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The manufacturing PMI remained weak in June and still points to sharp falls in industrial output. However, we would put more weight on firms’ production forecasts which point to a solid rebound in activity this quarter. … Flash Manufacturing PMI …
23rd June 2016
Doing away with a specific timeframe for reaching 2% inflation would sow doubts about policymakers’ commitment to the 2%-target and would be a major step backwards. Instead, more stimulus is needed to make more credible policymakers’ efforts to achieving …
22nd June 2016
Bank lending rates have fallen sharply since policymakers introduced negative interest rates in January. One consequence is that bank profits have started to moderate from high levels. … Monetary Indicators Monitor …
21st June 2016
The trade surplus narrowed in May as the stronger yen lowered export revenues and rising energy prices lifted import values. We expect crude oil prices to recover further next year, so the trade balance may return to deficit before long. … External …
20th June 2016
Commercial bank profits have started to moderate following the launch of negative interest rates as banks have cut lending rates. However, we are not convinced that further cuts in lending rates will inevitably reduce banks’ willingness to provide credit, …
17th June 2016
The Bank of Japan still sees downside risks to its inflation forecasts, and we believe that policymakers will respond by stepping up the pace of easing next month. … Bank of Japan to provide more easing next …
16th June 2016
The government’s decision to postpone the sales tax hike to 2019 has improved the economic outlook. However, we still believe that the Bank will respond to the recent moderation in underlying inflation by stepping up the pace of monetary easing, probably …
13th June 2016
The upcoming Upper House elections should solidify the government’s position even if the LDP/New Komeito coalition fails to achieve the hoped for two-thirds majority. However, hopes that a strong electoral showing will revive the stalled reform agenda …
10th June 2016
The sharp fall in machinery orders in April bodes ill for capital spending in the second quarter, though we wouldn’t read too much into the data for a single month. … Machinery Orders …
9th June 2016
The decline in current conditions in May’s Economy Watchers Survey reflects seasonal patterns rather than a genuine deterioration. What’s more, the outlook for coming months has started to brighten again. … Economy Watchers Survey …
8th June 2016
The second estimate of Q1 GDP revealed that growth was marginally stronger last quarter than initially reported. However, we expect spare capacity to shrink only slowly, so the Bank of Japan will remain under pressure to introduce more stimulus. … GDP …
Japan’s economy is holding up reasonably well despite the recent strengthening of the yen. Meanwhile, the decision to delay the sales tax hike that had been scheduled for next April has brightened the outlook for domestic demand. Nonetheless, with import …
6th June 2016
While the number of people in paid employment in Japan is now the highest since 2008, hours worked have fallen to fresh lows as full-time workers have been replaced by part-time workers. With little prospect of productivity growth accelerating …
3rd June 2016
The slowdown in wage growth in April was broad-based, and we believe that the labour market will have to tighten much further to create major cost pressures. … Labour Cash Earnings …
Households’ expectations for the next few months were little changed in May but the delay of the sales tax hike should lift spirits in coming months. … Consumer Confidence …
2nd June 2016
The delay that has just been confirmed in the sales tax hike will result in economic activity being stronger than would have been the case next year. The decision diminishes pressure on the Bank of Japan to provide more monetary stimulus to offset fiscal …
1st June 2016
Today’s capital spending figures suggest that business investment was stronger last quarter than initially reported. The upshot is that next week’s revised Q1 GDP figures could show a 0.5% q/q increase instead of the preliminary estimate of +0.4% q/q. … …
Small business confidence dropped back in May and suggests that the economic recovery remains anaemic. … Small Business Confidence …
31st May 2016
Today’s figures on industrial production and household spending suggest that Japan's economy continued to expand at a solid pace in the second quarter. … Industrial Production, Household Spending & Unemployment …
The stagnation in retail sales values in April suggests that private consumption will slow this quarter. … Retail Sales (Apr.) …
30th May 2016
A decision on whether to go ahead with the sales tax hike scheduled for next April will be announced in coming weeks. If the tax rise is postponed, GDP growth next year would be considerably stronger than is likely on current projections. Given the …
27th May 2016
According to our estimates, the Bank of Japan’s preferred inflation gauge slowed in April. Lingering slack and falling import prices suggest that price pressures will continue to moderate. … Consumer Prices …
Claims that the launch of negative interest rates has caused a flight to cash are exaggerated. However, there are clear signs that negative rates have lowered borrowing costs for Japan’s private sector. … Monetary Indicators Monitor …
25th May 2016
The fifth straight drop in the manufacturing PMI in May suggests that economic momentum slowed sharply in the second quarter. … Manufacturing PMI points to sharp slowdown in …
24th May 2016
Export values continued to fall sharply in April, and the further strengthening of the exchange rate suggests that the drag from falling export prices should persist for now. … External Trade …
23rd May 2016
Population ageing has weighed on the average employee’s disposable income as social security contributions have risen by nearly 50% over the past fifteen years, and will continue rising in future. Still, with the elderly population growing fast, average …
20th May 2016
On its own, the rebound in machinery orders in March bodes well for capital spending in the second quarter. However, the weakness in capital goods shipments is disconcerting. … Machinery Orders …
19th May 2016
Japan’s economy performed better than expected in Q1, reducing the odds that the government will postpone the sales tax hike currently scheduled for next April. But the Bank of Japan clearly has more work to do to reach its 2% inflation target. … GDP (Q1 …
18th May 2016
We don’t share concerns that the Bank of Japan will soon run into trouble acquiring the ¥80 trillion worth of Japanese Government Bonds it has pledged to buy every year. Admittedly, insurance companies have yet to reduce their bloated JGB holdings. But …
13th May 2016
If we are right in assuming that the Kyushu earthquake dampened sentiment in April, an improvement in coming months seems likely. … Consumer Confidence …
9th May 2016
Wage growth rose sharply in March, but only because of strong bonus payments. Growth in base pay weakened, and the ongoing spring wage negotiations suggest that the tight labour market is not about to create sustained cost pressures. … Labour Cash …
The proposed tax on corporate cash holdings may shift firms’ behaviour somewhat but is not as groundbreaking as it sounds. The government already provides tax incentives to encourage investment spending and pay hikes. A more promising option would be …
6th May 2016
The Bank of Japan’s decision to forego additional stimulus at its April meeting was a major disappointment to markets. The yen climbed to fresh highs against the dollar, while the Nikkei slumped. The rise in the currency will only add to downward pressure …
5th May 2016
The new measure of consumer spending developed by the Bank of Japan does not appear to be an improvement on the Cabinet Office’s “synthetic consumption index”. In any case, both measures show that consumer spending has remained sluggish at the start of …
4th May 2016
We now expect Japan’s economy to expand by only 0.5% this year – and that is on the assumption that the government presses ahead with next year’s sales tax hike. If it does, households will bring some spending forward into 2016 to beat the price rises. If …
29th April 2016
The Bank of Japan’s decision to forgo additional easing today came as a major disappointment to markets and resulted in a sharp appreciation of the yen. Amid sluggish growth and moderating price pressures, we still think that more monetary stimulus will …
28th April 2016
While consumer spending and industrial production rebounded in March, the outlook for the second quarter is mixed. With price pressures moderating, we retain our forecast that the Bank of Japan will announce more easing later today. … Industrial …
The fall in small business confidence in April reflects seasonal patterns. Still, the survey suggests that economic activity remains sluggish. … Small Business Confidence …
27th April 2016
We believe that public spending financed permanently by central bank transfers would be a viable option to boost demand and lift price pressures. However, until the existing policy measures are exhausted, which will take a few more years, we consider the …
26th April 2016
Headwinds to the Bank of Japan’s efforts to lift inflation have intensified in recent weeks. We expect the Bank to ease more at the upcoming meeting, most probably by increasing asset purchases and cutting interest rates. … Bank to announce more easing …
25th April 2016
The recent strengthening of the yen will lower prices of imported goods and provide some support to flagging private consumption. However, lower import prices provide a further headwind to the Bank of Japan’s efforts to lift inflation. What’s more, the …
22nd April 2016
The fourth straight drop in the manufacturing PMI in April suggests that the continued strengthening of the yen and the disruptions caused by the Kyushu earthquakes are taking their toll on activity in the sector. … Flash Manufacturing PMI …
The slump in export values is weighing on firms’ revenues and may undermine their willingness to invest and lift wages. … External trade …
20th April 2016
While the earthquake that hit Kyushu Island during the weekend is a human tragedy, we doubt that it will have a severe impact on Japan’s economy. The scale of damage does not appear huge and production shutdowns by major manufacturers should be reversed …
18th April 2016
If the government presses ahead with the sales tax hike next year, the chances of hitting 2% inflation on a sustainable basis anytime soon are very slim. Even if the tax hike is postponed, our best guess is that it will take at least three years before …
15th April 2016
If the end-game for Japan’s public debt problem is direct financing of the budget deficit by the Bank of Japan, this could be a step towards a solution rather than the disaster that many assume. Inflation would be likely to rise, which is exactly what is …
14th April 2016
While corporate debt has been broadly stable relative to output in recent years, firms have never been in a better position to service their debt as interest rates have collapsed and profits have surged. … Monetary Indicators Monitor …
We do not share the view that monetary policy has become impotent. However, scope to step up monetary stimulus much beyond current levels is small. The Bank of Japan’s efforts to boost growth and lift price pressures are therefore likely to require …
13th April 2016
Three years after the launch of Quantitative and Qualitative Easing, the Bank of Japan’s efforts to stoke price pressures are failing. Business confidence has fallen to a three-year low while the appreciation of the yen has magnified the slump in import …
12th April 2016
The surge in iron and steel orders which pushed up machinery orders in January reversed in February but orders remain consistent with a renewed rise in business investment last quarter. … Machinery Orders …
11th April 2016
