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While the economy contracted even more than most had anticipated in the third quarter, we expect GDP growth to return to trend next year. … GDP (Q3 …
10th December 2018
One explanation for the persistent weakness of wage growth in Japan, despite the tightness of the labour market, is that employment growth has been skewed towards positions with low hours and low pay. But that doesn’t seem to be the case: the share of …
7th December 2018
The continued strength in base pay casts doubt on the Bank of Japan’s view that sampling distortions have overstated wage growth in recent months. And if the unemployment rate falls towards 2.0% over coming months as we expect, cost pressures will …
This week brought reassurance that the contraction in the economy in Q3 was largely due to one-off factors. The early signs are that there has been a strong rebound this quarter. In the week ahead, the government will be pushing to relax Japan’s …
30th November 2018
The surge in industrial production in October is a strong sign that the economy returned to growth in the fourth quarter. That suggests that October’s weakening in the labour market data won’t be sustained. In fact, we still expect the unemployment rate …
While doubts have been raised over whether the Japanese yen remains a safe haven in light of its poor performance in the summer, we think that the currency will retain this status for the foreseeable future. … The yen’s days as a safe haven are probably …
29th November 2018
The rebound in consumer spending in October suggests that private consumption returned to growth in the fourth quarter. That means that the contraction in GDP in the third quarter was just a blip. … Retail Sales …
Even though Japan’s “true” level of government debt is not as high as the commonly-watched gross measure suggests, it is still far higher than elsewhere. The ease with which Japan nonetheless copes with this might suggest that we should not worry too much …
27th November 2018
The slump in global oil prices will deliver a windfall to Japanese firms and households but it creates a headache for the Bank of Japan: lower energy prices will knock half a percentage point off headline inflation over the next few months. Meanwhile, …
23rd November 2018
Japan’s stock market has already fallen by 11% since its recent peak in early October, and we expect further declines in 2019 as equity prices tumble in the US and the yen strengthens. But this won’t create a major drag on Japan’s economy. … Further stock …
22nd November 2018
The jump in headline inflation in October reflected a boost from fresh food and energy prices that won’t last. However, we expect overall inflation to settle around 1% over coming months as price pressures strengthen ahead of next year’s sales tax hike. … …
The measures under consideration to offset the damage from next year’s sales tax hike may help to soften the blow if big enough. But they are unlikely to prevent a fall in domestic demand. … Plans to offset sales tax hike won’t stop spending …
20th November 2018
The continued widening of the trade deficit suggests that net trade remained a drag on GDP growth in the fourth quarter. And while the recent strength in import growth probably won’t be sustained, the outlook for external demand has deteriorated. … …
19th November 2018
The contraction in Q3 GDP that was confirmed this week is likely to be followed by a rebound over coming quarters. But the bigger picture is that growth momentum has weakened since last year and, while spending to beat the coming tax hike will flatter the …
16th November 2018
The contraction in Japan’s economy in Q3 should prove short-lived. But the income data released alongside the GDP figures provide a more lasting reason for concern. The Bank of Japan had been able to point to signs of accelerating wage growth as evidence …
15th November 2018
The slump in output in the third quarter probably reflects a number of natural disasters and the economy almost certainly returned to growth in Q4. Indeed, the near-term outlook is positive as consumers bring forward spending ahead of next year’s sales …
14th November 2018
The past week’s data cast a shadow over some of the few remaining bright spots in Q3. Next week’s GDP release is very likely to show that Japan’s economy contracted for a second time this year. Meanwhile, Governor Kuroda’s message about forward guidance …
9th November 2018
The acceleration in wage growth in September was driven by volatile bonus payments whereas growth in base pay slowed rather sharply. The final reading may yet show stronger growth in regular earnings but the key point is that wages would have to rise much …
7th November 2018
The steep cut to mobile phone charges announced by Japan’s largest wireless operator last week means that consumer price inflation may average only 1.0% next year rather than the 1.2% we had been forecasting. While the Bank of Japan will argue correctly …
6th November 2018
The new types of work visas Japan’s government plans to introduce in April will probably result in an even greater inflow of foreign workers over the coming years. That’s a step in the right direction but immigration won’t offset the rapid decline in the …
2nd November 2018
The Bank of Japan seems to be getting a little more worried about the impact of prolonged easing on financial stability. However, the looming sales tax hike and the downgrade to the BoJ’s inflation forecasts underline that policy tightening remains a long …
31st October 2018
The slump in industrial production in September means that Q3 GDP may have fallen by more than we had anticipated. But the recent weakness probably reflects the impact of natural disasters and a return to growth in Q4 is likely. … Industrial Production …
The unemployment rate is the lowest it has been in a generation and we think it will fall further over the coming year. But wage growth probably won’t reach the rates required to meet the BoJ’s 2% inflation target. … Labour Market …
30th October 2018
The drop in retail sales in September suggests that consumer spending fell yet again in Q3. That’s one reason why we expect GDP to contract in Q3. … Retail Sales …
29th October 2018
We still think that the solution to the continued fall in regional banks’ capital ratios is a reduction in the number of lenders rather than an increase in the BoJ’s 10-year yield target. Japan’s government seems to agree. Meanwhile, Prime Minister Abe’s …
26th October 2018
The jump in fresh food prices that lifted inflation in the Tokyo region to a ten-year high in October won’t be sustained. And with underlying inflation moderating yet again, the Bank of Japan’s 2% inflation target remains out of reach. … Tokyo CPI …
The Bank of Japan will probably lower its growth and inflation forecasts further at next week’s policy meeting. And it should reiterate its pledge to keep interest rates at current extremely low levels for an extended period. … Sales tax hike is the nail …
24th October 2018
The pick-up in the manufacturing PMI in October, from 52.5 to 53.1, suggests that the likely slowdown in GDP growth in Q3 was just a blip. … Flash Manufacturing PMI …
US insistence that provisions against currency manipulation be a part of any future trade deal with Japan has raised suggestions this week that Japanese policymakers, particularly those at the Bank of Japan, could find their hands tied in future. We …
19th October 2018
While underlying inflation didn’t rise any further in September, we think it will strengthen as firms pass on higher labour costs and domestic demand strengthens ahead of the tax hike. However, inflation won’t reach the BoJ’s 2% inflation target for the …
Net exports probably remained a drag on GDP growth in the third quarter. It now looks likely that economic activity came to a standstill in Q3. … External Trade …
18th October 2018
Japan’s economy was always likely to slow in the third quarter after the surge of output it generated in the second. But the latest data have still been rather disappointing. While investment remains strong, industrial output may have contracted, consumer …
15th October 2018
The government has indicated that it will be more lenient in applying antimonopoly legislation when assessing regional bank mergers. That should pave the way for a further consolidation of unprofitable small lenders and assuage concerns about the impact …
12th October 2018
The continued surge in machinery orders in August suggests that business investment may have been stronger in Q3 than we had anticipated. Even so, we still expect a marked slowdown in Q3 GDP growth. … Machinery Orders …
10th October 2018
Domestic demand will pick up speed ahead of next year’s sales tax hike, extending one of Japan’s strongest runs of growth since the 1980s, and price pressures will strengthen. But weaker domestic demand after the tax hike means that GDP growth will slow …
9th October 2018
Japan’s labour market is as strong as most of today’s workers will ever have known, which makes the persistent weakness of consumption all the more puzzling. Spending remains flat according to data from the Bank of Japan today and survey evidence suggests …
5th October 2018
The strongest rise in regular earnings since 1997 should be followed by even stronger gains in coming months as the labour market tightens further. … Labour Cash Earnings & Household Spending …
The deterioration in business conditions in the Q3 Tankan supports our view that GDP growth slowed last quarter. That said, firms remain optimistic about the outlook for capital spending and the survey suggests that price pressures will continue to …
1st October 2018
Japan’s government this week caved to US pressure to start discussions on a bilateral trade deal. But it appears to have won some valuable concessions in return. Meanwhile, we learnt more about what the Bank of Japan was thinking with its recent …
28th September 2018
Today’s activity data showed a rebound in August but that won’t prevent a slowdown in GDP growth in Q3. The labour market remains tight and price pressures in the capital have strengthened further. … Labour Market & Activity (Aug.) & Tokyo CPI …
Recent comments by Prime Minister Abe suggest that he is no longer obsessed with overcoming deflation and would like the Bank of Japan to focus more on the financial stability part of its mandate. However, credit growth remains strong, price pressures …
21st September 2018
The continued increase in the manufacturing PMI in September suggests that industrial activity should soon start to strengthen again. … Flash Manufacturing PMI …
Underlying inflation climbed to a four-month high in August and should pick up further ahead of next year’s sales tax hike. But price pressures will weaken once the tax has been raised and the BoJ’s 2% target remains elusive. … Consumer Prices …
Mr Abe will remain Prime Minister for another three years. That means fiscal policy will probably be tightened further, monetary policy will remain loose and policymakers may take some further steps to address the country’s demographic headwinds. … What …
20th September 2018
The Bank of Japan today reiterated its pledge to keep rates low for a prolonged period. With the sales tax hike looming and inflation set to remain below target for longer, we think that the Bank will keep rates unchanged beyond 2020. … Mounting risks …
19th September 2018
Import volumes seem to have outpaced export volumes yet again in August which supports our view that net trade remained a drag on Q3 GDP growth. … External Trade …
Recent comments by President Trump suggest that he may target Japan next in his efforts to reduce the US trade deficit. Trump may want Japan to increase pressure on China to end unfair trading practices. But that would require more than just rhetoric by …
14th September 2018
Mounting downside risks to economic activity mean that the Bank of Japan will have little reason in the foreseeable future to deviate from its pledge to keep interest rates extremely low for an extended period. Our long-held view that the Bank will keep …
13th September 2018
Even though machinery orders jumped in July, the recent fall in capital goods shipments suggests that a slowdown in business investment in the third quarter will be hard to avoid. … Machinery Orders …
Summer bonuses rose the most since 1991 this year. That is partly a reflection of the surge in corporate profits in recent years. But workers are earning more than their fair share of the pie. Labour income is growing much faster than output and the wage …
11th September 2018
