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The Bank of Japan made some technical adjustments to its policy framework today. But its key message, which it emphasised with the introduction of explicit forward guidance, was that the main policy rates will remain at very low levels for the foreseeable …
31st July 2018
Even though job growth slowed in June, the unemployment rate remained very low. Meanwhile, industrial production rebounded last quarter which suggests that the economy returned to growth. … Labour Market & Industrial Production …
The rebound in retail sales in June suggests that consumer spending picked up again in Q2 which supports our view that the economy returned to growth last quarter. … Retail Sales …
30th July 2018
Bond market participants appear convinced that something substantive will come from next week’s Bank of Japan meeting. But if the Bank did anything that was perceived as backing away from the commitment to keep policy ultra-loose it would be shooting …
27th July 2018
There was a broad-based rise in price pressures in the capital region last month. But while the rise in energy inflation won’t be sustained, the recent pick-up in underlying inflation has further to run. … Tokyo CPI …
Leaks from the Bank of Japan ahead of next week’s Policy Board meeting have prompted speculation that the Board will adjust its policy framework. Any changes would be intended to address the strains on financial institutions caused by ultra-loose policy, …
26th July 2018
The manufacturing PMI fell back in July which suggests that the threat of a global trade war may be weighing on business confidence. At the same time, price pressures have continued to intensify. … Flash Manufacturing PMI …
24th July 2018
The BoJ has been able to drastically slow the pace of its acquisition of Japanese Government Bonds since it adopted a 0% yield target, which should quells doubts about the policy’s long-run viability. And while ultra-loose policy creates some challenges …
23rd July 2018
The trade war between China and the US will cause some collateral damage but the biggest potential threat to Japan’s economy is a US tariff on Japanese cars. For now though, our base case is that the tariff won’t be as high as Trump had threatened and …
20th July 2018
Energy inflation jumped in June. But if we strip out energy and fresh food, consumer prices have fallen in recent months, leaving the BoJ’s 2% inflation target out of reach. … Consumer Prices …
Today’s trade data show a renewed plunge in imports in June and suggest that net trade continued to support GDP growth in the second quarter. … External Trade …
19th July 2018
The Bank of Japan’s admission that inflation won’t reach its 2% target anytime soon has generated speculation that the target will be lowered at the meeting later this month. By contrast, we believe that the target is here to stay. … Will the BoJ lower …
17th July 2018
Early signs are that this week’s floods in western Japan, for all their terrible human cost, have had only a small economic impact, though the affected regions are manufacturing centres. Meanwhile, the area around Tokyo has been anointed the most …
13th July 2018
The contraction in output in the first quarter was just a blip. The available activity data suggest that the economy returned to growth in the second quarter. But growth won’t be as strong this year as it was last. Unemployment is about as low as it is …
12th July 2018
We expect GDP growth to be broadly in line with trend both this year and next. The labour market will remain very tight and wage growth may strengthen further. But sluggish demand after next year’s tax hike will keep 2% inflation out of reach. The Bank of …
11th July 2018
Even though machinery orders dropped in May, their Q2 average is well above the Q1 average and suggests that investment spending picked up again last quarter. … Machinery Orders …
BoJ Board member Harada this week refuted criticism that the Bank’s prolonged monetary easing poses a major threat to financial stability. We share his view that those concerns are overdone, which is one reason why we expect policymakers to keep policy …
6th July 2018
The acceleration in base pay in May is another sign that the tight labour market is boosting cost pressures. But we think that wages would still have to rise much faster to generate 2% inflation. … Labour Cash Earnings & Household Spending …
The recent plunge in Japan’s jobless rate suggests that wage growth will pick up faster than we had been anticipating. But we suspect that unemployment is now close to a floor so wage growth may never reach the rates necessary to meet the BoJ’s 2% …
3rd July 2018
This report is only available as a PDF. Click to download. … Tankan (Q2) …
2nd July 2018
Japan has looked to be at full employment for some time but the latest releases have called that assumption into question and raised the possibility that wage growth – and the Bank of Japan’s hopes of hitting its inflation target – might rise. Meanwhile, …
29th June 2018
While industrial output fell slightly in May, the economy should have returned to growth in the second quarter. Meanwhile, the labour market continues to tighten and there are signs that this is now boosting price pressures. … Labour Market & Ind. Prod. …
Despite the fall in retail sales in May, consumer spending should still return to growth in the current quarter. … Retail Sales (May) …
28th June 2018
Forecasting shifts in productivity is notoriously hard but past experience suggests that the recent slowdown in productivity growth in Japan should reverse over the coming decade. Nonetheless, with the drag from a shrinking working age population …
27th June 2018
While Japan has close economic ties to both the US and China, it shouldn’t be too badly affected if the trade dispute between them heats up. Perhaps the main concern is that a trade war would cause the yen to strengthen as a safe haven. But the currency’s …
22nd June 2018
The manufacturing PMI was little changed in June and still points to robust gains in industrial output. And the recent surge in crude oil prices is boosting price pressures. … Flash Manufacturing PMI …
While a pick-up in energy and fresh food prices lifted inflation in May, underlying inflation weakened further and remains far below the Bank of Japan’s 2% target. … Consumer Prices …
Despite rapid growth, sales of second-hand goods remain too low to constitute a major threat to retailers. Their rising popularity reflects the increased convenience of electronic platforms rather than concerns over falling incomes and higher cost …
19th June 2018
Even though today’s trade data show a jump in imports in May, we still think that net trade supported GDP growth in the current quarter. … External Trade …
18th June 2018
The Bank of Japan has recently been expressing greater concern about the impact of ultra-loose monetary policy on financial stability. But Governor Kuroda today insisted that the key focus of policy must remain on lifting inflation expectations and …
15th June 2018
Corporate profits have more than doubled since Prime Minister Abe returned to power. We think that this reflects a reduction in cross-shareholdings since the late 1990s and improvements in corporate governance. The prolonged rise in profits suggests that …
14th June 2018
Headline inflation has been falling recently as the impact of the short-lived spike in food prices over the winter has reversed. Energy inflation has continued to slow as utility bills are rising less rapidly and the recent surge in crude oil prices has …
12th June 2018
Concerns about financial stability seem to have become more widespread on the Policy Board. But inflation remains far below the 2% target and the prospect of a renewed slowdown in domestic demand after next year’s sales tax hike will prevent policymakers …
11th June 2018
The surge in machinery orders in April is yet another sign that the drop in Q1 GDP was just a blip. The bigger picture is that firms are facing severe capacity constraints so investment spending should remain a key growth driver this year. … Machinery …
The slump in the share of young women that are married combined with the delay when women have their first child suggest that the fertility rate may at best rise from the current 1.4 to around 1.5. Even so, the working-age population would still fall by …
8th June 2018
Revised data show that Japan’s economy expanded a little faster in recent quarters than initially reported. But the economy is running into capacity constraints and we expect growth to slow this year. … GDP (Q1 …
The slowdown in wage growth in April was driven by volatile bonus payments, whereas base pay kept growing at the strongest pace in two decades. But wages would still have to grow much faster to meet the Bank of Japan’s 2% inflation target. … Labour Cash …
6th June 2018
While household spending was weak in April, the jump in retail sales suggests that private consumption returned to growth this quarter. … Household Spending …
5th June 2018
The Bank of Japan seems to be getting more concerned about the impact of low policy rates on financial stability. However, the financial system is neither unwilling to provide credit nor is credit growing at an unsustainable pace. And with inflation …
1st June 2018
Today’s capital spending confirmed that investment was sluggish last quarter and suggest that we won’t see major revisions in the second estimate of Q1 GDP. … Capital Spending …
Industrial production didn’t rise as much in April as most had anticipated. But the economy should still have returned to growth this quarter. … Industrial Production …
31st May 2018
Today’s consumer confidence survey suggests that wage and employment growth will slow. Still, sentiment edged up marginally in May and points to a rebound in consumer spending. … Consumer Confidence …
30th May 2018
The jump in retail sales in April suggests that consumer spending started to expand again in the current quarter. The weakness at the start of the year implies that private consumption won’t grow by much more than 0.5% this year but the outlook is …
Even though employment growth slowed a bit in April, it remains unrealistically high. Meanwhile, the jobless rate stayed at 2.5% and it will probably edge a little lower over the coming months. … Labour Market …
29th May 2018
The imposition of high tariffs on car imports that the US is considering would have a palpable impact on economic activity in Japan. This may be another empty threat by the Trump administration, but if they followed through, Japan would almost certainly …
25th May 2018
New projections suggest that social security spending could rise by 8% of GDP by 2040. The government has already increased social security contributions in recent years and there is some scope to increase them further. By contrast, sizeable hikes to …
The continued moderation in inflation in the capital region underlines that the Bank of Japan won’t be able to tighten monetary policy anytime soon. … Tokyo CPI …
On some measures, Japan has been the strongest performing large developed economy over recent years. Growth has been unusually fast, unemployment is at historic lows and wage growth at two-decade highs. For all this though, the Bank of Japan remains a …
23rd May 2018
Even though the manufacturing PMI fell to a fresh low in May, we still think that the economy returned to growth this quarter. Meanwhile, the recent strength in crude oil prices is boosting price pressures. … Flash Manufacturing PMI …
The BoJ could continue buying ETFs at the current pace for a long time since its purchases are small relative to the size of the stock market. But the Bank reckons that the stock market is now close to being overheated so a gradual reduction in the volume …
22nd May 2018
