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Japan External Trade (May 2022)

Export volumes recovered a bit in May, but they are likely to stay weak in the near term until supply shortages dissipate and allow exporting automakers to ramp up production again. Markets Drop-In (22nd June, 10:00 ET/15:00 BST): Join our Markets team for this special briefing on the outlook for equities, bonds and FX and a discussion about revisions to our forecasts. Register now
Tom Learmouth Japan Economist
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More from Japan

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 Update

BoJ to raise ceiling on 10-year yields

The weakening in the yen to a 24-year low and a crack in the Bank of Japan’s ceiling on 10-year yields today is putting significant pressure on policymakers to respond. FX intervention is a possibility, but we doubt it would be effective. We suspect the BoJ will raise the ceiling on long-term interest rates from 0.25% to 0.50% before long, buying itself a respite from pressure on JGB yields and on the yen.

13 June 2022

Bank of Japan Watch

Weak wage growth to preclude tighter policy

While Japanese inflation will stay just above the Bank of Japan’s 2% target over the coming months, the Bank will not tighten policy at either the short or long end of the yield curve while wage growth and domestic demand remain weak.

10 June 2022

Japan Economics Weekly

Rising prices won’t prevent solid rebound in Q2

The renewed drop in industrial production and the weakness in retail sales volumes in April has raised concerns that Japan’s recovery will continue to disappoint. However, with consumer prices rising far less than elsewhere, Japan isn’t facing a cost-of-living crisis. Indeed, high frequency data suggest that consumption picked up pace in May as the Omicron wave subsided. The upshot is that we’re sticking to our upbeat forecasts for GDP growth for this quarter and next.  

3 June 2022
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