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Exports heading into 2023 on the backfoot While the trade deficit narrowed further in December, most of that reflects falling import prices. Export volumes likely fell slightly and with the global downturn weighing on external demand, export growth will …
19th January 2023
The BoJ kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes over in April . Following the unexpected widening of the tolerance …
18th January 2023
New Governor will ditch Yield Curve Control in April The Bank of Japan kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes …
Business investment likely ended 2022 with a whimper “Core” machinery orders fell to their lowest level since February 2022 in November, pointing to a contraction in spending on machinery and transport equipment in Q4 from Q3. The upshot is we now have …
Further signs of investment slowdown Weakness in the manufacturing sector led to “core” machinery orders falling to their lowest level since February 2022, and points to a slowdown in investment last quarter. “Core” orders crashed by 8.3% m/m in November …
Services inflation on the rise The timely Tokyo CPI showed that inflation jumped from 3.7% to 4.0% in December, twice the BoJ’s 2% target. Our measure of “core” goods inflation accelerated further, but below the surface there are clear signs of a …
13th January 2023
Widening of tolerance band has done little to improve market functioning Nomination of less dovish Governor would signal Yield Curve Control is on its way out However, renewed slowdown in inflation will prevent policy rate hikes The widening of the …
11th January 2023
In less than two months, we should know who will replace Bank of Japan Governor Kuroda Haruhiko, whose term ends on 8 th April. Whoever replaces him will be under increasing pressure from the government to abandon Yield Curve Control (YCC), which has an …
9th January 2023
Q4 industry slump won’t prevent GDP rebound We warned in December that the surge in manufacturing inventories in the Tankan signals a sharp downturn in industrial activity. As it happens, industrial production only fell marginally in November. But that …
6th January 2023
Wage growth should settle around 1% this year The sharp slowdown in wage growth in November was mostly due to a plunge in volatile bonus payments and wage growth will rebound over the coming months . The slowdown in wage growth in November, from 1.4% to …
Wage growth will settle around 1% The sharp slowdown in wage growth in November was mostly due to a plunge in volatile bonus payments and it will rebound over the coming months. The slowdown in wage growth in November, from 1.4% y/y to 0.5%, was more …
5th January 2023
The nomination of a less dovish candidate to succeed BoJ Governor Kuroda would probably signal that Yield Curve Control will soon be abandoned, though we would still expect the Bank to keep its short-term policy rate at -0.1%. This would result in a …
4th January 2023
Yet another surprise from Governor Kuroda The Bank of Japan surprised everyone on Tuesday by widening the tolerance band around its 0% target for 10-year Japanese Government Bond (JGB) yields by 25bp to 0±50bp. The Bank argued that this decision was …
23rd December 2022
Inflation will fall below 2% by mid-2023 Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of Japan’s 2% target by mid-2023. The increase in inflation from 3.7% to 3.8% in …
We are resending this publication due to an error in the previous version. Inflation will fall below 2% by mid-2023 Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of …
22nd December 2022
The jump in bond yields and the further strengthening of the yen following the widening of the Bank of Japan’s tolerance band for 10-year JGB yields will lower the value of assets owned by Japanese investors. Insurance firms will be most affected by …
21st December 2022
The surge in government bond yields around the world in response to today’s decision by the Bank of Japan (BoJ) to tweak its policy of Yield Curve Control (YCC) highlights the risks to international markets posed by the country’s huge investment overseas. …
20th December 2022
The Bank of Japan’s unexpected decision to alter its yield curve control (YCC) policy has led to a surge in the yen today; we now expect the USD/JPY rate to drop further, reaching 125 by end-2023. The yen has jumped by ~3% against other major currencies, …
Wider YCC band not start of tightening cycle The Bank of Japan today tweaked its Yield Curve Control (YCC) settings by widening the tolerance band around its yield target but we don’t expect it to hike its short-term policy rate anytime soon. The Bank’s …
Bank won’t follow band widening with rate hikes The Bank of Japan today widened the tolerance band around its yield target but we don’t expect it to hike its short-term policy rate anytime soon. The Bank’s decision to keep its short-term policy rate at …
A mooted adjustment to the joint statement between the Bank of Japan and the government has been widely interpreted as a step towards the withdrawal of ultra-loose policy. However, the policy implications of giving the Bank more flexibility in meeting its …
19th December 2022
Large build-up in manufacturing inventories One important detail in the Bank of Japan’s Q4 Tankan this week that we didn’t fully address in our Data Response was the large build-up in manufacturing inventories. These are a coincident indicator of economic …
16th December 2022
Annual falls in industrial output to continue while services recover December’s flash PMIs point to further annual contractions in industrial output but suggest services spending rebounded towards year-end. According to today’s flash estimate, the …
Divergence between manufacturing and services to continue According to today’s flash estimate, the manufacturing PMI fell slightly deeper into contraction from 49.0 in November to 48.8 in December. The output sub-index rose to 46.4 but is still the second …
Export downturn will start before long While the trade deficit narrowed sharply in November, most of that reflects falling import prices. Export volumes seem to hold up well but with the global downturn weighing on external demand next year, export growth …
15th December 2022
Exports downturn has begun The trade deficit narrowed substantially in November and has further scope to do so again in December. But with the global downturn weighing on external demand next year, further progress towards a more balanced goods trade …
Strong investment intentions won’t survive coming recession Today’s Tankan survey suggests that while the services sector is going from strength to strength, the outlook for the manufacturing sector continues to worsen. Meanwhile, machinery orders were …
14th December 2022
Services race ahead while manufacturing struggle Today’s Tankan survey suggests that while the services sector is going from strength to strength, the outlook for the manufacturing sector continues to worsen. The Tankan’s headline index for large …
Consumers shedding virus-related caution and inflation surging to multi-decades highs However, global headwinds are strengthening and import prices are slowing Bank would be very brave to start tightening during a global recession Window for policy …
13th December 2022
We expect inflation to remain above the Bank of Japan’s 2% target through the middle of next year despite government utility price caps and falling non-food inflation over that period. One reason is that higher food import prices in recent months will …
12th December 2022
Q3 private consumption revised down Q3 real GDP growth was revised up to a contraction of 0.2% q/q from a 0.3% fall in the second estimate released yesterday. However, private consumption was revised down from a 0.3% q/q rise to 0.1% q/q. Rather than …
9th December 2022
Household real incomes to fall in 2023 despite energy subsidies Labour cash earnings increased by a slower 1.8% y/y in October due mostly to a much smaller gain in volatile bonus payments. However, real wage losses have extended for a seventh consecutive …
6th December 2022
Regular earnings growth to maintain quicker pace Labour cash earnings increased by a slower 1.8% in October due mostly to a much smaller gain in volatile bonus payments. Regular earnings held steady due to high inflation and the boost from the reopening, …
5th December 2022
Overview – The global downturn will pull Japan into recession next year. And with government caps on utility bills pushing inflation below the Bank of Japan’s 2% target by mid-2023, the Bank will remain the outlier by keeping monetary policy loose. Key …
China’s EV push a major threat The 2.6% m/m drop in industrial production in October was the second consecutive fall. And while motor vehicle output rebounded from the plunge in September, it was still 16% below its 2019 level. Firms are still pinning …
2nd December 2022
Industrial production looking to end 2022 with a whimper Industrial production saw a steeper contraction in October, while firms’ output forecasts for November and December point to a weak rebound. Industrial production contracted by a sharper 2.6% m/m in …
30th November 2022
Production to rebound in last two months of 2022 Industrial production saw a steeper contraction in October but firms' output forecasts for November and December point to a rebound. Industrial production contracted by a sharper 2.6% m/m in October, …
Labour market tightening on hold, soaring inflation to drag retail sales The unemployment rate stayed unchanged in October and will hover around 2.5% through 2023 due to a looming economic recession. Meanwhile, retail sales values barely grew in October …
29th November 2022
Soaring inflation weighing on retail sales Retail sales values barely grew in October from September and soaring inflation points to risks that growth will remain muted this quarter. Growth in retail sales values slowed sharply from 1.5% m/m to 0.2% m/m …
Halt to labour market tightening as recession looms The unemployment rate stayed unchanged in August and will hover around 2.5% through 2023 due to a looming economic recession. The job-to-applicant ratio rose from 1.34 to 1.35, the highest it has been …
28th November 2022
Foreign visitor numbers jump but services struggle Japan received 461,000 foreign visitors in October (seasonally adjusted), almost double the September figure. This is helping businesses in accommodation and transport, which media reports say are …
25th November 2022
Nationwide inflation to rise further and drag spending growth Headline inflation in the capital set a new three-decade high in November on aggressive rises in food inflation excluding fresh food and industrial goods inflation. The upshot is that …
Tokyo prices point to further rises in nationwide inflation Headline inflation in the capital set a new three-decade high in November on aggressive rises in food inflation excluding fresh food and industrial goods inflation. The upshot is that nationwide …
24th November 2022
Inflation to fall alongside November output price index November’s flash PMIs point to further weakness in the manufacturing sector, corroborating firms’ forecasts. At the same time, services activity appears to be struggling due to the rapid rise in …
Downbeat readings reinforce 2023 recession narrative November’s flash PMIs point to further weakness in the manufacturing sector, corroborating other data. At the same time, services activity appears to be struggling under the weight of rising inflation. …
Headline inflation shot up to 3.7% y/y in October , the strongest since December 1990 while inflation excluding fresh food and energy rose from 1.8% to 2.5%. Although this puts inflation well above the Bank of Japan’s target, the case for tightening is …
21st November 2022
Media blaming weak yen and virus for Q3 GDP fall The economy shrank by 0.3% q/q in Q3 due to a surge in real imports, as well as disappointing private consumption and investment growth. Some media outlets have blamed the weak yen and COVID for the …
18th November 2022
Government intervention to tame inflation Headline inflation set a new three-decade high in October on aggressive rises in food inflation excluding fresh food and will remain near those highs this quarter. That said, government support measures will lower …
Bank of Japan to maintain policy despite soaring inflation Headline inflation remained set a new three-decade high in October and will remain near those highs this quarter. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy …
17th November 2022
Deficit to narrow by end-2022 The trade deficit widened but stayed below the record high in August, but with the yen strengthening significantly in recent weeks, the deficit should narrow later this quarter. Export values rose by a slower 25.3% y/y …
