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BoJ still facing no inflation pressure

The Omicron surge will cause a renewed fall in consumer spending this quarter. But we still expect GDP to return to its pre-virus path in the second half of the year. And while Omicron and any subsequent outbreaks may exacerbate supply shortages, inflation will remain well below 2%, allowing the Bank of Japan to keep policy very loose.   Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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Japan Economics Weekly

Virus fears waning, Bank of Japan plans could change

We doubt that the spike in mobility during Golden Week is a harbinger of a rapid rebound in consumer spending. Mounting concerns about rising living costs and lingering virus fears among the elderly will keep the savings rate well above pre-virus levels. Meanwhile, the Bank of Japan this week ruled out widening the tolerance band around its 10-year yield target. However, markets remain unconvinced as yields continue to trade close to the ceiling of the band. We still expect the Bank to come under renewed pressure to defend the target, eventually forcing it to widen the tolerance band.  

13 May 2022

Japan Economics Update

Large pot of pandemic savings to collect dust

The hit to household incomes from higher inflation will be much smaller in Japan than elsewhere and consumers have plenty of pandemic forced savings to tap into to sustain spending. But we nonetheless expect the rebound in consumption to disappoint over the coming months as consumers are spooked by rare price hikes to everyday items and some remain wary of catching the virus. China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.

11 May 2022

Japan Data Response

Japan Labour Cash Earnings (Mar. 22)

Nominal wage growth stayed at 1.2% in March and we think it could touch 2% over the coming months as overtime and bonus payments get back to their pre-virus levels. But with base pay growth still weak, we think overall wage growth will fall back to 1% before long. China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.

9 May 2022

More from Marcel Thieliant

Australia & New Zealand Economics Update

Our key calls for 2022

We think that GDP growth in Australia will surprise to the upside. But with wage growth only approaching the 3% watermark the RBA would like to see by year-end, we expect the Bank to keep rates on hold. By contrast, we expect the RBNZ to hike interest rates a bit faster than most expect. Our view that commodity prices will continue to fall means that the Aussie dollar will weaken further.

11 January 2022

Japan Economics Weekly

Recovery in industrial activity will run out of steam

Japan’s car industry has rebounded quickly from the disruptions caused by Delta waves across South-East Asia a few months ago. But amidst persistent supply shortages, output hasn’t quite returned to pre-pandemic levels yet. Omicron may create additional strains on supply chains and will also result in a renewed drop in consumer spending this quarter. The upshot is that following a strong post-vaccination bounce in Q4, GDP growth is set to slow sharply this quarter.

7 January 2022

Australia & New Zealand Economics Update

Australia - Omicron will add to upward pressure on inflation

The Omicron variant will probably result in a stagnation in consumption this quarter. However, by worsening supply shortages it will only add to the upward pressure on inflation. The upshot is that it won’t necessarily prevent the RBA from ending QE in February as we anticipate.

6 January 2022
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