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Supply shortages set to hold back manufacturers

Production of motor vehicles and electronics fell sharply in August and is well below pre-pandemic levels. This isn’t mainly due to weaker demand, which has moderated but remains healthy. Instead, it seems to be driven by mounting material shortages. Those shortages will probably persist for a while yet, posing a downside risk to our upbeat forecasts for 2022 GDP growth.
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.  

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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)

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More from Marcel Thieliant

Japan Data Response

Tankan (Q3 2021)

The latest Tankan survey was stronger than most had anticipated, supporting our view that the economy will recover rapidly as the Delta wave has ebbed. However, there are mounting signs that the recovery in the manufacturing sector will be hampered by supply shortages.

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RBA Watch

RBA set to hike in 2023

With the latest lockdowns set to end next month, we expect the RBA to taper its bond purchases in February. We still expect wage growth to accelerate more rapidly than the Bank anticipates and stick to our forecast for the first rate hike in early-2023.

28 September 2021

Australia & New Zealand Economics Weekly

APRA to impose lending restrictions by mid-2022

While house prices have surged, household debt remains contained and lending standards remain sound overall. However, housing credit growth is set to accelerate and there are already signs that some households are borrowing too much. The upshot is that we now expect regulators to impose restrictions on debt-to-income ratios by the middle of next year.

24 September 2021
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