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Headline wage growth slowed in December as firms cut winter bonuses. While it should pick up again in coming months, a strong rebound is not on the cards. … Labour Cash Earnings …
6th February 2017
There is growing evidence that the tightness of Japan’s labour market is finally feeding into faster growth in incomes. This should support stronger private consumption at least until inflation becomes a headwind next year. … Tight labour market finally …
3rd February 2017
The slight rise in consumer confidence in January leaves it at its highest level in over three years. Meanwhile, household inflation expectations were broadly unchanged last month. … Consumer Confidence …
2nd February 2017
The BoJ left policy settings unchanged today and lifted its GDP forecasts for the next two years. Even though we expect inflation to approach the 2% inflation target next year, we doubt that the Bank will be able to tighten policy anytime soon as the …
31st January 2017
While today’s release on household spending suggests private consumption may have weakened in the fourth quarter, better-than-expected industrial production in December is consistent with a continued recovery in the wider economy. … Industrial Production, …
December’s retail sales figures were weaker than expected and suggest our forecast of a 0.2% q/q rise in consumer spending last quarter appears too optimistic. At this stage a fall of around 0.5% q/q seems possible, but we’ll know more when household …
30th January 2017
President Trump has threatened to impose a tariff on Mexican and Chinese imports, which wouldn’t create insurmountable challenges for Japanese firms producing cars and other products in these countries. However, his apparent determination to narrow the US …
27th January 2017
Both headline and underlying inflation weakened in December as the lingering effects of last year’s strengthening of the yen lowered goods prices. But with the yen having weakened markedly in recent months, inflation should start to rebound soon. … …
The Bank of Japan appears to have reduced the number of short-term JGB auctions it conducts this month, paving the way for a reduction in the volume of purchases this year. However, an increase in the target for 10-year JGB yields is not on the cards. … …
26th January 2017
The Bank of Japan will probably extend the deadlines for some of its lending programmes by one year at the upcoming meeting. But having upgraded its assessment of the economy at the December meeting, there is little chance of new stimulus being announced. …
The first rise in export values in more than a year reflects a combination of soaring export volumes and the recent depreciation of the yen. However, a weaker exchange rate tends to lift import prices by more than it boosts the yen-value of shipments, so …
25th January 2017
January’s manufacturing PMI suggests that Japan’s economic recovery picked up pace at the start of the year. What’s more, the weaker yen is fuelling price pressures. … Flash Manufacturing PMI …
24th January 2017
With the recent improvement in the inflation outlook, the Bank of Japan is unlikely to ease further in 2017 but any speculation about policy tightening will prove premature. In fact, the Bank’s pledge to keep long-term government bond yields low has …
23rd January 2017
Official data show a sharp decline in the budget deficit but it remains sizeable and we don’t expect the narrowing to continue. In any case, the key determinant of the sustainability of the public finances is not the size of the deficit but whether the …
20th January 2017
Corporate debt affordability remains extraordinarily high, as corporate profit margins have rebounded and borrowing costs have continued to decline. Firms have responded with higher corporate bond issuance rather than with increased borrowing from banks. …
18th January 2017
While machinery orders fell in November, their current level remains consistent with a rebound in investment spending last quarter. The rebound in capital goods shipments also suggests that business investment is on the mend. … Machinery Orders …
16th January 2017
Recent revisions to the GDP data suggest that the output gap has all but closed. However, the main factor holding back inflation over the last two decades were entrenched deflation expectations rather than a lack of demand. Unfortunately, the Bank of …
13th January 2017
Inflation fell to fresh lows at the end of 2016, with the Bank of Japan’s favourite measure of underlying inflation turning negative in the Tokyo region on our estimates. What’s more, there are few signs that the tight labour market is boosting wage …
12th January 2017
Today’s Economy Watchers Survey showed that the outlook has deteriorated somewhat relative to current conditions. Nonetheless, the survey remains consistent with a recovery in industrial production. … Economy Watchers Survey …
The rebound in consumer confidence to a three-year high in December supports our view that consumer spending will be one of the driving forces of the economic recovery this year. … Consumer Confidence …
10th January 2017
The budget for the coming fiscal year foresees broadly neutral rather than expansionary fiscal policy. With supplementary spending for the current fiscal year barely larger than last year’s, the strong increase in public spending promised last July will …
9th January 2017
The recent slump in the yen has lifted the yen-value of foreign assets and associated income streams. We estimate that the government’s net debt has fallen by 11% of GDP since the US election as the value of its overseas assets has increased. Meanwhile, …
6th January 2017
Headline wage growth remained close to zero in November and part-time wages would have to rise at a much stronger pace to generate faster gains in consumer prices. … Labour Cash Earnings …
We expect Japan’s economy to grow by 1% next year. Given how low potential growth is, this should be enough to drive a further decline in spare capacity and to add to price pressures. The Bank of Japan is therefore unlikely to introduce further easing. …
23rd December 2016
The Bank of Japan left policy settings unchanged today. As expected, it upgraded its assessment of the health of the economy, which points to policy remaining on hold for the foreseeable future. … Bank of Japan on hold for foreseeable …
20th December 2016
The Bank of Japan’s yield target has kept JGB prices anchored over recent weeks against the backdrop of a sell-off in bond markets overseas. The volume of the Bank’s bond purchases has also remained stable. With the yield target likely to be unchanged …
19th December 2016
The sharp weakening of the yen has contributed to a rebound in the annual growth rate of trade values. However, since imports are invoiced in foreign currency more often than exports, the trade surplus should start to narrow in coming months. … External …
The recent sharp fall in import volumes is largely a legacy of the slump in the exchange rate in the early stages of Abenomics. We expect imports to rebound next year, so the boost from net trade to GDP growth should fade. This would hardly be a disaster …
16th December 2016
At its last meeting, the Bank of Japan sounded the alarm over a decline in price pressures. However, the economy has continued to grow faster than potential and the recent sharp weakening of the yen should have soothed nerves. We expect the Bank to leave …
15th December 2016
The manufacturing PMI was the highest in December in almost a year and supports our view that the economy continued to expand at a robust pace this quarter. … Flash Manufacturing PMI …
While firms’ capital spending plans remain much weaker than in previous years, the rebound in the headline index of today’s Tankan should encourage the Bank of Japan to refrain from further easing. … Tankan …
14th December 2016
The Bank of Japan’s favourite gauge of underlying price pressures remains just a touch above zero. However, spare capacity is narrowing and growth in part-time pay has started to pick up. What’s more, the exchange rate has weakened sharply since the US …
12th December 2016
Combined with the recovery in capital goods shipments, October’s rebound in “core” machinery orders suggests that business investment will start to recover this quarter. … Machinery Orders …
We expect the upcoming spring wage negotiations to result in base pay hikes of only 0.5% or so, which would be broadly in line with the increase agreed upon this year. Even with output per employee stagnant for several years, this would be insufficient to …
9th December 2016
Today’s Economy Watchers Survey showed that current conditions are the most buoyant since 2014’s sales tax hike. However, the survey still points to a slowdown in job growth in coming months. … Economy Watchers Survey …
8th December 2016
GDP growth wasn’t quite as strong last quarter as initially reported, but this was more than offset by upward revisions to previous quarters. Spare capacity is narrowing and we still expect the Bank of Japan to remain on hold for the foreseeable future. … …
Wage growth picked up marginally in October but remained very weak. While wages are rising more strongly allowing for falling working hours, the tight labour market has yet to create noticeable cost pressures. … Labour Cash Earnings …
6th December 2016
While consumer sentiment worsened in November, household inflation expectations seem to have turned the corner. … Consumer Confidence …
5th December 2016
The recent weakening of the yen will lift headline inflation by around 0.5 percentage points in coming months and further gains are likely if, as we have been forecasting for a while, the yen weakens towards 120 against the dollar by the end of next year. …
2nd December 2016
Today’s capital spending figures suggest that non-residential investment was a touch stronger last quarter than initially estimated. However, the second preliminary estimate of Q3 GDP should confirm that the economy expanded by 0.5% q/q. … Capital …
1st December 2016
Small business confidence was flat in November and suggests that the economy is treading water. Meanwhile, there are signs that the recent weakening of the exchange rate is boosting price pressures. … Small Business Confidence …
30th November 2016
While industrial production was little changed in October, firms’ forecasts point to a strong rise in the current quarter. … Industrial Production …
A proposed reform to better link pension payments with movements in wages should improve the viability of Japan’s public finances. For current workers though, the reform may force them to delay retirement even longer. Japan has an older population than …
29th November 2016
While the jobless rate held steady in October, the job-to-applicant ratio is approaching the record-highs from the early-1990s. However, the tighter labour market has yet to translate into a visible rebound in consumer spending. … Unemployment, Retail …
A further rise in global government bond yields may put the Bank of Japan’s yield target under pressure but we nonetheless believe the Bank will be able to reduce its asset purchases next year while keeping the yield target unchanged. … BoJ set to taper …
25th November 2016
While underlying inflation edged up in October, past falls in import prices may still push underlying inflation towards zero by year-end. But with the yen now weakening again and spare capacity shrinking, price pressures should strengthen again soon. … …
Following five straight monthly gains, the small decline in the manufacturing PMI in November is hardly a disaster. In fact, the survey suggests that price pressures have started to strengthen again. … Flash Manufacturing PMI …
24th November 2016
Even though the drag from the stronger yen has started to fade, the annual growth rate of both export and import values fell deeper into the red last month. Nonetheless, net exports may still provide another small boost to GDP growth in the current …
21st November 2016
With the yen weakening dramatically since the US election and incoming data showing GDP growth strong last quarter, there is now little pressure on the Bank of Japan to ease further. Less positively from the Bank’s perspective, underlying inflation looks …
18th November 2016
With its first fixed-rate operation today in support of the new target for 10-year Japanese Government Bond yields, the Bank of Japan has moved closer to full-fledged helicopter money. There are already some indications that the government is responding …
17th November 2016
