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Bureaucracy hampering wage subsidy programme Some companies which have had to furlough workers appear to have judged that applying for the government’s employment adjustment subsidy is more trouble than it’s worth. The labour ministry simplified the …
19th June 2020
Underlying inflation will be negative across H2 Headline inflation was unchanged last month but the slow recovery in demand over the coming months should cause excess capacity to rise further. As such, we expect inflation to turn consistently negative in …
The recent spike in COVID-19 cases in Tokyo linked to nightlife establishments in Shinjuku underlines just how slow the road back to normality could be. Renewed outbreaks are likely to prevent a straightforward and swift economic recovery. Indeed, many …
18th June 2020
May should prove nadir for trade Import values fell much more than export values in May but that was mostly due to lower crude oil prices. Across Q2, net trade provided a sizeable drag on GDP growth. However, conditions should improve over the coming …
17th June 2020
The Bank of Japan today expanded its lending facilities further. The total amount of support for corporate funding is now equivalent to nearly 20% of the debt of non-financial firms and we don’t expect any further increases over the coming months. As …
16th June 2020
All restrictions to be lifted from next Friday The Tokyo Metropolitan Government announced on Thursday that it will join the rest of the country and follow the central government’s plan to lift all requests for businesses to close from the 19 th June. …
12th June 2020
Caught out with high levels of debt during the 1991 asset price crash, many Japanese firms then accumulated significant rainy-day funds to shield themselves against a future crisis. That trend intensified after the global financial crisis – when …
11th June 2020
Slump in orders points to sharp fall in business investment The large fall in machinery orders in April supports our forecast that non-residential investment will slump in Q2. With business confidence subdued, a recovery before the end of the year is …
10th June 2020
Existing lending schemes still well below ceilings But latest supplementary budget foresees additional subsidised lending Bank to secure funding for commercial lenders by further increase in lending schemes The Bank of Japan has already done a lot to …
9th June 2020
Wages falling already Wage growth turned negative in April at the height of efforts to contain the virus, and we expect wages to fall further over the coming months. According to today’s preliminary estimate, labour cash earnings growth fell from +0.1% to …
Recovery will be slow going The upward revision to Q1 GDP displayed in the revised estimate is cold comfort given that output is plummeting this quarter. We expect GDP to fall by another 9% this quarter. According to the second estimate released today, …
8th June 2020
Unprecedented slump in services spending We learned last week that retail sales plunged 9.6% m/m in April while Japan was in a state of emergency. Household spending on services is usually more stable than retail sending. But it has also been hammered …
5th June 2020
Many firms have furloughed employees during the state of emergency and stopped paying wages. But with the economy now opening up again and the government’s employment subsidy scheme starting to be used more widely, labour income should bounce back even if …
3rd June 2020
Consumption plunging in April The slump in activity in April was worse than most had anticipated. While domestic demand will rebound now that the state of emergency has come to an end, we think it will take until 2022 for output to return to pre-virus …
29th May 2020
Economy dealt severe blow in April, but road to recovery started in May The huge fall in industrial production and retail sales in April support our below-consensus forecast that the economy will contract by 12% q/q this quarter. The unemployment rate is …
The large supplementary budget drafted by PM Abe’s Cabinet today lifts fresh government spending in response to the virus to around 8% of GDP. That should provide the platform for a strong recovery in the second half of the year, provided infections don’t …
27th May 2020
Imports proving resilient to corona calamity The strength of imports in March and April suggests that our forecast for a double-digit drop in import volumes this quarter was too pessimistic. The Bank of Japan’s data released on Thursday showed a 4% m/m …
22nd May 2020
The Bank of Japan launched a new lending facility today to support bank lending to small businesses and we suspect its measures will now be sufficient to secure the financing needs of firms throughout the coronavirus crisis. As widely anticipated, the …
Inflation drops sharply and will turn deeply negative Headline inflation turned negative in April for the first time since 2016 adjusting for the impact of October’s sales tax hike. We expect it to weaken further over the coming months as services and …
Slump starting to abate, but rebound will be slow going The small pick-up in the composite PMI in May suggests that activity is no longer collapsing as dramatically as it was in April, but the survey doesn’t point to a rebound in output yet. According to …
21st May 2020
Exports were plummeting already in April Exports plunged in April and are set to continue falling sharply for a while yet with economic activity in Japan’s main trading partners remaining extremely depressed. The 21.9% annual fall in export values in …
Non-residential investment will collapse Machinery orders held up surprisingly well in March but we already know from the national accounts that business investment was sputtering at the end of Q1 with much darker skies awaiting in Q2. The 0.4% m/m fall …
20th May 2020
Economy in recession before full force of corona containment hit The fall in output in the first quarter suggests the spread of the virus had already dealt a significant blow to economic activity in March with much worse to come in Q2. A double-digit fall …
18th May 2020
Economic activity remained severely damaged by coronavirus containment efforts in early May. In particular, the retail sector usually receives a substantial boost during Golden Week but the number of restaurant goers was extremely low throughout this …
15th May 2020
State of emergency ending in most prefectures Japan declared a state of emergency on 6 th April and extended it nationwide on 16 th April. During the state of emergency, citizens were asked to stay at home This helped reduce the number of new coronavirus …
This should be as bad as it gets The further fall in the Economy Watcher’s Survey (EWS) in April underlines that consumption will be extremely weak across Q2. But while all components fell to new depths, this should mark the trough in business conditions. …
13th May 2020
Some regions moving to relax restrictions While the government confirmed this week that the nationwide state of emergency will be extended until 31 st May, there are signs that activity may pick up before that date in some regions. Moreover, PM Abe …
8th May 2020
Wage growth won’t be positive for much longer Wage growth slowed sharply in March and with the unemployment rate set to rise considerably over the coming months we think it will turn deeply negative before long. According to today’s preliminary estimate, …
Household spending evaporating Consumer confidence sank to a record low in April. That lends further credence to the view that a consumption-led plunge in economic activity is underway this quarter. We are forecasting a 12% q/q contraction in GDP in Q2. …
30th April 2020
Consumption plummeting as people stay at home Japan’s state of emergency is scheduled to end on Wednesday 6 th May but press reports suggest the government will extend it by one month tomorrow. The number of new coronavirus cases across Japan has fallen …
Corona containment harmed activity in March with much worse to come While both industrial output and retail sales held up a little better than we expected in March, they still fell sharply. And with efforts to contain the virus having been stepped up …
Most of the fresh spending in PM Abe’s fiscal package will not provide meaningful support to employment. But as was the case during the financial crisis, the government’s employment adjustment fund should help ensure that unemployment doesn’t spike as …
28th April 2020
Unemployment rate will rise sharply The unemployment rate rose in March and it’s set to spike much higher over the coming months. The labour force fell -0.1% m/m, while employment dropped -0.16% m/m. In annual terms, both rose just 0.1%. (See Chart 1.) As …
The Bank of Japan today scaled up its measures to ease corporate and household financing strains significantly. However, the Board didn’t cut the policy rate even though all members expect a slump in activity. With our forecasts not miles away from the …
27th April 2020
Corporate loan demand set to surge According to the Bank of Japan’s latest “Senior Loan Officer Survey”, which was conducted in the month to 10 th April, corporate loan demand was the strongest it has been since the global financial crisis and banks …
24th April 2020
Deflation to make unwelcome return Headline inflation was unchanged in March, but we suspect this may be the last positive reading for a while yet. Corona containment and the prior plunge in oil prices should translate into inflation turning deeply …
The government is encouraging manufacturers to return production of components from their overseas subsidiaries to Japan. Given the large scale of production that is now located abroad, a major reshoring of the industry isn’t realistic. And even if firms …
23rd April 2020
Surveys probably understating the severity of the downturn The slump in the composite PMI to a record-low in April points to GDP falling by at least 7% in Q2, but we think the survey is understating the severity of the downturn. The flash estimate of the …
Funding strains not severe so major expansion in asset purchases not on the cards But looming slump in activity will derail efforts to reach 2% inflation Bank may also cut policy rate from -0.1% to -0.2% The Bank of Japan will probably take some …
22nd April 2020
Trade flows are plummeting this quarter Exports fell sharply in March and are set to plummet this quarter as economic activity in most of Japan’s major trading partners has collapsed. The 11.7% annual fall in export values in March was more pronounced …
20th April 2020
A second wave of virus cases driven by rising infections in Tokyo and Osaka has triggered a major shift in economic behaviour. And while new cases in the two lynchpins of the Japanese economy have stabilised in recent days, yesterday’s declaration of a …
17th April 2020
State of emergency extended nationwide At first glance, the number of new coronavirus cases has started to drop back again in recent days. But this follows a familiar pattern as new cases tend do spike on the weekend and then fall back again. The smoother …
Regional banks in Japan will face mounting loan losses due to the virus outbreak. But as their linkages with other financial institutions are small, this won’t precipitate a financial crisis. The risk posed by the virus to the liability side of Japanese …
16th April 2020
State of emergency opens door for lockdowns The number of new coronavirus infections in Japan has accelerated rapidly recently. (See Chart 1.) The government this week declared a state of emergency in prefectures that generate 47% of Japan’s GDP. This …
9th April 2020
Consumption plunging to new depths The collapse in the Economy Watcher’s Survey (EWS) in March to its lowest level ever supports our view that consumption will fall off a cliff in Q2. Almost all indicators plummeted, suggesting the brief thaw in economic …
8th April 2020
Overview – Lockdowns will soon be imposed across much of Japan, triggering a decline of more than 10% in economic activity this quarter. The government’s latest fiscal package is intended to help firms stay afloat and to maintain employment while …
Business investment to plunge this quarter The slight rise in machinery orders in February suggests that business investment was weathering virus-related disruption well back then. But with measures to contain the virus severely harming domestic and …
The government today laid the groundwork for lockdowns in prefectures that generate nearly half of Japan’s economic output. The accompanying fiscal package has some impressive headline numbers attached but it is small set against the scale of the shock …
7th April 2020
Wage growth to turn negative before long Wage growth weakened a little in February and we think it won’t be long before it turns negative as the coronavirus outbreak generates large amounts of slack in the labour market. According to today’s preliminary …
Economy proved resilient in latest batch of data The robustness of the economy displayed in the data released this week is an encouraging sign but there is no doubt that coronavirus disruption will deal a severe economic blow over coming months. The …
3rd April 2020
