions and employment conditions all fell off a cliff, suggesting another contraction in GDP this quarter is a near-certainty.
Tom Learmouth Japan Economist
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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

Japan Economics Update

The implications of an escalating Taiwan crisis

The extent to which neighbouring countries would be affected by an escalation of tensions between China and Taiwan would depend both on which sides they take and on the nature of restrictions imposed by the West and China. ASEAN countries are most reliant on China both as a source of imported inputs as well as a destination for exports, while major disruptions to semiconductor production in Taiwan would severely restrain Japan’s manufacturing industry despite its smaller trade links with China.

10 August 2022

Japan Chart Book

Output will return to pre-virus trend eventually

With a record virus wave sweeping across the country and consumer confidence slumping, we’re slashing our forecast for Q3 consumption growth from 0.8% to 0.2%. While the government has refrained from declaring another state of emergency, spending was weakening even before virus cases started to surge. That means that GDP will remain much weaker in the near term than the pre-pandemic trend, forcing the Bank of Japan to keep policy loose even as central banks elsewhere are tightening the screws. However, we still expect that gap to close eventually, for two reasons. First, while the long-running rise in the labour force participation rate stalled over the last couple of years, the share of the population available for paid employment is now on the rise again. What’s more, mobility has recently reached pre-virus levels for the first time since the start of the pandemic, which suggests that households are learning to live with the virus even if currently they are not spending as before. The still very high household savings rate should fall in earnest before long.

8 August 2022

More from Tom Learmouth

Japan Data Response

Japan Trade (May 2021) & Machinery Orders (Apr.)

Despite the spectacular y/y growth rates in May, the rebound in exports is showing signs of slowing. Indeed, we doubt external demand will provide much of a tailwind to growth over the coming months as global consumer goods demand weakens in the wake of vaccine rollouts. Meanwhile, the muted rise in machinery orders in April supports our view that business investment will have trodden water this quarter.

16 June 2021

Japan Economics Weekly

Vaccines for all by November, ¥1000 minimum wage

The revised Q1 GDP figures and April wage data released this week suggest the economy was a little more resilient than first appeared in the early part of this year. And the economy is looking increasingly well set for a strong rebound in the second half of the year. Daily COVID cases and the number of patients in hospital have continued to plunge. With 98% of Japan’s municipalities expecting to be able to meet the government’s target of finishing vaccinations for the over-65s by end-July, the risk of the healthcare system being stretched to breaking point again is diminishing. The only remaining major downside risk now is the prospect of a more infectious variant – such as that first found in India – taking hold rapidly soon.

11 June 2021

Bank of Japan Watch

Asset purchases to remain low but rates on hold

At its June meeting we think the Bank of Japan may extend the deadline on its emergency lending facility from September to December. Beyond that point, it should further taper its purchases of short-dated debt as it digs in for a prolonged hold.

11 June 2021
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