Weak consumer confidence, BoJ pre-emptive easing?

The recent slump in consumer confidence underlines that consumer spending will fall sharply after October’s sales tax hike. But it doesn’t tell us much about the extent of the slowdown and the fact that households haven’t brought forward spending on durable goods on a major scale supports our view that consumption will hold up better than after previous tax hikes. Meanwhile, Bank of Japan Governor Kuroda provided no indication that interest rates will be lowered at the upcoming Board meeting.
Tom Learmouth Japan Economist
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Japan Economics Weekly

Kishida dissolves parliament, firms look to seniors

The ruling LDP appears to be bracing for a slimming down of its lower house majority in the general election that will take place on 31st October. That would make tangible structural reform progress under PM Kishida even less likely. And while a large fiscal stimulus package will be compiled immediately after the election, it’s likely to sustain the elevated fiscal support of the past year rather than act as a fresh driver of growth. Meanwhile, firms appear to be readying themselves for renewed labour shortages once the economy reopens by drawing up plans to re-employ more seniors. We expect further increases in over-60s employment to drive labour force participation higher over the next few years.

15 October 2021

Japan Data Response

Japan Machinery Orders (Aug. 2021)

The fall in machinery orders in August supports our view that the recovery in business investment stalled a little across Q3. But private investment should rebound more strongly in Q4 and into next year provided vaccines allow economic activity to return to somewhere near normal.

13 October 2021

Japan Economics Update

Why is inflation still so low in Japan?

The continued weakness in Japan’s inflation is partly due to the recent plunge in mobile phone tariffs and the long lags between global energy prices and household utility bills. Indeed, inflation is set to rise next year. But more muted cost pressures in manufacturing than in other advanced economies coupled with the reluctance of Japanese firms to raise output prices mean that inflation won’t surge as it has elsewhere.

12 October 2021

More from Tom Learmouth

Japan Data Response

Japan Trade (May 2021) & Machinery Orders (Apr.)

Despite the spectacular y/y growth rates in May, the rebound in exports is showing signs of slowing. Indeed, we doubt external demand will provide much of a tailwind to growth over the coming months as global consumer goods demand weakens in the wake of vaccine rollouts. Meanwhile, the muted rise in machinery orders in April supports our view that business investment will have trodden water this quarter.

16 June 2021

Japan Economics Weekly

Vaccines for all by November, ¥1000 minimum wage

The revised Q1 GDP figures and April wage data released this week suggest the economy was a little more resilient than first appeared in the early part of this year. And the economy is looking increasingly well set for a strong rebound in the second half of the year. Daily COVID cases and the number of patients in hospital have continued to plunge. With 98% of Japan’s municipalities expecting to be able to meet the government’s target of finishing vaccinations for the over-65s by end-July, the risk of the healthcare system being stretched to breaking point again is diminishing. The only remaining major downside risk now is the prospect of a more infectious variant – such as that first found in India – taking hold rapidly soon.

11 June 2021

Bank of Japan Watch

Asset purchases to remain low but rates on hold

At its June meeting we think the Bank of Japan may extend the deadline on its emergency lending facility from September to December. Beyond that point, it should further taper its purchases of short-dated debt as it digs in for a prolonged hold.

11 June 2021
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