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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
The jump in household activity in today’s Economy Watchers Survey suggests that the recent slowdown in consumer spending is unlikely to last. And if anything, buoyant consumers should bolster the chances of the ruling coalition defending its two-thirds …
10th October 2017
Victory for Prime Minister Abe in this month’s election would keep Japan on the same track it has been on since 2012, pursuing fiscal tightening, loose monetary policy and tentative structural reform. Given the economy’s relatively strong recent growth …
The Bank of Japan’s purchases of JGBs have now fallen to around ¥60 trillion per annum and they are likely to be cut further to ¥40 trillion over the next couple of years. However, this shouldn’t have a noticeable impact on financial conditions as the …
9th October 2017
Yuriko Koike’s Party of Hope has pledged to rely less on loose fiscal and monetary policy if it wins the upcoming election. But in practice its proposals, which include delaying the sales tax hike, improving public transport and introducing a basic income …
6th October 2017
Weak consumer spending data suggest that the expansion faltered in the third quarter. This might not spell the end of the economy’s extended growth spurt. But with the economy running into capacity constraints, the rapid growth of recent quarters has …
The rebound in wage growth in August reflects a fading drag from falling summer bonuses rather than any acceleration in regular earnings. Stronger gains in part-time pay suggest that underlying wage growth will pick up in coming months but wage growth …
Households remained upbeat ahead of the upcoming Lower House elections which is one reason why we expect the ruling coalition to defend its majority. … Consumer Confidence …
3rd October 2017
Today’s Tankan survey suggests that growth remained robust in the third quarter. Capacity and staff shortages are the most pronounced since the early 1990s and the survey suggests that price pressures are strengthening. … Tankan …
2nd October 2017
Prime Minister Abe has pitched the snap legislative election that he has called for next month as a plebiscite on fiscal policy. He is arguing that the sales tax hike scheduled for October 2019 should be used to step up spending rather than pay down debt …
29th September 2017
Today’s activity data point to a slowdown in GDP growth in Q3. Meanwhile, price pressures are strengthening again as the labour market remains tight. But we expect inflation to settle around 0.5% in coming months, leaving little scope for tighter monetary …
Small business confidence was little changed in September and points to modest gains in industrial production. Meanwhile, the survey confirms that capacity shortages have intensified but suggests that price pressures remain fairly subdued. … Small …
27th September 2017
Japan’s ruling coalition should emerge victorious from the upcoming Lower House elections but “Abenomics” has long since run out of momentum and so there is little prospect of meaningful structural reform. The main economic implication is that the tax …
25th September 2017
The pick-up in the manufacturing PMI in September suggests that industrial activity continued to rise at a strong pace in the third quarter. However, the survey suggests that price pressures remain subdued. … Flash Manufacturing PMI …
Spending on research and development has been sluggish recently, but the recent rebound in corporate profits suggests it will start to recover before long. This would provide a boost to domestic demand and help improve the competitiveness of Japan’s …
22nd September 2017
The Bank of Japan left its upbeat assessment of economic conditions intact at today’s meeting. But inflation remains a long way below its projections, so further reductions in the Board’s forecasts next month are all but guaranteed. The upshot is that …
21st September 2017
Export volumes rose the most since 2010 in August which suggests that net trade should have started to support growth in the third quarter. … External Trade …
20th September 2017
With the opposition in disarray and support for the ruling coalition rebounding, the government may well retain its two-thirds majority in the Lower House if it called a snap election. The chances of another delay in the sales tax hike would decrease …
18th September 2017
With long-term interest rates at home anchored by the Bank of Japan, the key determinants of the value of the yen are both outside Japanese policymakers’ control: geopolitics and the actions of the US Fed. The yen barely moved following today's North …
15th September 2017
The Bank of Japan at its upcoming meeting will acknowledge that the economic recovery has accelerated. But policymakers will again leave policy settings unchanged and, with inflation set to continue undershooting the Board’s forecasts, tightening will …
14th September 2017
While the Bank of Japan didn’t reduce the pace of its bond purchases any further in August, they are much lower now than they were when Yield Curve Control was launched. Nonetheless, bond yields have remained anchored – indeed, ten-year government bond …
One reason put forward recently for the weakness of price pressures in Japan is that a boom in e-commerce is keeping a lid on prices. However, we find no evidence that this is having a major impact. … Is online retailing keeping price pressures …
13th September 2017
Bank lending rates remain very low and corporate profits have climbed to record highs. Companies are in rude financial health as a result and the number of bankruptcies has dropped to levels not seen in a generation. … Monetary Indicators Monitor …
12th September 2017
The rebound in machinery orders in July was overdue, but the figures have become increasingly less reliable as an indicator of capital spending. The bigger picture is that investment should continue to recover even if it slows this quarter. … Machinery …
11th September 2017
The experience of the last couple of weeks suggests that gold might be the better safe haven choice if war were to break out on the Korean peninsula. Nonetheless, on the evidence of past crises, the yen would still be likely to appreciate. … Would the yen …
8th September 2017
