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Japan still paying premium to secure energy supply Japan’s crude oil import volumes held up well in August but importers are still paying a premium to secure sufficient crude oil supplies outside of the Middle East. Taking exports first, the 19.3% annual …
16th September 2026
We now expect the price of Brent crude oil to remain high throughout this year, which means that fiscal measures to cap retail energy prices will cost an additional 0.6% of GDP this year. And with the government pressing ahead with its plan to reduce the …
15th September 2026
Fundamentals reassert themselves Price pressures in Japan are not fading away. While we learnt today that producer prices fell 0.2% m/m in August, that decline was driven entirely by energy-related components and agricultural products. Our measure of …
11th September 2026
Bank has signalled a rate hike in September due to mounting upside risks to inflation Sales tax cut muddying the inflation outlook, but underlying inflation will remain strong Bank will continue to tighten rapidly; policy rate will reach 2% by mid-2027 …
Wage data clear the path for September BoJ hike With wage growth going from strength to strength, the case for the Bank of Japan to hasten the pace of tightening is becoming increasingly compelling. According to today’s preliminary estimate, annual growth …
8th September 2026
BoJ remains on track to hike We got further confirmation this week that the Japanese economy has been able to take energy supply disruptions on the chin. To start with, corporate profit margins rose to an all-time high in Q2. To be clear, that partly …
4th September 2026
The surge in planned spending in the FY2027 budget largely reflects the government’s desire to reduce reliance on supplementary budgets but it’s still unclear how that will affect the overall fiscal stance. According to press reports, Japan’s ministries …
1st September 2026
The recent increase in JGB yields has been driven by global rather than domestic factors and there are no signs that it is creating financial stress. The BoJ will accelerate its tightening cycle to reduce lingering concerns about inflation risks, but it …
Government is muddying the fiscal waters According to press reports, the spending requests by ministries for the FY2027 budget due early next year will surpass ¥130tn, up from ¥122.3tn in the FY2026 budget. That means that overall spending in the …
28th August 2026
Case for tighter policy remains compelling The 0.3% q/q rise in the preliminary estimate of Q2 GDP may have been a bit weaker than most (including ourselves) had anticipated. But it’s unlikely to dissuade the Bank of Japan from hiking rates again next …
21st August 2026
PMI strengthens case for further BoJ tightening The strength in the August PMI adds to the case for the BoJ to hike interest rates as soon as next month. According to the flash estimate released today, the composite PMI picked up from 52.7 to 53.4 in …
Pickup in inflation clears the way for September BoJ hike With underlying price pressures intensifying, we’re growing more confident in our view that the Bank of Japan will hike rates again at its meeting next month . The pickup in headline inflation from …
The economy has weathered the energy shock well as Japan has been able to secure sufficient crude oil supplies outside the Middle East. However, Japan is paying a large premium for those supplies, which is adding to inflationary pressures. Indeed, the …
20th August 2026
Japan paying a large price for stable crude oil supply Japan’s crude oil import volumes returned to normal in July, but the country seems to be paying a large premium to secure supplies from sources outside the Middle East. The 23.2% annual rise in export …
The recent bond market sell-off appears to reflect investors demanding greater compensation for fiscal, geopolitical and policy uncertainty. We expect this shift to prove relatively persistent. The direct macroeconomic impact should remain limited absent …
18th August 2026
Japan’s economy will remain resilient GDP expanded at a decent pace in Q2 and with the government still limiting the pass-through from higher energy prices that should remain the case across the second half of the year. The 0.3% q/q increase in Q2 GDP was …
17th August 2026
Inflation risks are mounting The Summary of Opinions from the Bank of Japan’s July meeting showed that the Board is becoming increasingly hawkish. One member argued that, given upside risks to inflation, the pace of interest rate hikes could be “faster …
14th August 2026
This Focus provides a detailed analysis of recent changes in US tariff policy and discusses what future changes are likely. It addresses some key questions about how the new Section 301 and Section 232 tariffs compare to the previous Section 122 and IEEPA …
7th August 2026
Policy normalisation remains key Earlier this week, US Treasury Secretary Scott Bessent confirmed that the US had sold euros to buy yen as part of last Friday’s joint intervention. The operation helped lift the yen to ¥157 against the greenback, although …
The yen had weakened to a 40-year low against the dollar before FX intervention prompted a rebound last week, while the 10-year JGB yield is close to multi-year highs. This Update answers key client questions on the drivers of those moves and where we …
6th August 2026
While carry trade positioning appears to have increased over the past couple of years, we doubt the recent yen intervention alone will trigger a carry trade unwind and a rapid yen appreciation along the lines of what occurred in the summer of 2024 unless …
5th August 2026
While PM Takaichi intends to abandon “excessive austerity” and is trying to steer the BoJ in a more dovish direction, we don’t believe that her policies pose a major risk for Japan’s economic outlook. In particular, we expect the budget deficit to remain …
Strong wage growth adds to case for September rate hike Wage growth remained strong in June, which supports our view that the Bank of Japan will tighten policy again as soon as next month. The 3.4% annual rise in labour cash earnings in June marked a …
In response to Governor Ueda’s hawkish comments, we’re bringing forward our forecast for the next rate hike from October to September. That would imply a marked acceleration in the Bank’s tightening cycle and is consistent with our view that the Bank will …
31st July 2026
Takaichi risks squandering fiscal sweet spot A renewed round of FX intervention shortly after midnight Tokyo time succeeded in strengthening the yen and we explained here why we expect the yen to avoid another major leg downward. But the more important …
Hawkish BoJ will lift rates to neutral levels next year While the BoJ left interest rates unchanged as widely anticipated, the accompanying Outlook report was hawkish and we’re sticking to our non-consensus view that the Bank will lift interest rates to …
Energy-intensive sectors recovering further The June activity data suggest that GDP rose at a robust pace last quarter, while there are early signs that higher energy costs are feeding through to consumer prices. Taking the preliminary industrial …
Intervention in support of the yen may not work any better now than it has previously, but the persistence of the Japanese authorities suggests to us that the yen will remain around the 160 level this year before staging a more sustained rebound next …
Spending growth starting to accelerate again Figures released this week showed that real household disposable income growth surged to a two-year high of 2.5% y/y in Q1. Consumption growth seems to have accelerated in Q2 and with the government’s fuel …
24th July 2026
Renewed rise in crude oil prices means Bank will see downside risks to activity However, weaker yen compounds upside risks to inflation from higher energy prices Bank set to hike again in October with rates reaching above-consensus 2% by end-2027 The …
Economy continues to shrug off energy cost shock The June composite PMI suggests that the economy remains resilient and still points to a sharp acceleration in inflation. According to the flash estimate released today, the composite PMI edged up from 52.8 …
Inflation won't remain low for much longer While inflation remained below the Bank of Japan’s 2% target in June, the surge in producer price inflation points to a marked acceleration and we expect inflation to climb above 3% by early next year. The …
The global AI investment boom is delivering a bonanza to electronics manufacturers across Asia well beyond just chipmakers in Korea and Taiwan. The recent performance of Korean and Taiwanese chipmakers has left other manufacturers in the shade. Korea’s …
23rd July 2026
The “ Section 122” global tariff imposed by the Trump administration after the Supreme Court struck down its IEEPA tariffs (including those from “ Liberation Day”) will expire on Friday, to be replaced by country-specific “Section 301” tariffs. The new …
GDP growth seems to have accelerated after the start of the Iran War and there are early signs that inflation will pick up sharply towards the end of the year. A prolonged closure of the Strait of Hormuz could result in a sharper slowdown in GDP growth …
22nd July 2026
Japan’s crude oil imports will remain below pre-war levels for now Japan’s crude oil imports rebounded strongly in June but with the Strait of Hormuz now closed again, they will remain below pre-war levels for a while yet. The 25.3% annual rise in import …
The Iran war has (already) lasted longer than we initially assumed in our base case but the disruption to energy markets and hit to the global economy have been more limited. This resilience will be tested if agreement to reopen the Strait of Hormuz …
21st July 2026
50% tariff does not appear to be as broad as feared President Trump’s set of proclamations imposing 50% tariffs on goods imported from Canada are not as broad as the initial media reports suggest, with the included item codes covering only 5% of goods …
Crude oil imports will remain depressed for longer Press reports at the beginning of the week suggested that the Bank of Japan’s Board will revise up their forecasts for GDP growth and lower their forecasts for inflation at the upcoming meeting on 31 st …
17th July 2026
Given reports of Houthi threats to close the Bab el-Mandeb passage to the Red Sea and to attack Saudi oil infrastructure, we are publishing an updated version of this note originally sent on 31 st March. Attacks on Saudi oil infrastructure and/or the …
16th July 2026
The global economy has so far weathered the energy shock created by the war in Iran, but a sharp drawdown in oil inventories has left stocks close to critically low levels. The oil market therefore has much less capacity to absorb another supply shock. …
While the weakness of the yen remains a puzzle, we still expect the currency to rebound by the end of next year. Our end-2027 forecast for USD/JPY is 150, which compares to a current rate of ~162. The yen’s decline against the dollar since April 2025 …
15th July 2026
Japan’s economy isn’t benefitting much from the surge in demand related to artificial intelligence. While higher electronics import prices should result in faster price increases for household appliances over the coming months, the impact on overall …
14th July 2026
Government offers temporary relief The JGB market has been on something of a roller-coaster ride this week. 10-year JGB yields hit a three-decade high of 2.9% earlier this week, partly reflecting investor concerns that jawboning by the Takaichi …
10th July 2026
Rate hikes remain on the table The slowdown in wage growth in May is unlikely to deter the Bank of Japan from tightening policy further in the months ahead. According to the preliminary estimate released today, labour cash earnings growth slowed from 3.6% …
7th July 2026
The latest available data are consistent with our long-held view that Japan’s budget deficit has narrowed far more rapidly than many thought. Nonetheless, with the BoJ set to lift interest rates to 2%, we expect the 10-year JGB yield to climb further over …
6th July 2026
Strongest increase in Tankan output prices ever The data released this week suggest that Japan’s economy has shrugged off the hit from the energy shock. While retail sales haven’t been a reliable guide to consumer spending in the national accounts, they …
3rd July 2026
While any boost from higher energy costs to consumer prices will be short-lived, the continued weakening of the yen will provide a more longer lasting boost to consumer prices in Japan. Accordingly, we’re sticking to our above-consensus interest rate …
1st July 2026
Tankan survey adds to case for rapid rate hikes The strength of the Q2 Tankan survey is consistent with our view that the Bank of Japan will tighten policy more aggressively than most expect. The headline index for large manufacturers jumped from +17 to …
Resilient economy points to further monetary tightening The May activity data suggest that Japan’s economy is shrugging off the hit from higher energy costs. The 0.5% m/m rise in industrial production in May fell short of the analyst consensus of 1.1%. …
30th June 2026
