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Bank of Japan won’t tighten even as inflation rises well above target 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 widely anticipated, …
22nd September 2022
Inflation will get another boost in October Headline inflation jumped in August to yet another three-decade high and it still has a stretch higher to climb. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy monetary …
20th September 2022
Inflation in final stages of ascent Headline inflation jumped in August to yet another high since 1991 and it still has a stretch higher to climb. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy monetary policy. Headline …
GPIF could shift back to domestic assets The release of stronger-than-expected US inflation figures on Tuesday contributed to a further rise in US long-term interest rates. They are now the highest they’ve been since mid-June. With the Bank of Japan …
16th September 2022
Deadline for applications under COVID-19 lending facility won’t be extended Interest rate targets will remain at current levels as surge in inflation won’t be sustained Bank will be able to ride out renewed pressure on 10-year yield target The Bank …
15th September 2022
Trade deficit to shrink as import prices ease Japan’s trade deficit widened to yet another record high in August, but the peak shouldn’t be far away now. Commodity prices continue to ease, and the yen should end the year stronger than its current lows, …
Deficit to shrink as import prices ease Japan’s trade deficit widened to yet another record high in August, but the peak shouldn’t be far away now. Commodity prices continue to ease, and the yen should end the year stronger than its current lows, which …
Strong US CPI data this week triggered a renewed slide in the yen to the brink of 145 and warnings from the Ministry of Finance that it could intervene ( 1 ).The Bank of Japan is also reported to have resorted to a yen rate check – calling dealers to …
14th September 2022
Business investment to remain strong this quarter Although the surge in “core” machinery orders in July was driven by a handful of non-manufacturing sectors, the result still points to strong non-residential investment growth this quarter, chiming with …
Business investment to remain strong this quarter Although the surge in “core” machinery orders growth in July was driven by a handful of non-manufacturing sectors, the result still points to strong non-residential investment growth this quarter, chiming …
We think the yen will strengthen against the US dollar over the next few years, as the headwinds that have driven the currency to multi-decade lows begin to unwind. The yen has fallen nearly 20% against the greenback this year, the most of any of the …
13th September 2022
Intervention unlikely but inflation would rise Despite warnings from the government that it would intervene against “rapid and one-sided moves” in the yen, the exchange rate fell this week to a 24-year low of 144 against the dollar and, so far, there …
9th September 2022
Economy to pick up as virus wave subsides The muted uptick in current readings in August’s Economy Watchers Survey indicates that the economy was still weighed down by the record Covid-19 wave last month, while buoyant outlook readings point to a quick …
8th September 2022
The Bank of Japan’s assets are falling for the first time since it embraced large-scale easing a decade ago, as banks are repaying emergency funds they borrowed during the pandemic. However, this is not holding back an acceleration in credit to …
6th September 2022
Consumers to fall back on pandemic savings as real wages fall Labour cash earnings growth weakened slightly in July as growth in bonuses slowed and further moderation is in store from August with the end of the summer bonus season. Overall earnings growth …
Real wages to continue shrinking but spending will be supported by savings Labour cash earnings growth weakened slightly in July as growth in bonuses slowed and further moderation is in store from August with the end of the summer bonus season. Overall …
Adult population shrinking more quickly While Japan’s population peaked in 2010, it only edged down over the subsequent decade as positive net migration cushioned the decline in the “natural” population that was caused by deaths outstripping births. …
2nd September 2022
Q2 GDP to be revised down The smaller increase in capital spending reported in today’s “Financial Statements Statistics of Corporations” means that Q2 GDP will likely be revised downward slightly in next week’s second estimate. Capital spending excluding …
1st September 2022
Retail sales recovery in July belies underlying weakness Industrial production rose at a solid pace in July whereas most of the rise in retail sales values reflected soaring prices. While the manufacturing sector should bounce back this quarter, services …
31st August 2022
Recovery to stall by September Industrial production made another stride towards pre-virus levels in July but the recovery should stall by September. Meanwhile, retail sales are in for a weak quarter despite a decent showing in July, as soaring inflation …
Japan is facing its largest terms of trade shock since the second oil crisis in the early-1980s. While we don’t expect Japan to follow other advanced economies into recession, we’re slashing our 2023 GDP growth forecast from 2.6% to a below-consensus …
30th August 2022
Mounting indication that labour force has peaked The unemployment rate stayed unchanged in July and we do not see much room for further tightening in the labour market in 2022. The labour force shrank by 0.06% m/m in July, but with the adult population …
Not much room left for further tightening The unemployment rate stayed unchanged in July and we do not see much room for further tightening in the labour market in 2022. The labour force shrank by 0.06% m/m in July, but with the adult population shrinking …
Nuclear restarts still in the balance The timely Tokyo CPI showed that inflation jumped from 2.5% to 2.9% in August. That was partly due to the fading drag from last year’s mobile phone tariff cuts, but another key driver was the 29% y/y surge in …
26th August 2022
Soaring electricity and gas prices will help lift inflation above 3% by year-end. But with that boost unlikely to be sustained, the Bank of Japan won’t see a need to tighten monetary policy. The surge in food prices and the fading drag from last May’s …
24th August 2022
Manufacturing and services fall further while prices seem to peak August’s PMIs indicate a further slowdown in the manufacturing sector as demand slumped even further, while services continue to bear the brunt from the record Covid-19 wave. According to …
23rd August 2022
Slowdown continues as supply shortages and virus wave persist August’s PMIs indicate a further slowdown in the manufacturing sector as demand slumped even further, while services continue to bear the brunt from the record Covid-19 wave. According to …
Productivity growth slowing further The 0.5% q/q rise in Japan’s Q2 GDP brought output closer to its pre-virus peak, with productivity up by 0.4% y/y. However, the bigger picture is that the pandemic has further slowed the sluggish productivity gains …
19th August 2022
Inflation summit in sight, but BoJ will not budge Headline inflation was the highest since 1991 in July and we think it still has higher to climb. But this will not make the Bank of Japan budge on its ultra-easy monetary policy. Headline inflation climbed …
Trade deficit should narrow again Japan’s trade deficit widened to a record high in July but it should start to shrink over the coming months as supply shortages and commodity prices continue to ease. Export values grew by 19.0% y/y, slowing only slightly …
17th August 2022
Recovery will persist through second half Japan’s economy grew in Q2 driven mainly by private consumption, though the overall figure disappointed mainly due to fluctuations in stockbuilding that won’t last. The recovery should persist through Q3 and Q4, …
15th August 2022
Net migration worsened population decline Japan’s population fell by 726,342 (0.6%) last year. The figure would have been less alarming if not for negative net migration of 107,202, which is a trend we do not think will last. (See Chart 1.) Chart 1: Net …
12th August 2022
The extent to which neighbouring countries would be affected by an escalation of tensions between China and Taiwan would depend both on which sides they take and on the nature of restrictions imposed by the West and China. ASEAN countries are most reliant …
10th August 2022
With a record virus wave sweeping across the country and consumer confidence slumping, we’re slashing our forecast for Q3 consumption growth from 0.8% to 0.2%. While the government has refrained from declaring another state of emergency, spending was …
8th August 2022
Shifting energy mix to renewables The Tokyo Metropolitan Government is planning to mandate the installation of solar panels on new homes. The plan follows a proposal at the national level to install solar panels on public buildings across Japan and …
5th August 2022
Minimum wage hike to provide support The jump in wage growth in June was mostly driven by a surge in summer bonus payments and the Bank of Japan’s 3% wage growth target will remain out of reach for a while yet . More positively, the strength in overtime …
The yen may have bottomed out against the dollar, but it is likely to remain weak for some time. That should boost Japan’s economy as higher revenues from exports and from overseas subsidiaries outweigh the resulting increase in import costs. Winning the …
2nd August 2022
Falling yields ease pressure on yield target Long-term government bond yields have retreated from their recent highs in both the US and Japan, with the yield on 10-year Japanese government bonds (JGB) now the lowest it has been since mid-March. (See Chart …
29th July 2022
Rebound in industrial output has further to run While industrial output bounced back strongly in June, the recovery in the labour market is stalling and consumer spending is faltering. One reason is that rising consumer prices are weighing on confidence. …
Real disposable household incomes will continue to be propped up until mid-2023 by fiscal transfers intended to offset the impact of virus disruption and rising inflation. But spending will continue to be held back as consumers remain cautious amid …
27th July 2022
Mobility softening as virus cases surge New Covid-19 cases are now nearly twice as high as they were at the peak of the Omicron wave in February. The government has so far ruled out declaring another state of emergency, which makes sense as the number of …
22nd July 2022
Manufacturing slowdown continues, services hit by fresh virus wave July’s PMIs suggest that the manufacturing sector is slowing as demand weakens, while the latest Covid-19 is starting to hit the services sector. According to today’s flash estimate, the …
“Core” goods inflation will accelerate further While inflation fell slightly in June, it will remain above the BoJ’s 2% target until early-2023, while underlying inflation will approach 2%. However, the Bank won’t respond with tighter policy. The weaker …
The Bank of Japan didn’t concede any ground to bond traders today but we still think there’s a good chance that it will widen the tolerance band around its 10-year yield target . The Bank kept its short-term policy rate at -0.1% and its 10-year yield …
21st July 2022
Trade deficit should narrow again Japan’s trade deficit in June was the largest it has been since 2014 but the recent fall in commodity prices suggests it will narrow again before long . The 19.4% annual rise in export values marked an acceleration from …
Overview – Supply shortages and continued virus caution will result in a weaker recovery in Japan than most anticipate. With wage growth sluggish too, the Bank of Japan won’t see a need to lift its policy rates. However, we expect the Bank to widen the …
18th July 2022
Tax revenues surging The Bank of Japan’s flow of funds figures show that the budget deficit was a still large 6.6% of GDP in the year to March. (See Chart 1.) In fact, we estimate that the deficit widened sharply in Q1 to around 10% of GDP in …
15th July 2022
Board will lift FY2022 inflation forecast but predict below-target inflation thereafter Interest rate targets will remain unchanged for years However, calm in bond markets provides window for tolerance band widening The Bank of Japan will signal prolonged …
14th July 2022
Capital spending plans strongest on record The most striking development in the Q2 Tankan was the surge in capital spending plans for the fiscal year that started in April. (See Chart 1.) Chart 1: Tankan Capital Spending Plans & Business Investment (% …
8th July 2022
Wage growth to settle around 1% The slowdown in wage growth in May was entirely due to volatile bonus payments. Nonetheless, we don’t expect wages to grow fast enough for the Bank of Japan to start tightening policy anytime soon . The 1.0% y/y rise in the …
5th July 2022
