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Japan Retail Sales (Feb. 2022)

Retail sales dropped again in February, making it almost certain that consumer spending fell across Q1. Looking into Q2 though, private consumption is well set for a strong, booster-boosted rebound.
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 Labour Market (Feb. 2022)

Employment was unchanged in February after January’s sizeable fall. But with all domestic restrictions since lifted and activity resuming its recovery, employment is set for a strong rebound over the coming months which should push the unemployment rate back down to 2.5% by the end of the year.

29 March 2022

Japan Economics Weekly

Support measures won’t prevent inflation reaching 2%

The government is preparing fresh support measures to lower prices of petroleum products, which will reduce the drag on household incomes and will prevent inflation from breaching 2% for now. We still expect inflation to surpass 2% in the second half of the year as underlying inflation accelerates and prices of electricity and gas surge. But with inflation only rising above the Bank of Japan’s 2% target for a few months, the Bank will keep policy settings loose for the foreseeable future.

25 March 2022

Japan Data Response

Japan Flash PMIs (Mar. 2022)

The March flash manufacturing PMI suggests that the war in Ukraine has intensified supply chain disruption for firms. By contrast, activity in the services sector bounced back and should continue to recover over the coming months. Commodities Drop-In (24 March, 11:00 EDT/15:00 GMT): Our Commodities team will be exploring how the war in Ukraine is shaking up commodity markets, from oil to wheat, while tackling some of the big market questions – not least whether we’re in for 1970s-style oil supply shocks. Register here.

24 March 2022
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