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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 …
The Economy Watchers Survey weakened further in February as poor weather persisted. The survey suggests that private consumption has slowed quite sharply. … Economy Watchers Survey …
8th March 2018
Revised GDP data show that growth was stronger in Q4 than initially reported. But with the economy running into capacity constraints, we still think that the expansion will lose vigour this year. … GDP (Q4 …
Japanese officials have good reasons to take the imposition of US tariffs on steel and aluminium in their stride. The US would have to target a more important industry to provoke Japan to retaliate. The car industry is arguably the red line. The European …
7th March 2018
Japan’s economic expansion has become more shaky recently. And, while inflation has surged in recent months, it looks likely to moderate over the course of the year with the recent strengthening of the yen helping to keep price pressures in check. Against …
5th March 2018
Dismal industrial production and weak consumer spending figures for January suggest that Japan’s longest period of uninterrupted expansion since the late 1980s will come to an end this quarter. We reiterate our forecast that growth will slow this year as …
2nd March 2018
The labour market continues to tighten and price pressures are strengthening further. However, there is still a long way to go to reach the Bank of Japan’s 2% inflation target. … Labour Market (Jan.) & Tokyo CPI …
An advisor to PM Abe has suggested that the Bank of Japan should buy foreign bonds. However, economic conditions are far too buoyant at the moment for policymakers to take such a radical step. … Bank of Japan unlikely to buy foreign …
1st March 2018
Household sentiment weakened in February as the recent equity market turmoil reduced confidence in households’ personal finances. … Consumer Confidence …
The jump in capital spending excluding software last quarter suggests that non-residential investment was stronger than initially reported. However, this alone won’t be enough to lift overall GDP growth. … Capital Spending …
Industrial production plunged and retail sales fell rather sharply in January. It looks increasingly likely that the longest period of uninterrupted expansion will come to an end this quarter. … Industrial Production & Retail Sales …
28th February 2018
On past form, capacity shortages alone will never be enough to generate 2% inflation in Japan. The prerequisite for faster price gains is that inflation expectations among households and firms also rise substantially. Unfortunately, the Bank of Japan’s …
23rd February 2018
Underlying inflation has picked up again but we think this mostly reflects the lagged pass-through from previous exchange rate weakness. With producer prices of consumer goods now moderating, underlying inflation is set to remain well below the Bank of …
While the manufacturing PMI weakened in February it remains near the highest it has been since 2014’s sales tax hike and consistent with strong gains in industrial output. Meanwhile, the survey suggests that price pressures aren’t strengthening any …
21st February 2018
Japan’s economy recorded an eighth consecutive quarter of growth in Q4, the longest uninterrupted run of expansion since the late 1980s. Unemployment is very low, inflation has started to pick up, condominium prices have soared and credit growth is the …
20th February 2018
Trade values were distorted in January by seasonal swings ahead of the Lunar New Year. The bigger picture is that external demand remains robust. … External Trade …
19th February 2018
While machinery orders fell sharply in December, they were broadly unchanged in the fourth quarter as a whole. However, we already know from yesterday’s release of the GDP data that business investment continued to expand in Q4 and the figures released …
15th February 2018
If the Bank of Japan were to reverse course on monetary loosening in the near future, it would more likely be a response to worries about financial stability than high inflation. The recent deterioration in banks’ capital ratios therefore should be …
14th February 2018
GDP growth slowed sharply last quarter and we think that the economy won’t expand as strongly this year as it did in 2017. … GDP (Q4 …
Bank lending has continued to slow and Japanese banks are no longer gaining market share in the cross-border lending market. However, one reason is that non-financial firms are increasingly turning to the bond market to raise funds. … Monetary Indicators …
13th February 2018
Governor Kuroda looks likely to be reappointed as Bank of Japan Governor when his current term ends in April. It is still unclear who his two deputies will be, but the main candidates are mostly in favour of continued aggressive monetary easing. As such, …
12th February 2018
The recent sell-off on the stock market would have to continue for much longer before it started to have a major effect on consumer spending in Japan. And with the yen barely changed, the impact on the wider economy of this week’s market moves should be …
9th February 2018
The yen has strengthened in recent months even though investors are now anticipating a more aggressive pace of tightening by the US Fed. While we expect US long-term interest rates to end this year a bit higher than they are now, we no longer expect this …
8th February 2018
The slump in the Economy Watchers Survey in January probably reflects cold winter weather and we wouldn’t read too much into it. … Economy Watchers Survey …
The slowdown in wage growth in December was driven by bonus payments and overtime pay whereas regular pay rebounded. The big picture is that wage growth remains sluggish. … Labour Cash Earnings …
7th February 2018
