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Abe nominates reflationist, Japanification, coronavirus

Discussion of “Japanification” amongst BoJ Policy Board members last week prompted one member to propose that the Bank review its monetary policy settings. And this week, PM Abe nominated reflationist Adachi Seiji as Mr Harada’s replacement on the Policy Board. We discuss whether either development increases the chances of the Bank introducing fresh easing measures this year.
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 Retail Sales & Industrial Production (Apr. 2021)

The sharp fall in retail sales and weaker than expected rise in industrial production in April suggests the economy was subdued even before states of emergency were declared, supporting our view that the economy won’t have rebounded from its weak Q1 this quarter.

31 May 2021

Japan Economics Weekly

State of emergency extension, Olympic fifth wave?

While the fourth wave of coronavirus has broken, with hospital capacity still stretched the government will today extend the emergency declarations covering half of the economy until 20th June. That supports our view that output won’t recover this quarter after a weak Q1. Further ahead, with the vaccine rollout accelerating we still expect a strong rebound from mid-Q3. But while the risks of importing dangerous virus variants during the Olympics are overblown, there certainly are downside risks from the more transmissible Indian variant which has already begun to spread in Japan. If it causes a fifth wave, then that would delay the economy’s recovery still further.

28 May 2021

Japan Data Response

Japan Labour Market (Apr. 2021)

The unemployment rate spiked back up in April after a surprise sharp fall in March. However, we think the jobless rate will fall back to around 2.6% over the coming months as employment resumes its recovery.

28 May 2021
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