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Japan Machinery Orders (Feb. 2021)

The sharp fall in machinery orders in February poses downside risks to our view that business investment continued to rise last quarter. However, the recovery in private investment should still gather pace again in the second half of the year as vaccines allow the economy to regain full health.
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 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

Japan Data Response

Bank of Japan Tankan (Q2 2021)

The further rebound in the Q2 Tankan supports our view that the economy’s disappointing start to the year won’t prevent vaccines driving a strong rebound in the second half of the year. And firms’ upbeat capital spending plans bolster our view that business investment will soon recover sharply.

1 July 2021

Japan Economics Focus

Transition to carbon neutral 2050 wouldn’t harm growth

Achieving net zero emissions in Japan in three decades is a difficult but achievable task. And while the most carbon-intensive sectors may face significant headwinds, overall we agree with PM Suga that economic growth wouldn’t have to be sacrificed to reach his goal of a carbon neutral 2050.

29 June 2021
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