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Japan Retail Sales & Industrial Production (Mar. 2022)

The strong rebound in retail sales in March suggests that the post-Omicron recovery got off to a good start. Meanwhile, industrial production edged up last month, but it will continue to be held back by supply shortages in the near term.  
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 (Mar. 2022)

Employment bounced back in March and it should continue to recover over the coming months as long as the reopening doesn’t go into reverse again. That should push the unemployment rate back down to its pre-virus level of 2.5% by the end of the year.

26 April 2022

Japan Data Response

Japan Consumer Prices (Mar. 2022)

Inflation picked up in March due to a further rise in utilities inflation and a jump in food inflation. And headline inflation will hit 2% in the April data released in just under a month’s time as most of the drag from mobile phone tariffs cuts drops out of the annual comparison, and we expect it to stay there until early next year.

22 April 2022

Bank of Japan Watch

Policy settings under threat but BoJ won’t yield

Despite coming under significant pressure in both bond and currency markets in recent weeks, the Bank of Japan will not respond to inflation reaching its 2% target by hiking its short-term policy rate, nor by letting go of 10-year JGB yields.

21 April 2022
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