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Drag from net trade will hold back Q2 GDP rebound Trade volumes were little changed in May which suggests that net trade provided a small drag on GDP growth this quarter. The 13.5% annual rise in export values was a touch stronger than the analyst …
19th June 2024
While the economy has only narrowly avoided a recession, activity should rebound over coming quarters as real household incomes recover. Indeed, with inflation set to remain above the Bank’s 2% target this year and wage growth accelerating, we expect the …
18th June 2024
The Bank of Japan disappointed markets today by announcing that it will only present a detailed plan for reducing its bond purchases at its July meeting. We think it will also deliver a final policy rate hike then . Today’s BoJ meeting was a damp squib . …
14th June 2024
BoJ pledges to unveil taper plans next month With the Bank of Japan today disappointing financial markets by delaying any announcement on the reduction of its bond purchases to its July meeting, 10-year JGB yields initially dropped by around 5bp and …
Bank will deliver a final rate hike in July The Bank of Japan announced today that it will present a detailed plan for reducing its bond purchases at the upcoming meeting in July and we think it will also deliver a final policy rate hike then. Around …
While the official job openings figures have fallen since late-2022, the bulk of the evidence suggests that firms are facing increasingly severe job shortages. One explanation for the fall in job vacancies could be a change in firms’ recruitment …
12th June 2024
Rising car prices explain why US import prices from Japan haven’t fallen despite the sharp weakening of the yen. While growth in car prices has slowed as supply shortages have unwound, this hasn’t boosted export volumes so far and we think that the weak …
10th June 2024
Regular earnings growth hits 30-year high At first glance, the jump in regular earnings growth to a 30-year high of 2.3% in April is a clear sign that the strong pay hikes agreed in this year’s spring wage negotiations (Shunto) are filtering through. …
7th June 2024
Bank may reduce its bond purchases next week, though we think it will wait until July. Next rate hike should happen in July as BoJ increasingly worried about weaker yen. However, sharp slowdown in underlying inflation will forestall a series of rate …
6th June 2024
This page has been updated with additional analysis since first publication. Wage growth will climb above 2.5% this year Base pay rose the most since 1994 in April and we think it will accelerate a bit further as the strong pay hikes agreed in the spring …
5th June 2024
Overview – A rebound in real household incomes should ensure that the recent slump in output should turn into above-trend GDP growth of 1% over the next couple of years. Regardless, inflation will continue to slow as the influence of the previous import …
4th June 2024
Fertility rate may have fallen to fresh lows According to some estimates , Japan’s fertility rate fell from 1.26 in 2022 to 1.21 last year. Although higher than in some other Asian economies, for Japan this would still be a fresh record low. (See Chart …
31st May 2024
This page has been updated with additional analysis since first publication. GDP should rebound this quarter On balance, the modest decline in industrial production and the rebound in retail sales in April point to a decent rebound in GDP this quarter. …
This page has been updated with additional analysis since first publication. Slowdown in underlying inflation has further to run May’s rebound in inflation in Tokyo largely reflects a jump in electricity inflation that has further to run, but underlying …
Inflation rapidly losing momentum The economic data released over the last couple of weeks hardly suggest that the Bank of Japan should tighten monetary policy any further. After all, GDP plunged by 0.5% q/q in Q1 and the April inflation data released …
24th May 2024
This page has been updated with additional analysis since first publication. Underlying inflation will fall below 2% over coming months The sharp slowdown in underlying inflation in April had little to do with the slashing of high school fees in Tokyo …
20th May 2024
BoJ starting to scale back bond purchases The 0.5% q/q fall in Q1 GDP was the second fall over the last three quarters. With GDP unchanged in Q4, Japan barely escaped a recession. What’s more, with real consumption falling for four consecutive quarters, …
17th May 2024
This page has been updated with additional analysis since first publication. Activity set to rebound this quarter The renewed drop in GDP in the first quarter mostly reflects production shutdowns at major carmakers and a pronounced rebound this quarter …
16th May 2024
This interactive dashboard allows you to explore all of our forecasts and key data for the Japanese economy. If you have subscriber access to the data underlying this redesigned dashboard, you can download it via the menu options in the top right of each …
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
15th May 2024
Production shutdowns now over If we’re right and the GDP data due next week show a 0.6% q/q drop in output, that would mark the second fall in just three quarters. The recent weakness largely reflects a slump in industrial output at the start of the …
10th May 2024
This page has been updated with additional analysis since first publication. Wage growth to gain further momentum While total wage growth slowed sharply in March, this was mostly driven by a plunge in volatile bonus payments. Regular wage growth held up …
9th May 2024
Government intervenes in FX market yet again As Japanese markets were closed due to Sh ō wa day, the yen surpassed 160 against the dollar in thin trading on Monday, the weakest it has been since the mid-1980s. While the Ministry of Finance refused to …
3rd May 2024
This page has been updated with additional analysis since first publication. GDP set to rebound this quarter Coupled with solid output forecasts for April and May, the strong rebound in industrial production in March suggests that the likely slump in GDP …
30th April 2024
The Ministry of Finance may have intervened earlier today by selling FX reserves to halt the sharp fall of the yen. However, the economic case for foreign exchange intervention is much weaker now than it was in 2022, when the MoF last sold dollars to …
29th April 2024
The Bank of Japan is getting more confident in meeting its inflation target on a sustained basis and signalled that inflation wouldn’t have to overshoot for policy to be tightened further. Nonetheless, policy rate hikes will become difficult to justify …
26th April 2024
Wage increases becoming more widespread The Bank of Japan’s measures of underlying inflation suggest that the case for further policy tightening is diminishing as two out of three indicators fell below the Bank of Japan’s 2% target in March. (See Chart …
Bank of Japan will hike rates further in July The Bank of Japan signalled growing confidence in meeting its inflation target at today’s meeting and we’re sticking to our forecast that it will increase its policy rate further to 0.3% in July. As widely …
The plunge in inflation in Tokyo in April was mostly due to a sharp fall in high school tuition fees and the provision of free school meals. The impact of those policy changes on nationwide inflation will be much smaller and they won’t affect the Bank of …
The latest activity data suggest that GDP contracted at the start of the year, but a rebound is very likely over the coming quarters. Goods inflation should keep slowing rapidly, but strong wage growth will keep inflation above the BoJ’s target for most …
24th April 2024
We now expect services inflation to remain around 2% this year as a fading tailwind from soaring hotel and package tour prices will be offset by stronger labour cost growth. The upshot is that the Bank of Japan will probably lift its policy rate once more …
23rd April 2024
This page has been updated with additional analysis since first publication. A strong rebound in Q2 GDP is likely The composite PMI continued to rise strongly to a eight-month high in April, suggesting that a strong rebound is on the cards for Q2 GDP …
Bank will probably revise up its inflation forecasts at upcoming meeting Ueda sounds keen on another rate hike However, window for tightening is closing as underlying inflation set to fall below 2% Governor Ueda sounds keen in tightening policy further …
22nd April 2024
We’ll be discussing what a stronger-for-longer dollar means for the Japanese policy outlook and the yen in a 20-minute online briefing at 9am BST/4pm SGT on 26th April . (Register here .) Yen falling to fresh low but no intervention yet The yen …
19th April 2024
Inflation should receive a boost in mid-year Inflation moderated slightly in March, in line with the consensus and our forecasts. If inflation continues to move in line with the BoJ’s projections, further rate hikes may be on the cards this year. Headline …
This page has been updated with additional analysis since first publication. Net exports will be a drag on Q1 GDP While the trade deficit increased in March, net goods trade should contribute positively to Q1 GDP figures. But net services should have …
17th April 2024
Yen falling to fresh 34-year low Following a hotter-than-expected US inflation print, the yen has now weakened to 153 against the dollar for the first time since 1990. Bank of Japan Governor Ueda explicitly ruled out responding to the weakness of the …
12th April 2024
The slump in the yen has resulted in Germany overtaking Japan as the world’s 3 rd largest economy at market exchange rates. We expect Japan to overtake Germany yet again in the early 2030s as the yen strengthens and Japan benefits from higher productivity …
9th April 2024
This page has been updated with additional analysis since first publication. Virtuous cycle will continue to gain momentum in Q2 Regular wage growth spiked in February, which suggests that the virtuous cycle between prices and wages is in full swing. And …
8th April 2024
Tankan points to persistent strength in inflation Bank of Japan Governor Ueda today provided the strongest hint yet that the Bank is keen to hike interest rates further in the second half of the year. He noted that the probability of attaining a …
5th April 2024
Once the Bank of Japan starts to reduce its huge holdings of Japanese Government Bonds (JGBs) in earnest, we think that commercial banks will once again become major holders of JGBs. Insurance firms may lift their holdings a touch further as well, but we …
2nd April 2024
This page has been updated with additional analysis since first publication. Tankan points to sluggish recovery The slight fall in business conditions across all firm sizes in the latest Tankan suggests that a rapid recovery from the likely slump in Q1 …
1st April 2024
Q1 GDP to drop sharply as industrial output slumps With industrial output falling yet again in February following the plunge in January, GDP will fall sharply in the first quarter. The 0.1% m/m decline in industrial production in February was weaker than …
29th March 2024
BoJ won’t provide much help in supporting yen With the yen hitting a 34-year low of just under 152 against the dollar on Wednesday, the Ministry of Finance’s Masato Kanda noted that the government will respond resolutely to “excessive” yen weakness and …
28th March 2024
We continue to think that policymakers in China and Japan will do enough to keep their currencies from weakening much further, but the risk of a break lower in one, or both, is increasing. Push-back from the authorities in China and Japan has stabilised …
27th March 2024
While the Bank of Japan’s JGB holdings have started to shrink and will continue to do so now that Yield Curve Control is over, we think that the normalisation of the Bank’s balance sheet could take up to a decade. While shrinking central bank demand for …
26th March 2024
Run-off in bond holdings will accelerate The Bank of Japan didn’t disappoint at this week’s meeting as the Bank ended negative interest rates, Yield Curve Control and its ETF purchases. Even so, 10-year JGB yields declined and the yen weakened to as low …
22nd March 2024
Inflation will return to BoJ’s target by year-end The renewed jump in headline inflation in February leaves the door open for another rate hike by the Bank of Japan, but with underlying inflation moderating the case for tighter policy is weakening. The …
21st March 2024
In the wake of this week’s FOMC and BoJ policy announcements we are revising our forecast for the Japanese yen. While we still expect the Japanese yen to rebound over the course of 2024, we now project it to reach 140 by the end of the year and 135 by …
