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BoJ’s pause won’t last as long as most expect The main show in town next week will be the Bank of Japan’s meeting on Tuesday. As we explain in our BoJ Watch , the Board will almost certainly leave its policy rate unchanged, given its concerns about the …
13th June 2025
Wage growth looks less worrisome The slump in earnings growth at the start of the year looks increasingly like a data glitch . Earnings data published yesterday incorporated upward revisions for March and showed a marked rebound in April. (See Chart 1.) …
6th June 2025
Firms upbeat about production outlook The latest activity data suggest that if anything, Japan is benefitting from trade tensions. To be sure, industrial production declined in April, but output of motor vehicles rose despite the 25% US tariff on auto …
30th May 2025
Deficit shrinking, debt ratio falling While the cabinet’s approval rating has declined since PM Ishiba came to power in October, it hasn’t yet reached levels that in the past triggered electoral defeats or prompted other Prime Ministers to resign. That …
23rd May 2025
Lower energy prices will weigh on inflation The truce reached between China and the US over the weekend is a clear positive for Japan’s economy. Even so, we suspect that weak economic activity coupled with an impending plunge in inflation will delay …
16th May 2025
No signs of progress in US-Japan trade talks Preliminary data for the first twenty days of April point to export values rising by 0.7% m/m, according to our seasonal adjustment. However, that follows big swings across the first quarter, including a 5.7% …
9th May 2025
Few signs of sharp slowdown in activity With trade tensions clouding prospects for Japan’s economy, the Bank of Japan revised down its GDP growth forecasts sharply at its meeting on Thursday and sounded more dovish than it did in January. One channel …
2nd May 2025
Underlying inflation set to surpass 3% Inflation excluding fresh food and energy picked up from 2.6% to 2.9% in March. And the big jump in inflation in Tokyo in April at first glance would suggest that the Bank of Japan is starting to fall behind the …
25th April 2025
Tariff impact may not be as big as feared The OIS markets imply that it’s a coin flip whether the Bank of Japan will raise rates again this year. That makes sense because the Bank sent some rather dovish signals this week. Governor Ueda noted in an …
17th April 2025
BoJ will stay on sidelines for now The relief that followed the suspension of reciprocal tariffs for all countries except China on Wednesday proved short-lived as bilateral tariffs between China and the US are still being ratcheted up to eye-watering …
11th April 2025
Tankan consistent with further tightening Compared to other Asian economies, the 24% US tariff on imports from Japan announced this week looks rather modest. Nonetheless, the chances that the Bank of Japan will hike rates in May as we’re forecasting have …
4th April 2025
Time to act decisively has come The US this week announced a 25% tariff on auto imports and Japan will be among those economies most affected. (See here .) While PM Ishiba has said that “all options are on the table” when it comes to Japan’s response, our …
28th March 2025
Export volumes jump the most on record While export values have surged in recent years as the weaker exchange rate lifted the yen-value of shipments and firms passed on soaring input costs, the same can’t be said for export volumes, which have tread water …
21st March 2025
Shunto results in largest pay hikes since 1991 Japan’s Trade Union Confederation (RENGO) today released the first round of results of this year’s spring wage negotiations (Shunto). Including seniority pay hikes, RENGO’s preliminary tally showed a 5.46% …
14th March 2025
Biggest pay hikes since 1991 forthcoming Japan’s Trade Union Confederation (RENGO) revealed yesterday that its members are requesting a 6.09% rise in pay (including seniority pay hikes) in this year’s spring wage negotiations (Shunto). That marks an even …
7th March 2025
Ratio of deaths to births reaches record high According to preliminary data released this week, the number of births in 2024 fell by 5% to a record low of 721,000, while the number of deaths edged up by 1.8% to a record high of 1,62mn. Even though net …
28th February 2025
Starts align for further rate hikes A recent Reuters survey showed that most economists expect just one more 25bp rate hike by the Bank of Japan this year. Even so, the financial markets are starting to come around to our view that the Bank will lift …
21st February 2025
10-year JGB yield climbs to 14-year high Even though the 10-year US Treasury yield has been little changed, the 10-year JGB yield rose to a 14-year high of 1.35% this week and we think that it will climb further to 1.75% by year-end. See our Global …
14th February 2025
Wage growth strongest since 1997 According to the preliminary estimate released this week, labour cash earnings rose by 4.8% y/y in December, the largest increase since 1997. But while those strong gains boost household incomes, on their own they don’t …
7th February 2025
BoJ may need to lift inflation forecasts further The economic data released this week support our non-consensus view that the Bank will deliver two more 25bp rate hikes this year. For a start, two out of the three measures of underlying inflation the Bank …
31st January 2025
BoJ signals further tightening As widely anticipated, the Bank of Japan resumed its tightening cycle with a 25bp rate hike to 0.5% at its meeting on Friday. And the Bank’s Outlook report suggests that there’s more to come: the Bank revised up its …
24th January 2025
Bank wary of triggering another market rout A flurry of communication by the Bank of Japan has resulted in the financial markets pricing in an 80% chance of a rate hike at next week’s meeting. We and two-thirds of economists polled by Reuters agree that a …
17th January 2025
Bank will probably wait until March While the Bank of Japan refrained from hiking interest rates at its December meeting, the case for further policy tightening remains intact. For a start, the “Summary of Opinions” of that meeting showed that at least …
10th January 2025
When matters less than how far Governor Ueda delivered two messages in the press conference after yesterday’s policy meeting : first, the Bank of Japan thinks that policy normalisation is still on track and it intends to raise rates further; second, the …
20th December 2024
Tankan adds to case for December hike Q3 private consumption revised down Real GDP growth for the third quarter was revised up to 0.3% q/q from 0.2% in the second estimate released on Monday. However, private consumption was revised down from a 0.9% q/q …
13th December 2024
December still on After a news report on Wednesday poured cold water on the prospect of a rate hike at the Bank of Japan’s upcoming meeting in a couple of weeks, the financial markets now price in only a 40% chance of a hike then, down from 60% last week. …
6th December 2024
Inflation gaining renewed momentum The October activity data suggest that the economy continued to lose momentum this quarter. But with the labour market still very tight, we doubt that the Bank of Japan will be very concerned. Instead, the Bank will feel …
29th November 2024
Risks are shifting towards more BoJ tightening The stars are aligning for our long-held view of another rate hike before year-end. For a start, the LDP/Komeito coalition and the DPP have agreed on a ¥13.9tn (2.3% of GDP) supplementary budget. The LDP …
22nd November 2024
Consumption continuing to surge For the first time since the market turmoil in August, the financial markets consider it more likely than not that the Bank of Japan will hike rates by another 25bp at its December meeting. One reason is that markets now …
15th November 2024
Tariffs won’t be a big drag We’re now assuming that Donald Trump will impose a 60% tariff on US imports from China and a 10% tariff on imports from all other countries next year. The US is Japan’s largest export destination, with shipments equivalent to a …
8th November 2024
LDP loses majority for first time since 2009 We already indicated last week that the LDP might lose its majority in last Sunday’s House of Representatives election, but the fact that it failed to achieve a majority even once we include the seats of …
1st November 2024
October surprise? The result of Japan’s Lower House election should be clear by early Monday morning. The new prime minister, Shigeru Ishiba, called Sunday’s vote to take advantage of a revival in the government’s popularity since he replaced Fumio …
25th October 2024
Government to increase supplementary spending Prime Minister Ishiba said this week that the customary supplementary budget due before the end of this year will be larger than last year’s ¥13tn (2.2% of GDP). This is probably motivated by the upcoming …
18th October 2024
Record growth in household incomes The Q2 household income data released this week were much stronger than we had anticipated. Indeed, both nominal and real disposable income have risen the most on record over the past year, leaving aside the temporary …
11th October 2024
Tankan upbeat, BoJ cautious The August activity data were a mixed bag, with retail sales rising for the fifth consecutive month but the 3.3% m/m plunge in industrial output was much weaker than expected. What’s more, firms’ production forecasts don’t …
4th October 2024
BoJ set to press ahead with "stupid" rate hikes Japan won’t have its first female Prime Minister after all as former defense minister Shigeru Ishiba won the runoff in the LDP leadership election against economic security minister Sanae Takaichi. In …
27th September 2024
Takaichi leading in the polls According to a recent poll, Economic Security minister Sanae Takaichi is seen as the most suitable successor for departing Prime Minister Fumio Kushida. However, the LDP’s leadership elections next Friday will probably …
20th September 2024
Stronger yen reducing upside risks to inflation Developments over the past week seem to support the consensus view that the Bank of Japan will wait at least until December before hiking interest rates again. After all, the yen reached a fresh high against …
13th September 2024
Regular pay growth hits 32-year high According to preliminary figures for July , regular wage growth jumped from 2.2% y/y to 2.7%, which is where we had expected it to peak in the second half of this year. And an alternative gauge that the Bank of Japan …
6th September 2024
Activity rebounding, inflation levelling off at 2% The activity and inflation data released today increase our conviction that the Bank of Japan will press ahead with another rate hike. The rebound in industrial production and the rise in retail sales in …
30th August 2024
Underlying inflation falling below 2% According to a recent survey, 57% of analysts predict another rate hike by year-end, with one-third thinking it will happen in October and the remainder favouring the December meeting. In his parliamentary hearing …
23rd August 2024
Real labour incomes rising again The 0.8% q/q rise in Q2 GDP was stronger than most had anticipated though close to our Nowcast estimate. The main driver was a 1% q/q jump in consumption, the first increase following four consecutive quarterly falls. That …
16th August 2024
Financial stress should be short-lived The Topix and the yen have reversed some of the large moves seen earlier this week, but BoJ Deputy Governor Uchida still signalled that those developments have reduced the chances of further policy tightening in a …
8th August 2024
Near-term outlook for consumption brightening As we had anticipated , the Bank of Japan’s decision to halve its JGB purchases over the next couple of years didn’t deter it from also raising interest rates further at this week’s meeting . Press reports …
2nd August 2024
Weak Tokyo CPI may prompt BoJ inaction While we expect the Bank of Japan to lift its policy rate to 0.3% at next week’s meeting (see our BoJ Watch ), only one-third of analysts polled by Refinitiv expect a rate hike at that meeting. The financial markets …
26th July 2024
Mof intervenes again All signs are that Japan’s government sold US dollars to support the yen on Thursday and Friday last week. Bank of Japan data suggest that the intervention was a bit smaller than previous ones, perhaps because the yen was already …
19th July 2024
Goods inflation set to remain strong Data released this week showed that producer price inflation has jumped from 0.3% in January to 2.9% in June, though the bulk of that increase is due to a rebound in electricity & gas inflation. Producer prices of …
12th July 2024
Government spending probably fell last year In its April WEO, the IMF estimated that Japan’s budget deficit widened from 4.2% of GDP in 2022 to 5.7% last year and will rise further to 6.5% this year. By contrast, we expect the deficit to have shrunk to 3% …
5th July 2024
Yen sliding to multi-decade lows The yen continued its descent this week, climbing above the 160 mark against the dollar that triggered foreign exchange intervention in late-April . It has not been this weak since 1986. The Ministry of Finance this week …
28th June 2024
Inflation slowdown creates dilemma for BoJ The minutes of the Bank of Japan’s April meeting released this week confirmed that many Board members were concerned about a renewed strengthening of price pressures caused by the weak exchange rate. Those …
21st June 2024
