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More cash handouts on the way

The latest survey data suggest that consumer spending is still struggling to gain momentum even as the bulk of the population are fully vaccinated and virus cases have plunged. However, with car sales now rebounding sharply as supply disruptions are easing and spending set to get another shot in the arm from the government’s cash handouts, we still expect consumption to surpass its pre-virus level by early next year.
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

RBA recapitalisation would lift public debt

Rising interest rates will result in the RBA making further losses in the years ahead. The Bank’s existing reserves should be enough to absorb those losses in a benign scenario, but the Bank will stop paying a dividend. And in a worst-case scenario, the Treasury may inject capital of as much as 5% of GDP.

9 November 2021

Japan Data Response

Japan Economy Watchers Survey (Oct. 2021)

The surge in October’s Economy Watchers Survey is the strongest sign yet that the economy is rebounding rapidly now that the bulk of the population is fully vaccinated and new virus cases have plunged.

9 November 2021

Japan Data Response

Japan Labour Cash Earnings (Sep. 2021)

Wage growth weakened in September as the Delta wave resulted in a drop in overtime working hours. But with the economy now rebounding and the labour market tightening, we still expect wage growth to climb above 1% next year.

9 November 2021
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