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Japan External Trade (Jan. 2022)

Exports were broadly unchanged in January despite Omicron surges at home and abroad. We think they’ll rebound further this year as external demand for capital goods rises further and motor vehicle exports resume their recovery now that Omicron waves are subsiding.
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 GDP (Q4 2021 Preliminary)

While Omicron will cause Japan’s economy to do little more than tread water this quarter following a rebound in Q4, output should soon resume its recovery and get back on its pre-virus trend by the end of the year.

15 February 2022

Japan Economics Weekly

BoJ sets its stall out, three more weeks of restrictions

The Bank of Japan’s first unlimited fixed rate auction in three-and-a-half years is likely to send a strong signal to investors that +0.25% is right now a clear line in the sand for 10-year JGB yields. For now, that quashes speculation that the 10-year yield target could be abandoned in favour of a pivot to shorter maturities such as 3- or 5-year yields, a move Governor Kuroda recently said could only be discussed when the time comes to exit ultra-loose policy. Meanwhile, daily virus cases fell for the first time since early December yesterday on a week-on-week basis. That supports our view that GDP will get back on its pre-virus trend as soon as Q3 this year.

11 February 2022

Japan Economics Update

Prolonged border closure could lift labour costs

With economic activity still depressed by recurrent virus waves, the sharp slowdown in immigration to Japan has yet to put much upwards pressure on wages. However, looking ahead we think some sectors could be hit by a rise in labour costs if the border remains closed to new entrants across most of 2022.

9 February 2022
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