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Japan Flash PMIs (Feb. 2022)

The February flash PMIs suggest that the Omicron wave has dealt a significant blow to economic activity. But with that wave now having broken, we think Japan’s economy is set for a rebound stronger than the consensus expects over the remainder of the year.
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 Consumer Prices (Jan. 2022)

Inflation slowed in January but that was entirely down to the base effects boost from the Go To Travel campaign disappearing. While underlying inflation is unlikely to reach 1% until later in the year, we think headline inflation will approach 1.5% in April as most of the hit from mobile phone tariff cuts drops out of the annual comparison.

18 February 2022

Japan Data Response

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.

17 February 2022

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
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