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Japan Wages & Household Spending (Aug. 2021)

Wage growth recovered a touch further in August and it should rise higher over the coming months as the labour market tightens and vaccines allow a full recovery in overtime and bonus payments. Meanwhile, the sharp drop in household spending in August supports our view that consumer spending will fall across Q3.
Tom Learmouth Japan Economist
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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

Japan Economics Weekly

The rise and fall of Japan's energy imports

Japan is still struggling to wean itself off fossil fuels despite a new government push to boost solar power. However, the country has become more energy efficient over the past decade, which has helped the economy weather the impact of rising global energy prices. Meanwhile, the government has recommended a 3.3% rise in the minimum wage, the largest move on record. While overall wage growth would get a boost over the next year, we think it would still remain well below the 3.0% level the BoJ maintains is needed to sustain inflation above its 2.0% target  

5 August 2022

More from Tom Learmouth

Japan Data Response

Japan Labour Market (Aug. 2021)

While employment fell sharply in August, that was due to the Delta wave and should only prove a temporary setback. We expect the jobless rate to fall further over the coming months as the lifting of virus restrictions allows face-to-face services employment to rebound.

1 October 2021

Japan Data Response

Japan Retail Sales & Industrial Production (Aug. 2021)

The sharp falls in both retail sales and industrial production in August indicate that activity weakened significantly at the height of the Delta-driven fifth wave. But while that suggests that the economy may have contracted slightly in Q3, output is set for a strong rebound in Q4.

30 September 2021

Japan Economics Update

What does Kishida’s victory mean for Japan?

Incoming PM Kishida has provided mixed signals on fiscal policy, pledging a large near-term stimulus while retaining ambitious medium-term consolidation plans. Given that he blamed deregulation for widening inequality, structural reforms will move further down the agenda. Meanwhile, his stance on China is hawkish: it’s likely that he’ll push back against further integration and support decoupling.

29 September 2021
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