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Yen rally to help narrow trade deficit 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% …
17th November 2022
Losing streak has further to run Weakness in the manufacturing sector led to “core” machinery orders falling for a second consecutive month in September. Worse still, machine tool orders indicate that the two-month losing streak, rare as it is, hasn’t …
16th November 2022
Imminent rebound in orders to be soft “Core” machinery orders fell for a second consecutive month in September due to weakness in manufacturing orders. While the usual see-saw patterns in orders point to a rebound that should materialise in October’s …
Technical recession looms in H1 2023 Japan’s economy contracted in Q3, with private consumption and business investment posting far weaker results than timelier data had suggested. Growth should turn positive in Q4, amid a rebound in inbound tourism and a …
15th November 2022
Economy to rebound in Q4 after Q3 contraction Japan’s economy contracted in Q3, with both private consumption and business investment posting far weaker results than timelier data had suggested. The single largest drag was from net trade due mostly to a …
Consumption resilient against Q3 virus wave The seventh COVID wave in Q3 has been the worst on record so far in terms of daily infections. Yet the Cabinet Office’s monthly estimate of private consumption for July and August was 0.6% above the Q2 average …
11th November 2022
We still expect consumer spending to rise rapidly over the coming year. But with many overseas trading partners entering recession, exports will decline. That will prompt firms to pull in their horns and weigh on business investment. The upshot is that we …
10th November 2022
Q4 spending rebound may not materialise Current readings picked up in October’s Economy Watchers Survey but remain well short of the peaks seen after previous virus waves ended. The deepening gloom captured by the outlook readings suggest that spending …
9th November 2022
A strong rebound in working hours in the accommodation and food services sector is one reason why regular pay is growing at the fastest pace in a generation. However, there’s been a broad-based upward shift in the distribution of pay hikes so the …
8th November 2022
Regular wage growth to fall alongside inflation and profitability The 2.1% rise in labour cash earnings in September was the fastest since 1997 but it was mostly driven by volatile bonus payments and won’t be sustained. However, regular earnings growth …
Inflation and reopening boost to keep earnings growth high Overall earnings rose 2.1% y/y in September, the fastest since 1997, but we don’t think this can be kept up consistently, given that a large spike in volatile bonus payments was key to hitting …
7th November 2022
Business investment strong in Q3 Data released on Monday showed that capital goods shipments fell by 4.1% m/m in September. But across Q3, capital goods shipments rose 11.4% q/q to the strongest they have been since Q4 2018. Meanwhile, the Bank of Japan’s …
4th November 2022
The Bank of Japan’s renewed difficulties in defending its 10-year yield target have prompted fresh speculation that it may abandon Yield Curve Control. However, neither concerns about the functioning of the bond market nor worries about a weaker yen …
1st November 2022
Capital goods shipments strength to wane, retail sales outlook buoyant Industrial production declined in September whereas retail sales values saw another relatively strong rise. We are expecting a strong fourth quarter for retail sales, but industrial …
31st October 2022
Weakening global economy weighing on manufacturing outlook Industrial production declined in September whereas retail sales values saw another relatively strong rise. We are expecting a strong fourth quarter for retail sales, but industrial output looks …
MoF likely intervened again We revised up our inflation forecasts last week to reflect the further weakening of the yen to 150 against the dollar last week. As it happens, the yen jumped from a low-point of 152 against the dollar to 146 late on Friday, …
28th October 2022
The Bank of Japan revised up its medium-term inflation forecasts while keeping policy unchanged today, but we still think that it won’t snuff out the budding virtuous cycle between incomes and wages . As widely anticipated, the Bank kept its interest rate …
Window for tighter policy is closing The Bank of Japan revised up its medium-term inflation forecasts while keeping policy unchanged today, but we still think that it won’t snuff out the budding virtuous cycle between prices and wages. As widely …
Government subsidies to tame surging inflation The unemployment rate rose slightly in September on the back of a large jump in the labour force but a continued rise in the job-to-applicant ratio suggests that the labour market will tighten again before …
Tokyo inflation to start falling next month The unemployment rate rose slightly in September on the back of a large jump in the labour force and a continued rise in the job-to-applicant ratio suggests that the labour market will continue to tighten. …
German economy overtakes Japan’s With the yen weakening to 150 against the dollar this week, we estimate that Germany has overtaken Japan as the world’s third largest economy in dollar terms. (See Chart 1.) Chart 1: Nominal GDP (US$bn, 4Q Sum) Sources: …
21st October 2022
Higher inflation from weaker yen won’t prompt BoJ tightening Headline inflation remained at a three-decade high in September and will climb slightly higher by early 2023. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy …
Weaker yen means higher inflation for longer Headline inflation remained at a three-decade high in September and will climb slightly higher by early 2023. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy monetary policy. …
Economists from across our Asia teams were online for this 20-minute briefing on the region’s big investment stories. During this session, the team answered client questions about what’s happening in Asian economics and markets as they addressed current …
20th October 2022
Board will lift FY2022 inflation forecasts but signal below-target inflation further ahead High inflation is triggering larger pay hikes but that won’t last Even a hawkish successor for Kuroda would struggle to tighten during a global recession The …
Weaker yen to offset falling commodity prices The trade deficit narrowed from its record high in August, but with the yen weakening significantly in recent days, any further narrowing of the deficit will likely be delayed. Export values accelerated to …
Weaker yen an obstacle to deficit narrowing again The trade deficit narrowed from its record high in August, but with the yen weakening dramatically in recent days, any further narrowing of the deficit will likely be delayed. Export values accelerated to …
With the yen currently trading just below 149, it now appears to be a question of when and not if policymakers step in again. But as recent weeks and the Asian Financial Crisis have shown, such interventions alone can’t reverse yen weakness. An even …
17th October 2022
With the yen approaching 150 against the dollar, we now expect underlying inflation to climb to 2.5% by early-2023 instead of our previous forecast of 2.0%. But as this will happen when the global economy is in recession, we don’t expect the Bank of Japan …
Yen tumbles again after strong US inflation data Following another strong inflation reading from the US, the yen today weakened slightly past the 147.6 trough it hit in 1998, reaching its weakest against the dollar since 1990. It then rebounded, sparking …
14th October 2022
All signs still point to strong Q3 business investment Although “core” machinery orders dropped sharply in August due to a crash in non-manufacturing orders, Q3’s average still points to an expansion in non-residential investment growth this quarter, …
12th October 2022
Q3 investment growth outlook still strong Although “core” machinery orders dropped sharply in August due to a crash in non-manufacturing orders, Q3’s average still points to an expansion in non-residential investment growth this quarter, chiming with …
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
Spending to recover in earnest Q4 Current readings picked up in September’s Economy Watchers Survey but fell well short of the peaks seen after previous virus waves ended. However, we suspect that the fading virus wave, the domestic travel subsidy …
Japanese firms’ holdings of interest-bearing assets have risen relative to their interest-bearing liabilities and some are suggesting that they benefit from rising interest rates as a result. But with domestic interest rates little changed as the Bank …
10th October 2022
Regular pay rising at the fastest rate in 25 years The preliminary estimate of labour cash earnings released today showed a 1.6% annual rise in regular pay in August, the largest rise in 25 years. We wouldn’t be surprised if that figure was revised …
7th October 2022
Fastest rise in regular earnings in a generation won’t be sustained The 1.6% annual rise in regular earnings last month was the largest since 1997 and jars with the fact that the labour market still isn’t as tight as it was pre-pandemic. We suspect …
August surge largely due to favourable base effects Labour cash earnings jumped in August, but this was largely due to favourable base effects for hours worked and should slow over coming months. Preliminary estimates for August showed overall earnings …
Overview – In a difficult global environment, Japan's economy has benefitted in recent months from a reopening boom in consumption and the easing of supply shortages in industry. Those tailwinds will soon fade, while external demand will slow. As a …
5th October 2022
Record capex projections likely overstate real investment growth Today’s Tankan survey suggests that while the services sector is benefitting from the subsiding virus wave, the outlook for the manufacturing sector continues to worsen. The Tankan’s …
3rd October 2022
Capex projections scaled new heights Today’s Tankan survey suggests that while the services sector is benefitting from the subsiding virus wave, the outlook for the manufacturing sector continues to worsen. The Tankan’s headline index for large …
Travel subsidies to return in October The government announced this week that it will once again be providing travel subsidies, this time under the National Travel Discount (NTD) program, from 11 th October through December. Prefectural governments get …
30th September 2022
Labour market continues to tighten, while consumers shrug off virus wave The unemployment rate dropped to a four-month low in August and a continued rise in the job-to-applicant ratio suggests that the labour market will continue to tighten. Meanwhile, …
Industry to struggle while retail sales outlook improves Both industrial production and retail sales growth quickened in August and while the rebound in industrial production will lose steam, retail sales will continue to expand as the record virus wave …
Labour market will continue to tighten The unemployment rate dropped to a four-month low in August and the continued rise in the job-to-applicant ratio suggests that the labour market will continue to tighten. The labour force dropped by 70,000 last …
Demand woes persist while inflation will stay high for longer September’s flash PMIs indicate yet another slowdown in the manufacturing sector, while services appear to be recovering from the recent record virus wave. According to today’s flash …
26th September 2022
Post-virus services recovery underway September’s flash PMIs indicate yet another slowdown in the manufacturing sector, with the manufacturing PMI falling from 51.5 in August to 51. Demand weakened again but this appeared to be mostly caused by domestic …
First intervention to buy yen since 1998 In the wake of the Fed’s hawkish 75bp rate hike on Wednesday, the yen approached 146 against the dollar for the first time since 1998. Back then the government intervened to shore up the yen and it did so again …
23rd September 2022
Japan’s Ministry of Finance has intervened in support of the yen today, with the USD/JPY rate dropping from near 146 to ~143 at the time of writing, a ~2% appreciation in the space of an hour. Today’s decision effectively draws a line in the sand at 145 …
22nd September 2022
The Bank of Japan kept policy loose and retained its easing bias today and we think it won’t tighten policy even as underlying inflation reaches its 2% target. As was widely anticipated, the Bank kept its short-term policy rate at -0.1% and its target for …
