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The Q1 Tankan revealed a sharp deterioration in activity at the start of the year. That suggests that the easing in capacity and staff shortages that started in manufacturing should soon spread to other sectors. … Tankan …
1st April 2019
The sharp fall in JGB yields in recent weeks means that the Bank of Japan will probably lower its JGB purchases more quickly than we had anticipated. In fact, there’s a chance that the Bank may soon have to sell rather than buy JGBs in order to defend its …
29th March 2019
February’s activity data don’t alter our view that GDP contracted in the first quarter and won’t rise at all this year. And while the labour market remains exceptionally tight, the weakness in activity should result in rising unemployment before long. … …
Japan’s economy on some measures is weaker now than it was on the two previous occasions when Prime Minister Abe announced a delay to the planned sales tax hike, so it is perhaps not surprising that some influential voices were calling this week for …
22nd March 2019
Inflation remained flat in February and will probably start to slow over the coming months due to falling energy prices and moderating underlying price pressures. … Consumer Prices …
Major electronics firms and carmakers offered workers smaller base pay increases during this year’s spring wage negotiations than they did last year. (See Chart.) Only a small share of firms participate in the so- called shunto, and the results of the …
19th March 2019
The rebound in February’s exports was probably distorted by shifts in the timing of Chinese New Year. What’s more, the PMIs from Japan’s main trading partners suggest that exports will remain subdued in the coming months. … External Trade …
18th March 2019
The wisdom of the Bank of Japan sticking with an inflation target it can’t reach is being questioned again, including by Japan’s finance minister this week. But all alternatives would be worse. And this would, in any case, be an inopportune time to signal …
15th March 2019
Just over two decades after it first cut rates to zero, the Bank of Japan today left its policy settings unchanged and reiterated that the ultra-loose stance will be maintained for the foreseeable future. While Governor Kuroda sounded relaxed about the …
The decline in machinery orders in January is another signal that business investment will be weak in Q1, and possibly tip GDP into another contraction. … Machinery Orders …
13th March 2019
Upcoming regulatory changes reported this week should help support an increase in bank profits and thereby neutralise one of the key arguments for why the Bank of Japan should reverse its ultra-loose policy stance. … Bank mergers to lift profits, trade …
8th March 2019
While there are mounting signs that a global downturn is underway, concerns about the impact of low policy rates on the health of the banking sector will probably prevent the BoJ from cutting its policy rates any further. Instead, the Bank’s response will …
5th March 2019
The LDP’s proposal to do away with term limits for the Prime Minister will make little difference to the outlook for Japan’s economy. Meanwhile, we aren’t overly worried about the continued surge in condominium prices in the large metropolitan areas as …
1st March 2019
The unemployment rate edged up in January and with GDP growth set to remain soft, we think it will creep higher next year. … Labour Market (Jan.) & Capital Spending …
The sharp falls in industrial production and retail sales in January suggest that the economy slowed sharply at the start of 2019. And the deterioration in business confidence means that a rapid rebound is not on the cards. … Industrial Production & …
28th February 2019
The export climate index fell to a three-year low in January and suggests that exports will barely grow at all this year. The monthly trade data have been even more downbeat as they showed export volumes falling at an annual rate of nearly 6% over the …
26th February 2019
The survey evidence suggests that the economy is losing momentum and we’ve lowered our GDP growth forecast for 2019 to 0.5%. If the economy records yet another quarter of falling output, we suspect PM Abe may delay the sales tax scheduled for October yet …
22nd February 2019
The drag from slumping fresh food inflation will subside soon but headline inflation will still hover around 0.5% over the coming months. … Consumer Prices …
The continued sharp fall in the manufacturing PMI in February adds to the evidence that Japan’s economy is losing steam rapidly and suggests that GDP growth will remain weak for now. … Flash Manufacturing PMI …
21st February 2019
The renewed widening of the trade deficit in January suggests that net trade remained a drag on GDP growth in the first quarter and we think that export growth will remain sluggish this year. … External Trade …
20th February 2019
Corporate investment has been a key driver of domestic demand in Japan recently, underpinned by healthy profits and the growing capacity constraints that resulted from a prolonged period of above-trend growth. But recent evidence suggests that firms are …
15th February 2019
Japan’s economy returned to growth in Q4 but its performance over the past year has been poor. Domestic demand will get a lift ahead of October’s sales tax hike but that sugar-high won’t be sustained. … GDP …
14th February 2019
This week’s “shunto” spring wage negotiations got underway against an inauspicious backdrop, with corrected official data showing that real wages didn’t rise at all last year. Next week, Japan’s zero interest rate policy, which was conceived as a last …
8th February 2019
Faced with a severe downturn, developed economies would exhaust their conventional monetary policy tools quickly. At first sight, Japan’s experience suggests that even the bold use of unconventional tools might not work. However, there are reasons why …
5th February 2019
The final few releases of December spending and output data have provided reassurance that Japan’s economy returned to growth in Q4. But the early signs for the current quarter are not at all encouraging. Meanwhile, the number of foreign workers continues …
1st February 2019
The sharp fall in December’s labour force and employment followed unusually strong gains in previous months and should not be a cause for concern. However, the unemployment rate may be close to a floor, so wage growth probably won’t rise further. … Labour …
The jump in industrial production in the fourth quarter points to a strong rebound in GDP. But the worsening of the business surveys suggests that a renewed slowdown at the start of this year is likely. … Industrial Production …
31st January 2019
The strong rise in December’s retail sales values suggests that private consumption growth in the fourth quarter could slightly exceed our expectations. And as consumers bring forward spending ahead of October’s sales tax hike, consumption should …
30th January 2019
A shocking set of export figures this week may have been worsened by specific troubles in the tech sector. But a deterioration in the global environment is likely to be an increasing headwind for the whole export sector this year. … Exports slump as tech …
25th January 2019
Combined with the recent fall in Reuters’ manufacturing Tankan, the slump in the manufacturing PMI in January suggests that the growth outlook for Japan has deteriorated. While we still expect domestic demand to pick up ahead of the sales tax hike, …
24th January 2019
Economic growth is set to slow after October’s sales tax hike while inflation will remain well below the Bank of Japan’s 2% target. But with high hurdles to additional policy easing, we think that the Bank will keep policy settings unchanged both this …
23rd January 2019
The slump in export volumes in December probably overstated the weakness in external demand. Even so, we expect export growth to slow this year. … External Trade …
Japanese households are more positive about current economic conditions than they have been for many years but they report still being highly price sensitive, and their worries about the outlook have spiked recently. All of this helps explain why, …
18th January 2019
The sharp fall in inflation in December in part reflects temporary factors that will reverse soon. But the bigger picture is that underlying price pressures will remain weak for the foreseeable future. … Consumer Prices …
The Bank is getting a bit more concerned about the impact of prolonged monetary easing on financial stability. But with economic activity and inflation set to fall short of its forecasts yet again, policy settings will have to remain loose for the …
16th January 2019
The stagnation in machinery orders in November suggests that business investment wasn’t the main driver of the likely rebound in Q4 GDP. But we still expect capital spending to rise at a strong pace this year. … Machinery Orders …
Japan’s 10-year government bond yield has been flirting with zero since the start of the year. Not so long ago, it was climbing towards the 0.2% ceiling of the “tolerance band” managed by the Bank of Japan. The outlook for domestic monetary policy hasn’t …
14th January 2019
It increasingly appears that Japan’s unemployment rate is bottoming out. Recent data suggest that wage growth is picking up, but the surge that some policymakers had hoped for at this point in the economic cycle remains elusive. The admission today of …
11th January 2019
The sales tax hike is likely to trigger a fall in output in Japan later this year but, thanks to counter-measures from the government, the downturn will be much less sharp than after similar tax increases in the past. Even so, price pressures will remain …
9th January 2019
The pick-up in wage growth in November has probably further to run as the unemployment rate declines ahead of the sales tax hike. But wages may not rise fast enough to meet the BoJ’s 2% inflation target. … Labour Cash Earnings …
The yield on 10-year Japanese Government Bonds turned negative again this week, for the first time since shortly after the “around zero” target was adopted in 2016. This may rattle some of the more hawkish people at the Bank of Japan but is unlikely to …
4th January 2019
Even though industrial production and retail sales fell rather sharply in November, both should have risen across the fourth quarter. Meanwhile, the unemployment rate hasn’t fallen any further over the past year and the floor may be higher than we had …
2nd January 2019
We expect the global economy to slow further next year which will be a headwind to trade. But the government has recognised the threat to domestic demand posed by next year’s sales tax hike and announced a number of measures to dampen the blow. The upshot …
21st December 2018
The recent slump in crude oil prices means that the slowdown in inflation in November has further to run. And underlying inflation may not climb much above 0.5% even if domestic demand strengthens ahead of next year’s sales tax hike. … Consumer Prices …
The Bank of Japan left interest rates unchanged today and Governor Kuroda’s dovish comments suggest that policy tightening remains a long way off. … Bank of Japan Meeting …
20th December 2018
The slump in export values in November suggests that growth in export volumes will continue to fall short of growth in import volumes in the fourth quarter. And the recent weakening in external demand suggests that net exports will remain a drag on GDP …
19th December 2018
Ten-year Japanese government bond yields this week dropped back to below their level when the Bank of Japan widened the tolerance band in July. The stealth tightening that some talked of at the time turned out to be nothing of the sort. … JGB yields …
14th December 2018
The Q4 Tankan survey was better than most had anticipated and adds to the evidence that the economy has turned the corner. Meanwhile, firms are reporting mounting difficulties finding staff which supports our view that the unemployment rate will fall to …
Recent comments by Governor Kuroda and analysis published by the Bank of Japan have again fuelled speculation that policy may be tightened soon. But with the economic expansion sputtering, the consumption tax clouding the outlook and inflation set to slow …
12th December 2018
The rise in machinery orders in October was weaker than anticipated, but orders still point to rising business investment in Q4. That suggests that the slump in Q3 GDP will be reversed in the fourth quarter. … Machinery Orders …
