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Japan External Trade (Oct. 2021)

The recovery in exports in October suggests that supply shortages were beginning to ease in the automobile sector. We think that the rebound in exports will pick up pace over the coming months as production at Japanese carmakers returns to normal.
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 (Q3 2021 Preliminary)

While the economy contracted yet again in Q3 as supply shortages and the Delta wave softened domestic demand, output should now be rebounding sharply. With most domestic restrictions removed, we expect GDP to regain its pre-virus level this quarter.

15 November 2021

Japan Economics Weekly

PM Kishida’s plans to raise wages sound familiar

PM Kishida’s plans to lift wage growth largely follow the Abenomics blueprint of tax incentives, targeted pay hikes in sectors facing severe labour shortages and rapid minimum wage hikes. A tax on corporate cash holdings would be a novelty, but we suspect that firms would respond by diverting their cash into other financial assets or raising dividend payouts rather than by lifting wages. Unfortunately, Kishida is showing little appetite for putting his money where his mouth is by providing generous across-the-board pay hikes for public sector workers.

5 November 2021

Japan Economics Weekly

Services recovering, industry still ailing

This week’s activity data provided further evidence that supply shortages in the car sector are holding back the recovery. We expect car production to rebound this quarter as factories in Southeast Asia are reopening, but lingering chip shortages will remain a drag. As such, the onus rests on the services sector to drive the recovery for now, which is being supported by the end of curfews at bars & restaurants and should soon get an additional shot in the arm by the resumption of the Go To Travel campaign.

29 October 2021
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