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Wage pressures showing signs of strengthening With base pay growth on a new upswing, we think the Bank of Japan will restart its hiking cycle before long. According to today’s preliminary estimate, growth in labour cash earnings remained unchanged at 2.3% …
5th June 2025
Japan’s economy shrugging off trade tensions If anything, the April activity data suggest that Japan’s economy is benefitting from trade tensions, which bodes well for our view that the Bank of Japan will hike rates again soon. Taking industrial …
30th May 2025
Strong inflation opens up chance of July rate hike The Tokyo CPI showed a further broad-based acceleration in inflation in inflation, which suggests that the Bank of Japan may hike even earlier than our current forecast of October. Headline inflation held …
Strong inflation will prompt rate hikes later this year Underlying inflation remained strong in April despite the slashing of public high school fees and we still expect the Bank of Japan to tighten policy further this year. Headline inflation was …
23rd May 2025
PMIs point to a cooling economy The ongoing weakness in activity, coupled with softer price pressures, will keep the Bank of Japan in wait and watch mode in the near term. According to today’s flash estimate, Japan’s composite PMI fell from 51.2 in April …
22nd May 2025
Exports slump as US auto tariffs kick in With US tariffs weighing on Japanese exports, net trade will continue to act as a drag on activity in the near term. The annual increase in export values slowed from 4% in March to 2% in April. The slowdown in …
21st May 2025
GDP growth set to remain sluggish this year With the economy already shrinking on the eve of the trade war, the Bank of Japan will probably wait even longer before resuming its tightening cycle than we had anticipated. The 0.2% q/q fall in Q1 GDP was …
16th May 2025
Weakness in regular earnings very difficult to explain We still believe that the labour cash earnings figures are understating the strength of wage growth but taken at face value they reduce chances of further tightening by the Bank of Japan. According to …
9th May 2025
Bank of Japan will hike rates again in July The Bank of Japan revised down its growth forecasts and sounded more dovish when it left policy settings unchanged today. However, we believe that the trade war won’t be as damaging as feared and we’re sticking …
1st May 2025
Manufacturing sector shrugging off trade tensions Japan’s economy approached Liberation Day with solid momentum and firms’ production forecasts suggest that the manufacturing sector won’t be affected much by higher US tariffs. The 1.1% m/m fall in …
30th April 2025
Exports will rebound across Q2 While export values fell in March, we expect them to rebound over the coming months as US consumers rush to place orders before the suspension of reciprocal tariffs ends in July. The annual increase in export values slowed …
17th April 2025
Underlying wage growth remains strong We suspect that the sharp slowdown in regular earnings growth in February is just a sampling anomaly rather than a sign of genuine weakness. With this year’s spring wage negotiations resulting in a larger pay hike …
7th April 2025
Tankan suggests economy is firing on all cylinders While business conditions were unchanged in the latest Tankan survey, the survey suggests that an increasingly overheating economy is creating strong price pressures. The Tankan’s headline measure of …
1st April 2025
Strength in inflation suggests BoJ will hike rates again soon The strength in underlying inflation in February suggests that the Bank of Japan could hike rates at its next meeting in May but we still expect that uncertainty over the impact of US tariffs …
20th March 2025
Bank of Japan will lift rates to 1.5% by 2027 The BoJ’s decision to leave policy settings unchanged today was widely anticipated but we still think that the Bank’s tightening cycle has much further to run. After having lifted its policy rate to 0.5% in …
19th March 2025
Wage growth will accelerate further Regular pay growth surged in January and with this year’s spring wage negotiations set to result in stronger pay hikes than last year, wage growth will pick up further over the course of the year. According to the …
9th March 2025
Shunto set to result in stronger pay hikes than last year With Japan’s trade unions requesting an even larger pay hike in this year’s spring wage negotiations (Shunto) than they did a year ago, we now expect the negotiations to result in a base pay hike …
6th March 2025
Inflation on track to overshoot BoJ’s forecasts The January activity data suggest that GDP will have fallen this quarter, but that would follow strong gains in previous quarters. With inflation set to overshoot the Bank of Japan’s forecasts, we still …
28th February 2025
This page has been updated with additional analysis since first publication. PMIs point to further rate hikes The further rebound in the composite PMI in February coupled with the persistent strength in manufacturing output prices suggests that the Bank …
21st February 2025
Softer inflation ahead The acceleration in headline inflation and strength in underlying inflation in January should add to the Bank of Japan’s confidence that it can continue its tightening cycle over the coming quarters. In January, headline inflation …
20th February 2025
The decision by the US and Russia to “lay the groundwork” to end the war in Ukraine marks a potentially significant turning point after three years of conflict. Negotiations will take time and the macroeconomic implications will depend on the features of …
18th February 2025
GDP growth should settle around trend this year Even though the jump in Q4 GDP wasn’t broad-based, it supports our view that the Bank of Japan will tighten policy more aggressively this year than most anticipate. According to the preliminary estimate …
17th February 2025
Regular earnings growth will hold strong at just under 3% for most of this year Growth in base pay rose the most since 1992 in December, and we think it will continue to hold strong in this year. According to today’s preliminary estimate, labour cash …
4th February 2025
Conditions for further tightening remain in place The end-month data rush vindicates the Bank’s decision to lift its policy rate last week and suggests that further tightening over the coming months is likely. Taking the activity data first, the 0.3% m/m …
31st January 2025
Bank of Japan will lift policy rate to 1.25% next year The Bank of Japan hiked its policy rate to 0.5% today and we think it will lift it to an above-consensus 1.25% by the middle of next year. The Bank’s decision to resume its tightening cycle with a …
24th January 2025
Flash PMI points to pick-up in activity this quarter The continued rise in the composite PMI to its highest point since Q3 last year supports our view that activity will pick up again this quarter. Today’s flash estimate showed that the manufacturing PMI …
Strength in underlying inflation points to further tightening The acceleration in headline inflation and strength in underlying inflation in December should add to the Bank’s confidence that it can resume rate hikes today and over the coming months. In …
23rd January 2025
Regular earnings growth will hold strong at just under 3% this year Growth in base pay rose to its highest figure since 1992 in November, and we think that it will continue to hold strong through to this year. According to today’s preliminary estimate, …
8th January 2025
Surge in headline inflation won’t last, but underlying inflation to remain near target November’s surge in inflation wasn’t a surprise – the Bank of Japan will have known it was on the cards when it decided not to hike rates yesterday. But it should add …
19th December 2024
Bank will bring in the new year with a rate hike Although the Bank of Japan left rates on hold for a third consecutive meeting, we think it will resume its tightening cycle before long. The Bank’s decision to leave the policy rate unchanged at 0.25% was …
This page has been updated with additional analysis since first publication. Tankan points to sluggish growth The mediocre increase in business conditions across all firm sizes in the latest Tankan suggests that the activity is unlikely to rebound …
13th December 2024
Base pay rose the most since 1992 in October and we think it will continue to hold strong through to the end of next year. According to today’s preliminary estimate, labour cash earnings rose by 2.6% in October, which was just a tad higher than the 2.5% …
5th December 2024
Activity data point to sluggish Q4 While industrial production and retail sales both rose in October, the figures are consistent with output stagnating at best this quarter. Taking industrial production first, the 3.0% m/m rise marked the second …
29th November 2024
Underlying inflation set to remain above 2% The Tokyo CPI suggests that inflation excluding fresh food and energy rose further above the Bank of Japan’s 2% target in November, supporting our long-held view that the Bank will hike rates in December. In …
28th November 2024
This page has been updated with additional analysis since first publication. Flash PMI points to continued rebound in activity The renewed rise in the composite PMI supports our view that activity will continue to expand at a robust pace in the remainder …
22nd November 2024
Pick-up in underlying inflation will prompt rate hike next month The slowdown in headline inflation in October was due to base effects from utilities prices. With underlying inflation climbing further above the Bank’s 2% target, the case for another rate …
21st November 2024
GDP growth set to remain sluggish The economy lost momentum in the third quarter and we think that GDP growth will remain around trend over the coming quarters. According to today’s preliminary estimate, GDP growth slowed from a downward-revised 0.5% q/q …
15th November 2024
Regular wage growth may already have peaked The strong pay hikes in this year’s spring wage negotiations now seem to be fully reflected in labour cash earnings and we expect wage growth to slow again next year. According to today’s preliminary estimate, …
7th November 2024
Bank of Japan will hike rates at December meeting The Bank of Japan retained its hawkish outlook when it kept policy unchanged at today’s meeting and we still expect a rate hike to 0.5% at its next meeting in December. It came as no surprise that the Bank …
31st October 2024
Consumption weakening yet again The September activity data were a mixed bag and consistent with our view that GDP growth slowed last quarter. Taking industrial production first, the 1.4% m/m rise was stronger than most had anticipated (Refinitiv …
LDP election loss heralds era of political instability Following its poor showing in yesterday’s Lower House elections, the LDP will need to form an untested coalition to remain in power which will undermine its ability to push through major pieces of …
27th October 2024
Flash PMI economic momentum is fizzling out The sharp fall in the composite PMI to a 2-year low supports our view that the strong rebound in activity that started in Q2 will be more muted across the second half of the year. Today’s flash estimate showed …
24th October 2024
Underlying inflation will remain around 2% for now While the resumption of electricity subsidies resulted in a plunge in headline inflation in September, inflation excluding fresh food and energy rose to a three-month high and should remain around 2% over …
18th October 2024
Regular earnings growth will remain close to 3% Base pay rose the most since 1992 in August and we think it will continue to surge in the coming months. According to today’s preliminary estimate, labour cash earnings rose by 3.0 y/y in August. That result …
8th October 2024
Tankan points to continued recovery This website has been updated with additional analysis since first publication. The slight rise in business conditions across all firm sizes in the latest Tankan suggests that the robust rebound in activity in Q2 will …
1st October 2024
Economic recovery lost some pace in Q3 While the plunge in industrial production in August creates some downside risks to our forecasts, the continued strength in consumer spending is encouraging. According to the preliminary estimate, industrial …
30th September 2024
Flash PMI suggests continued rebound in activity The composite PMI remained at healthy level in September which suggests that the strong rebound in activity that started last quarter will continue across the second half of the year. Today’s flash estimate …
24th September 2024
The Bank of Japan kept policy unchanged today as widely anticipated and we’re sticking to our forecast that it will deliver another 25bp rate hike at its October meeting. As correctly anticipated by all analysts polled by Reuters, including ourselves, the …
20th September 2024
Underlying inflation will hover around 2% until early-2025 Underlying inflation rebounded in August and will remain close to the BoJ’s 2% target until early-2025, triggering another rate hike by the Bank at its October meeting. The 2.8% annual rise in …
Drag from net trade will moderate Q3 GDP growth Even though the trade balance held up much better than most had anticipated in August, net trade will still provide a large drag on Q3 GDP growth. The 5.6% y/y rise in export values was much weaker than the …
18th September 2024
