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Some of the rebound in trade values in April reflects higher export and import prices. The key point though is that export volumes continue to outpace import volumes. … External Trade …
21st May 2018
The fall in GDP last quarter should be followed by a rebound in activity in the current quarter. But with the economy running into capacity constraints, our view remains that growth will slow this year. … Weaker Q1 sets the tone for …
18th May 2018
The recent jump in crude oil prices will give a significant lift to inflation in Japan, taking it somewhat closer to the Bank of Japan’s target, but only for a short while. For a large net energy importer, higher prices are inevitably a headwind to …
Most of the slowdown in inflation in April was driven by volatile fresh food prices. But the moderation in underlying inflation underlines that the Bank of Japan’s 2% inflation target remains out of reach. … Consumer Prices …
We already know that business investment was little changed last quarter. As such, we wouldn’t read too much into the fall in machinery orders in March. The bigger picture is that firms are facing mounting capacity shortages so investment spending will …
17th May 2018
We wouldn’t read too much into the contraction in GDP last quarter. After all, trend growth in Japan is low and the drop in output followed eight consecutive quarters of expansion, the longest stretch in three decades. The available data suggest that …
16th May 2018
The longest period of uninterrupted expansion since the late 1980s came to an end last quarter and we think that the economy won’t expand as much this year as it did in 2017. … GDP (Q1 …
Purchases of government bonds by the Bank of Japan have stabilised over the past six months. But the rate at which its holdings are growing has continued to slow as its bonds are now maturing at a rapid rate. Our view remains that the Bank’s holdings of …
14th May 2018
Investment in IT equipment and infrastructure has fallen in recent years and there has been no push to raise the low level of university enrolment in related subjects. Still, the country’s ICT infrastructure is excellent, investment remains higher than in …
11th May 2018
The Economy Watchers Survey was little changed in April and points to a further slowdown in consumer spending and sluggish industrial activity. … Economy Watchers Survey …
10th May 2018
The surge in base pay in March underlines that the tight labour market is now generating noticeable cost pressures. However, it will still take a few more years before wage growth is strong enough to meet the Bank of Japan’s 2% inflation target. … Labour …
9th May 2018
The fall in household spending in March suggests that private consumption dipped last quarter. And with other areas of demand broadly flat, we reiterate our forecast that GDP contracted by 0.1% q/q last quarter. … Household Spending …
8th May 2018
The continued slowdown in bank lending seems to vindicate the Bank of Japan’s concerns that low policy rates are undermining financial intermediation. But broader measures of credit availability suggest that firms’ ability to raise funds has rarely been …
4th May 2018
Population ageing explains little of the recent slowdown in productivity growth. And with the pace of greying not picking up any further, we expect productivity growth to rebound to 1% per annum over the coming years. … Ageing unlikely to lower …
We suspect that the recent deterioration in consumer sentiment reflects the impact of rising food prices. Either way, the survey still points to a rebound in spending on durable goods. … Consumer Confidence …
2nd May 2018
The Bank of Japan today refrained from providing a concrete timeframe for hitting its 2% inflation target for the first time since Governor Kuroda took over. This highlights that policymakers have little confidence in their lofty inflation projections and …
27th April 2018
An increase in hedging costs has undermined the appeal of investing in US$ bonds for Japanese investors. This won’t affect the profitability of banks much as their holdings of foreign bonds are small. It presents a bigger headache for insurance firms, …
The slump in industrial production last quarter suggests that GDP shrank in Q1. Meanwhile, price pressures have started to moderate again even though the labour market remains very tight. … Labour Market & Ind. Prod. (Mar.) & Tokyo CPI …
The unusual strength of wage growth in Japan has attracted attention recently. But the main development at the upcoming Bank of Japan meeting is likely to be another reduction in the Board’s forecast for inflation, underlining that policy tightening …
24th April 2018
The manufacturing PMI suggests that activity in the sector remains healthy but firms are getting increasingly concerned about the outlook for external demand. … Flash Manufacturing PMI …
23rd April 2018
The tight labour market is now boosting wage growth but not by enough to generate significant inflation. With the economy likely to slow this year, the Bank of Japan won’t be able to tighten policy anytime soon. … Policy tightening still a distant …
20th April 2018
Inflation ended the last fiscal year well below the Bank of Japan’s forecast for the current fiscal year and the Bank will have to lower its projections yet again. … Consumer Prices …
Distortions related to the Lunar New Year unwound in March, but we estimate that net trade still turned into a drag on GDP growth last quarter. … External Trade …
18th April 2018
US President Trump has once again sown confusion by indicating that the US may still join the Trans Pacific Partnership. However, he indicated that this would require a renegotiation of the agreement, which looks unlikely. We think that the US will …
13th April 2018
Bank lending has continued to slow in recent months. However, banks’ willingness to provide credit has rarely been higher, and broader measures of credit that also include corporate bonds show that credit growth remains strong by past standards. The …
12th April 2018
Revised data show that regular earnings expanded at the fastest pace in two decades at the start of this year, underlining that the tight labour market is finally generating stronger cost pressures. Still, we estimate that the jobless rate would have to …
11th April 2018
The continued rise in machinery orders in February is a positive sign but we still expect business investment to fall in Q1. However, the medium-term outlook for capital spending remains positive. … Machinery Orders …
The proposed tariffs on bilateral imports between the US and China would only have a small direct impact on Japan. Nor would Japan benefit much if buyers looked for cheaper alternatives. A further escalation of tensions would hit Japan’s economy mostly …
10th April 2018
The Economy Watchers Survey didn’t improve much in March and still points to subdued growth in both industrial production and consumer spending. … Economy Watchers Survey …
9th April 2018
The recent volatility in global stock markets has undermined households’ confidence in their personal wealth. But this doesn’t seem to affect their willingness to spend much. … Consumer Confidence …
The early indications point to a fall in capital spending in Q1. However, mounting capacity and staff shortages suggest that spending on machinery and equipment will continue to grow faster than overall output both this year and next. This is good news …
6th April 2018
Base pay rose the most in two decades at the start of the year which indicates that the tight labour market is finally starting to create noticeable cost pressures. Meanwhile, the renewed slump in “core” household spending in February suggests that …
The Bank of Japan has become more vocal about its desire to exit the current ultra-loose policy settings. But with concerns about the impact of low policy rates on financial intermediation overblown and inflation set to remain well below its 2% target, …
4th April 2018
Today’s Tankan survey suggests that growth slowed last quarter. Nonetheless, staff shortages have continued to intensify and price pressures are strengthening. … Tankan …
2nd April 2018
The rebound in industrial production in February wasn’t strong enough to prevent a slump in output last quarter and we reiterate our forecast that GDP shrank in Q1. Meanwhile, the labour market remains very tight but the Tokyo CPI showed that price …
30th March 2018
There is a plausible argument that widespread “underemployment” of employees who would like to work longer hours means that labour market conditions in Japan are not as tight as the historically-low unemployment rate suggests. We find no evidence that …
29th March 2018
The muted increase in retail sales in February leaves Q1 on track for the sharpest fall since 2014’s sales tax hike. However, the figures haven’t been a great guide to developments in private consumption recently. For now, we’ve pencilled in a stagnation …
Five years after Governor Kuroda embarked on aggressive policy easing, core inflation in Japan is still barely positive and the Bank of Japan seems to have run out of ideas on how to push it higher. There is an argument that the Bank should acknowledge …
27th March 2018
The conventional wisdom is that population ageing results in a falling savings rate and rising interest rates. Yet Japan, despite the high average age of its population, runs a sizeable current account surplus, and real interest rates there have in recent …
23rd March 2018
Underlying inflation climbed to a 20-month high in February but the recent strengthening of the exchange rate suggests that it won’t rise much further. … Consumer Prices …
While the manufacturing PMI weakened in March, it remains consistent with solid gains in industrial production. However, the hard data suggest that output will fall this quarter. … Flash Manufacturing PMI …
22nd March 2018
Japanese households and firms now both receive more in interest income than they pay out on their debt. That is making life difficult for banks. The main factor keeping them afloat is their sizeable activity overseas. … Monetary Indicators Monitor …
20th March 2018
Seasonal swings related to Chinese New Year pushed the trade balance into the red in February. However, we suspect that these moves will reverse in March. … External Trade …
19th March 2018
We wouldn’t read too much into the early results of this year’s spring wage negotiations, which showed that the large carmakers and electronic firms lifted base pay by less than in 2014 and 2015. But the bigger picture is that wage growth will remain well …
16th March 2018
Revised GDP figures confirmed that the economic recovery continued apace in Q4. However, the more recent monthly activity data suggest that the longest period of uninterrupted expansion since the late 1980s may finally have come to an end this quarter. …
14th March 2018
The rebound in machinery orders in January lifted them above their Q4 average. With firms facing severe capacity and staff shortages, business investment will remain a growth driver this year. … Machinery Orders …
Prime Minister Abe is once again embroiled in a political scandal that raises the possibility that he could be replaced as head of the LDP, and hence as prime minister. This still seems unlikely but, if it did happen, Mr Abe’s departure would not have …
12th March 2018
Sluggish wage growth, subdued inflation expectations and the renewed strengthening of the exchange rate suggest that inflation will remain below the Bank’s 2% target for the foreseeable future. The upshot is that the Bank’s new leadership will have to …
9th March 2018
The yen would have to strengthen much further before it turns into a major drag on export competitiveness and corporate profits. However, the recent appreciation should bring the pick-up in goods inflation to a halt over the coming months. … Yen strength …
The slowdown in base pay in January underlines that the Bank of Japan won’t be able to tighten monetary policy anytime soon. Meanwhile, the jump in household spending in January is good news but we still expect private consumption to stagnate this …
