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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.
Tom Learmouth Japan Economist
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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

Japan Economics Weekly

The rise and fall of Japan's energy imports

Japan is still struggling to wean itself off fossil fuels despite a new government push to boost solar power. However, the country has become more energy efficient over the past decade, which has helped the economy weather the impact of rising global energy prices. Meanwhile, the government has recommended a 3.3% rise in the minimum wage, the largest move on record. While overall wage growth would get a boost over the next year, we think it would still remain well below the 3.0% level the BoJ maintains is needed to sustain inflation above its 2.0% target  

5 August 2022

More from Tom Learmouth

Japan Data Response

Japan Machinery Orders (Nov. 2021)

The rise in machinery orders in November supports our view that business investment recovered strongly across Q4. And private investment should continue to rebound strongly this year as firms look past a brief hit from Omicron.

17 January 2022

Japan Economics Weekly

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.

14 January 2022

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
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