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Amid falling profitability and sluggish loan demand at home, banks continue to expand overseas lending. … Monetary Indicators Monitor …
16th November 2016
The potential benefits for Japan from the proposed RCEP trade deal in Asia are similar in scale to those that might have been achieved under the TPP. But they are not substitutes for each other: gains under RCEP would come from reductions in tariffs, …
15th November 2016
The 0.5% q/q rise in GDP last quarter implies that the output gap was the smallest since 2014’s sales tax hike. Combined with the recent weakening of the yen, today’s figures therefore reduce the pressure on the Bank of Japan to introduce more easing. … …
14th November 2016
Falling rents have been a persistent drag on inflation in Japan. While condominium prices have surged since the launch of QQE, there is virtually no link between house prices and rents. Instead, rents are mainly driven by developments in household …
11th November 2016
Despite having a sizeable output gap, Japan’s economy has expanded at a pace no stronger than potential this year so slack in the economy has not been reduced. One reason is that consumer spending has been flat since 2014’s sales tax hike. Even though the …
10th November 2016
Despite a renewed fall in September, machinery orders suggest that non-residential investment rebounded last quarter. However, we think this will prove short-lived. … Machinery Orders …
The yen may strengthen a little further as increased uncertainty adds to safe haven demand, and Japanese exporters may face a less welcoming environment for trade. But, for Japan, the key immediate economic implication of Donald Trump’s election win is …
9th November 2016
Allowing for seasonal factors, the Economy Watchers Survey climbed to a ten-month high in October. However, the index remains consistent with sluggish activity in the manufacturing sector. … Economy Watchers Survey …
Wage growth remained weak in September as regular earnings are barely rising. The upshot is that the tight labour market has yet to generate noticeable cost pressures. … Labour Cash Earnings …
7th November 2016
Consumer spending has been broadly flat since 2014’s sales tax hike as households have used the windfall from falling energy and import prices to replenish savings. However, we believe that this is about to change. We expect consumer spending to expand by …
4th November 2016
While consumer confidence weakened slightly last month, the survey still points to a rebound in consumer spending. Meanwhile, inflation expectations show further signs of stabilising. … Consumer Confidence …
2nd November 2016
The Bank of Japan today pushed back the timing for hitting its inflation target and sounded alarmed about the recent moderation in price pressures, but nonetheless refrained from providing more stimulus. While we still think that further cuts in the …
1st November 2016
While today’s retail sales data suggest that private consumption may at best be flat in Q3, the industrial production figures point to continued recovery. We therefore stick to our forecast of a 0.1% q/q rise in GDP in Q3. Nonetheless, today’s data will …
31st October 2016
The Bank of Japan recently abandoned its target for expansion of the monetary base but said that it would continue to buy assets at around the same rate as before. This pace of asset purchases will increasingly become inconsistent with the Bank’s new …
28th October 2016
At its upcoming meeting, the Bank of Japan is set to slash its inflation forecasts for the coming fiscal year and may push also back the timeframe for hitting the 2% inflation target yet again. While the failure to hit the target can be blamed in part on …
The labour market is getting increasingly tight. However, consumer spending remains sluggish and the slowdown in underlying inflation shows that price pressures continue to moderate. … Household Spending, Unemployment & Consumer Prices …
Despite a rise in October, small business confidence still points to stagnant industrial production at best, and the outlook is not any better. … Small Business Confidence …
26th October 2016
The contraction in export values eased last month as the drag from falling prices is fading, and export volumes recorded the strongest rise since January last year. However, the renewed recent weakening of the yen suggests that the trade surplus will …
24th October 2016
The strong recent increase in the current account surplus is bad news for an economy struggling with persistently weak demand, as it implies that households and firms have saved rather than spent the windfall from cheaper energy. While we expect firms to …
21st October 2016
Investment by Japanese firms has been disappointingly weak recently. Capacity utilisation is high and firms are in a strong financial position to step up spending, but we nonetheless expect the recent deterioration in corporate sentiment to weigh on …
19th October 2016
Japan’s economy has become less reliant on imported energy in recent years as electricity consumption has fallen sharply. With consumers having stepped up savings over the past two years, the country is in a good position to deal with rising oil prices. … …
18th October 2016
Bank lending picked up in September and a broader measure of private sector credit expanded at the fastest pace since the launch of QQE in Q2. Meanwhile, low returns at home have encouraged Japanese investors to buy record amounts of foreign bonds. … …
17th October 2016
Japan’s effective labour force has continued to grow despite a continued fall in the working-age population as more women have entered the workforce and baby-boomers have continued to work into older age. But these tailwinds appear to be fading. The …
14th October 2016
Despite a drop in August, machinery orders point to a rebound in investment spending in Q3. However, falling capital goods shipments and the deterioration in business confidence suggest that capital expenditure will continue to weaken. … Machinery Orders …
12th October 2016
Allowing for seasonal factors, the Economy Watchers Survey continued to improve in September. However, “current conditions” still point to falling industrial output. … Economy Watchers Survey …
11th October 2016
Recent data suggest that the economic recovery may be a touch stronger than we had been expecting. However, there are no signs that the tight labour market is fuelling price pressures. While the Bank of Japan can blame the stronger yen for a sharp fall in …
10th October 2016
While the collapse in energy prices over the past two years explains some of the recent decline in services inflation, we suspect that it mostly reflects the sluggish state of consumer spending. However, the continued tightening of the labour market …
7th October 2016
Wage growth slowed in August as the bonus payments slumped after the end of the summer bonus season. While growth in hourly wages remains strong, we expect it to fall again in coming months. … Labour Cash Earnings …
We wouldn’t be overly concerned about a US tariff on Japanese imports should Donald Trump become president, as Japanese manufacturers mostly serve their US customers from their US subsidiaries. By contrast, shelving the TPP would do lasting damage to …
5th October 2016
The improvement in consumer confidence in September suggests that the recent surge in the household saving rate is unlikely to continue. Another positive sign is that inflation expectations seem to be bottoming. … Consumer Confidence …
4th October 2016
According to today’s Tankan survey, conditions in the manufacturing sector remained the weakest they have been seen the launch of QQE, while conditions in non-manufacturing continued to worsen. The survey therefore underlines that the Bank of Japan has …
3rd October 2016
Japanese manufacturers continue to increase production in their overseas subsidiaries. However, only a fraction of the goods produced overseas are re-imported to Japan. With the overall importance of manufactured goods imports on the rise, inflation has …
30th September 2016
While the consumer spending data send conflicting messages for Q3 GDP growth, the solid rise in industrial production in August strongly suggests that Japan’s economy continued to recover in the third quarter. However, the continued decline in underlying …
Even though retail sales values dropped in August, the data suggest that consumer spending rebounded in the third quarter. … Retail Sales …
29th September 2016
Even though small business confidence remains consistent with falling industrial production despite a rebound in September, firms’ forecasts for October suggest that conditions are on the mend. … Small Business Confidence …
28th September 2016
Data from the Bank of Japan show that bank lending to real estate companies reached a record high last quarter and, on some measures, property prices have been rising rapidly too. However, broader measures of debt suggest that concerns a property bubble …
23rd September 2016
The fourth straight rise in the manufacturing PMI suggests that the sector continued to take the strong appreciation of the exchange rate in its stride. However, the weakness in price pressures should be disconcerting for policymakers at the Bank of …
The key tool for monetary loosening in the Bank of Japan’s new framework will be the short-termpolicy rate, which now stands at -0.1%, rather than the new target for 10-year JGB yields. … How will the BoJ conduct policy in …
22nd September 2016
The Bank of Japan’s decision to replace its target for the monetary base with a target for 10-year government bond yields has prolonged the lifespan of QQE. However, it hasn’t improved the near term prospects for hitting 2% inflation, and we continue to …
21st September 2016
The contraction in both export and import values eased last month despite the ongoing price drag from the stronger yen. Export volumes are holding up well as the bulk is invoiced in currencies other than the yen. … External trade …
Negative interest rates are undermining the profitability of financial institutions asbanks have slashed lending rates. However, lower borrowing costs have yet to resultin stronger credit demand. … Monetary Indicators Monitor …
19th September 2016
The announcement that a comprehensive assessment of monetary policy would be carried out at the upcoming Bank of Japan meeting has triggered even more speculation than usual about possible changes of direction. We expect the negative policy rate to be cut …
16th September 2016
The stronger yen has brought Japan’s tourism boom to a halt. However, the importance ofoverseas visitors for economic activity remains small. The bigger risks from the appreciation ofthe exchange rate lie elsewhere. … End of tourism boom no …
Despite the further rise in “core” machinery orders in July, it still appears that business investment has stagnated. Indeed, other surveys of activity are hardly reassuring. … Machinery Orders …
12th September 2016
Japan’s budget deficit has narrowed in recent years, mostly because of 2014’s sales tax hike. However, tax revenues have started to fall relative to output as corporate profits are weakening and consumer spending is sluggish. As a result, the government’s …
9th September 2016
Negative interest rates have succeeded in lowering bond yields and bank lending rates in Japan without undermining lenders’ willingness to provide credit. However, credit growth has nonetheless continued to slow, and the measure has arguably contributed …
8th September 2016
Japan’s labour market has been tight for a while but the unemployment rate has continued to fall and now stands at a level last seen in the mid-1990s. The latest data show a long-awaited pick-up in wages too. The wage data can be volatile and it is …
7th September 2016
Wage growth held up better than expected in July, helped by faster growth in bonus payments. But with regular earnings still expanding at a sluggish pace, wage growth is set to moderate over the coming months. … Labour Cash Earnings …
5th September 2016
While the recent strengthening of the yen has rendered outward investment cheaper for Japanese firms, we doubt that it will lift investment outflows much as the growth outlook elsewhere remains rather gloomy. Nonetheless, the long-run trend towards …
2nd September 2016
Households have become more upbeat about the outlook for their personal finances, which suggests that the recent jump in the household saving rate should reverse before long. By contrast, the renewed dip in household inflation expectations adds to the …
