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The Bank of Japan has been warning that low policy rates could eventually prove contractionary if they depress banks’ profits and capital and reduce their willingness to lend. In reality though, capital ratios have risen in recent years, banks’ lending …
19th December 2017
Producer prices in Japan are rising at the fastest pace in years but we still expect consumer price inflation to remain broadly flat in coming months. … What to make of the surge in producer …
18th December 2017
Japan’s economy will expand the most this year since 2013. Yet the unemployment rate hasn’t fallen any further since the start of the year. This isn’t due to a surge in productivity that has reduced labour demand. In fact, productivity growth has been …
Export volumes continued to grow faster than import volumes last month which suggests that net trade continued to support growth in the current quarter. … External Trade …
We expect Japan’s GDP growth to slow next year as the economy is now operating above capacity. Price and wage pressures should strengthen somewhat but inflation will remain well below the Bank of Japan’s 2% target and monetary policy settings will …
15th December 2017
Today’s Tankan survey showed that business conditions didn’t improve much further this quarter which suggests that growth is now slowing. Nonetheless, capacity and staff shortages continue to intensify and price pressures are strengthening. … Tankan …
The manufacturing PMI was the highest in nearly four years in December as external demand continues to improve. However, price pressures are only strengthening slowly. … Flash Manufacturing PMI …
14th December 2017
With yields set to rise overseas and concerns that low policy rates may curtail lending likely to linger, speculation about policy tightening in Japan will not subside next year. However, we believe that subdued price pressures will force the Bank to keep …
13th December 2017
The rebound in machinery orders left them no higher than their Q3 average, but we’ve still pencilled in another rise in business investment this quarter. … Machinery Orders …
The jobless rate has been effectively flat since February despite continued strong growth in the economy. The economy is now close to full employment which suggests that wage growth will continue to strengthen. However, wages would have to rise much …
8th December 2017
The surge in the Economy Watchers Survey is yet another sign that the drop in consumer spending last quarter was just a blip. The survey suggests that job growth will pick up further and that industrial production will rise at a strong pace over the …
Regular earnings are now growing a touch faster than productivity which suggests that firms may have to start raising prices before long. Nonetheless, there is still a long way to reach the Bank of Japan’s 2% inflation target. … Labour Cash Earnings …
Revised data show that growth was stronger last quarter than initially estimated. However, the economy is running into capacity constraints and firms face increasingly severe staff shortages. The upshot is that the expansion should slow again before long. …
A long period of sustained economic growth has helped drive unemployment in Japan to its lowest level in nearly a quarter of a century. Nonetheless, inflation and wage growth are both barely positive and look set to remain subdued. The Bank of Japan is …
7th December 2017
Households are the most upbeat since 2013 which suggests that the drop in consumer spending last quarter was just a blip. … Consumer Confidence …
4th December 2017
Governor Kuroda has recently discussed the idea that extremely low interest rates could undermine bank profits and capital and, ultimately, lending. Evidence for this idea is lacking in Japan, where the main pressure on bank profits is coming from …
1st December 2017
Today’s household spending data suggest that private consumption remained sluggish this quarter. Meanwhile, there are still few signs that the tight labour market is boosting price pressures. … Labour Market, Household Spending, Consumer Prices (Oct.) & …
Even though industrial production disappointed in October, optimistic forecasts for the remainder of Q4 suggest that activity accelerated towards the end of the year. … Industrial Production …
30th November 2017
While retail sales stagnated in October, strong gains in household incomes and buoyant consumer confidence suggest that consumer spending should return to growth this quarter. … Retail Sales …
29th November 2017
Recent comments by BoJ Board members have trigged speculation that the Bank is considering a gradual withdrawal of monetary stimulus, in part to help Japan’s banks. But with inflation still rooted well below the 2% target, we still expect the Bank to hold …
27th November 2017
Private consumption fell last quarter for the first time since end-2015. However, solid growth in household incomes, an elevated household saving rate and upbeat consumer confidence suggest that this was just a blip. We reiterate our forecast that private …
24th November 2017
The manufacturing PMI climbed to a fresh high in November and suggests that the expansion accelerated in the final quarter of the year. What’s more, the survey shows that price pressures continue to strengthen. … Flash Manufacturing PMI …
Export volumes continue to rise more rapidly than import volumes so net trade should have continued to support GDP growth in the current quarter. … External Trade …
20th November 2017
Some commentators are arguing that the costs of continued loose monetary policy outweigh the benefits as house and stock prices have soared and banks’ lending margins have slumped. By contrast, we believe that these development should not be major causes …
17th November 2017
The Nikkei is near its highest in 25 years, buoyed by a 200% rise in net profits since PM Abe returned to power five years ago. Looking ahead, we expect the yen to weaken to 120 by the end of next year. With this backdrop, even though Japanese stocks are …
16th November 2017
The longest expansion since 2001 continued in the third quarter. However, the economy is running into capacity constraints and we expect growth to slow next year. … GDP …
15th November 2017
Bank lending has slowed in recent months and the BoJ’s Senior Loan Officer Survey points to a further weakening in coming months. However, brisk corporate bond issuance and record corporate profits imply that firms have sufficient funds to finance capital …
14th November 2017
Even after the withdrawal of the US, the TPP remains an ambitious free trade agreement that will lower tariffs and non-tariff barriers for Japanese firms in a number of important trading partners and should open its economy to productivity-enhancing …
13th November 2017
Wage growth is likely to pick up over coming months as the labour market remains extremely tight. But unusually low job mobility in Japan, which is linked to the widespread use of seniority wages and the lifetime employment model, means that wage gains …
10th November 2017
The Economy Watchers Survey was the strongest it has been since 2014’s sales tax hike last month. Job growth should therefore remain strong and the recent slowdown in consumer spending should come to an end soon. … Economy Watchers Survey …
9th November 2017
The plunge in machinery orders in September followed strong gains in previous months and orders still recorded a solid rise last quarter. The upshot is that we’ve pencilled in another increase in non-residential investment in Q3. … Machinery Orders …
President Trump drew attention this week to the difficulties US firms face trading with Japan. Japan’s tariff barriers are typically lower than those in the US but non-tariff barriers are significantly higher. Since foreign firms are more productive than …
8th November 2017
Wage growth rebounded in September and strong growth in part-time earnings suggest that it will pick up further in coming months. But the bigger picture is that much stronger increases would be needed to lift price pressures. … Labour Cash Earnings …
7th November 2017
Suggestions from Japan’s government that it has vanquished deflation are premature when wages are barely rising, core inflation is close to zero and inflation expectations are lower than a few years ago. As things stand, a drop back into deflation still …
6th November 2017
Outward investment from Japan has soared in recent years but this doesn’t seem to have been to the detriment of domestic manufacturing. This isn’t entirely surprising: firms say their main reason for setting up shop overseas is to be closer to customers …
3rd November 2017
Households remained upbeat ahead of last month’s Lower House elections which suggests that the recent slowdown in household spending is unlikely to last. … Consumer Confidence …
2nd November 2017
The Bank of Japan still expects growth to exceed its sustainable rate both this year and next. However, sluggish price pressures forced the Board to slash its inflation forecasts yet again at today’s meeting. The upshot is that policy tightening remains a …
31st October 2017
Today’s activity data confirm that growth slowed last quarter but a rebound in the current quarter is likely. Meanwhile, strong job growth isn’t reducing unemployment for now as the labour force continues to expand a rapid pace. … Industrial Production, …
Despite a rebound in retail sales in September, private consumption probably fell in Q3 for the first time in almost two years. However, the weakness is unlikely to last as household incomes are growing at a healthy pace and consumers remain unusually …
30th October 2017
Overseas lending by Japanese banks has risen sharply in recent years and now almost matches domestic lending. The bulk of foreign lending is financed in yen which exposes lenders to a sizeable currency mismatch. However, foreign lending is less risky and …
27th October 2017
Inflation didn’t rise any further in September. With the tailwind from higher energy prices set to fade, we think that price gains will level off around 0.5% in coming months. … Consumer Prices …
The Bank of Japan will leave policy settings unchanged at the upcoming meeting while further reductions in the Board’s inflation forecasts will underline that policy tightening remains a distant prospect. … Lower inflation forecasts underline case for …
25th October 2017
Even though the manufacturing PMI weakened a touch this month, it still points to robust gains in industrial output. However, the survey suggests that price pressures will not strengthen any further for now. … Flash Manufacturing PMI …
24th October 2017
We are re-sending this publication because the previous one contained an error. Mr Abe is now entering his fourth term as Prime Minister. Fiscal policy will probably be tightened further during PM Abe’s fourth term and the economic expansion is set to …
23rd October 2017
Recent scandals underline that Japan’s corporate governance practices are still poor. Investors often pay a heavy price as shown by the bankruptcy of Takata and the slump in Kobe Steel’s stock prices. However, we are not convinced that this constitutes a …
20th October 2017
Net exports probably supported quarterly GDP growth in Q3 despite September’s weakness in export volumes. But we expect overseas GDP growth to weaken so the slowdown in export growth should continue. … External Trade …
19th October 2017
Credit growth slowed slightly in the second quarter but remains very strong by past standards. However, this has yet to result in a marked increase in private sector indebtedness. … Monetary Indicators Monitor …
16th October 2017
Export values rose the most since 2013 in August but the recent acceleration largely reflects a pick-up in export prices that is unlikely to last. While business surveys suggest that export volumes will continue growing at a reasonable rate for now, we …
13th October 2017
The economy is providing a favourable backdrop to Prime Minister Abe’s efforts to be re-elected on 22nd October. Firms are the most upbeat in a generation following a jump in their profits. Job growth remains strong and the unemployment rate is at a …
12th October 2017
Machinery orders rose further in August and suggest that the recovery in investment spending continued last quarter. With firms facing rising capacity shortages, the outlook for capital expenditure remains healthy. … Machinery Orders …
11th October 2017
