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Japan External Trade (Jun. 2021)

The rebound in exports showed further signs of slowing in June despite another high y/y growth rate caused by base effects. We think external demand will only provide a small tailwind to growth over the coming months as capital goods exports continue to rise but consumer goods exports weaken in the wake of vaccine rollouts.
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 Economics Weekly

Delta variant taking hold in Tokyo before Olympics

A delta variant-driven fifth wave has begun and cases are beginning to surge in Tokyo ahead of the Olympics opening ceremony next Friday. However, the variant is still overwhelmingly concentrated in Tokyo – where a state of emergency came into force on Monday – and vaccines are already beginning to have a positive impact. Only a small fraction of cases are now amongst the over-65s and nationwide deaths are at their lowest level since November. Indeed, we think the current outbreak should be manageable with the current restrictions in place and still expect PM Suga to be able to remove most domestic restrictions from late-Q3 once vaccine coverage is high.

16 July 2021

Bank of Japan Watch

New climate change facility not a game changer

At its July meeting we expect the Bank of Japan to outline that it will offer interest-free loans to banks under its new fund-provisioning measures aimed at addressing climate change. Beyond that though, the Bank won’t alter its major policy settings.

9 July 2021

Japan Data Response

Japan Wages & Household Spending (May 2021)

While the further acceleration in wage growth in May was again largely down to favourable base effects, we think wage growth will stay elevated as the labour market tightens and vaccines fuel a further recovery in overtime pay. Meanwhile, the only modest drop in household spending in May suggests that consumer spending may have edged up last quarter.

6 July 2021
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