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Japan Wages & Household Spending (Oct. 2021)

Wage growth stayed weak in October but it should accelerate as the labour market tightens and the recent vaccine-led reopening allows a full recovery in overtime and bonus payments. Meanwhile, the rise in household spending in October supports our view that consumer spending will rebound strongly across Q4.
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 Economics Weekly

Omicron restrictions wouldn’t jolt BoJ into action

Even if Omicron proves more transmissible than Delta, its impact on Japan’s economy could vary substantially depending on how deadly it is, how well it evades vaccines, and PM Kishida’s appetite for draconian containment measures. With supply shortages already severe, fresh restrictions on Japanese manufacturers’ global supply chains coupled with a global shift in spending away from services and back towards goods could cause input price pressures to intensify further. However, we doubt any resulting boost to core goods inflation would do much more than simply offset a drag from energy inflation. As such, core inflation would stay well short of the BoJ’s 2.0% target, keeping rate hikes off the table.

3 December 2021

Japan Data Response

Labour Market & Industrial Production (Oct. 2021)

Employment fell sharply again in October despite the lifting of states of emergency declarations at the start of the month. However, it should rebound sharply across November and December in line with the revival in face-to-face service sector activity. And while industrial production only edged up in October, we think it too will rebound more strongly this month and next, potentially approaching its recent April peak in December.

30 November 2021

Japan Economics Weekly

Government seeks to revive soggy chip industry

The breakdown of PM Kishida’s new supplementary budget released today showed that ¥600 billion has been allocated to reviving semiconductor manufacturing in Japan. The centrepiece of the plan is a new TSMC factory in Kumamoto Prefecture that will produce the mid-range chips critical for car production. Given recent supply disruptions caused by chip shortages, beefing up local production makes strategic sense. We think the government’s new interventionist approach to stimulating mid-range chip production may succeed, but plans to make inroads into high-range chip production are likely to fall flat.

26 November 2021
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