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While wage growth rebounded in January, it remains low by past standards. With the upcoming spring wage negotiations set to result in smaller pay hikes than last year, the labour market will not create strong price pressures anytime soon. … Labour Cash …
4th March 2016
Today’s capital spending figures suggest that investment spending was a touch weaker last quarter than initially estimated, but revised GDP data due on Monday should confirm that output shrank by 0.4% q/q. … Capital Expenditure …
1st March 2016
While the labour market continues to tighten, consumer spending remained sluggish at the start of the new year. … Unemployment & Household Spending …
The surge in nominal GDP last year reflects temporary factors and should not be taken as a sign of success for Abenomics. In fact, nominal GDP growth is set to slow this year. … Nominal GDP growth set to slow …
29th February 2016
The rebound in industrial production in January is unlikely to assuage concerns about the health of Japan’s economy as firms are predicting a renewed slump in February. … Industrial Production & Retail Sales …
Weak productivity developments pose some upside risks to inflation, particularly in services. However, this will be more than offset by the impact of lower consumer import prices on goods inflation. The upshot is that the Bank of Japan’s new favourite …
26th February 2016
We estimate that the Bank of Japan’s new favourite inflation measure moderated in January. In light of falling import prices and sluggish economic activity, we think that the slowdown in underlying inflation has further to run. … Consumer Prices …
There has been some recent talk of froth returning to Japan’s housing market but prices, other than for condominiums, are not rising at a rapid rate. With debt levels also stable, there are no signs of a bubble. Indeed, policymakers would probably welcome …
25th February 2016
While small business confidence picked up in February, firms project a deterioration in March allowing for seasonal factors. … Small Business Confidence …
24th February 2016
JGB yields would have to fall by another 40bp to wipe out the Bank of Japan’s profits, and they would have to remain that negative for many years to erode its capital base. However, that would be a price worth paying to overcome deflation and return the …
23rd February 2016
The manufacturing PMI fell to an eight-month low in February and suggests that business sentiment has suffered from the sharp falls in the equity market and the stronger yen. … Flash Manufacturing PMI …
22nd February 2016
Following the renewed contraction in output last quarter, we are lowering our forecast for GDP growth this year from 1.5% to 1.0%. If domestic demand doesn’t pick up soon, the government may decide to postpone the sales tax hike that is currently …
19th February 2016
We don’t expect the recent slump in the stock market to create a major drag on consumer spending. But with wage growth unlikely to accelerate, we think that private consumption will be weaker this year than most anticipate. … Outlook for consumer …
The trade surplus climbed to a fresh high in January, and should continue to improve for now as cheaper energy prices have yet to be fully reflected in the import bill. … External trade …
18th February 2016
Today’s data on machinery orders suggest that the preliminary estimate may have overstated the strength of non-residential investment last quarter . … Machinery Orders …
17th February 2016
While domestic lending continues to expand at a steady pace, the bigger story is the continued expansion in cross-border lending. Even though banks have curtailed their exposure to China, overall foreign lending nearly matches domestic credit. … …
16th February 2016
The recent appreciation of the yen, even if sustained for longer, should not have a major impact on external demand nor consumer prices. However, it will lower corporate profits and could reduce firms’ willingness to lift wages, thus further delaying the …
15th February 2016
Japan’s economy shrank last quarter for the second time over the past year. While activity is set to pick up in coming months ahead of next year’s sales tax hike, the bigger picture is that spare capacity is not shrinking fast enough to reach the Bank of …
The Bank of Japan unveiled a negative interest rate policy two weeks ago because it concluded that more forceful action was needed to lift inflation. Now, with equities slumping and the yen soaring to a 15-month high, policymakers are under even greater …
12th February 2016
The Bank of Japan’s decision to cut the interest rate on some excess reserves below zero initially delivered a slide in the exchange rate and a rise in equities. But these shifts soon reversed and the yen is now at its strongest level relative to the …
10th February 2016
The continued stagnation in wage growth in December is disappointing and suggests that the outlook for labour income is even bleaker than we thought. This supports our view that the Bank of Japan will need to reduce interest rates further below zero. … …
8th February 2016
The introduction of a negative interest rate on a small portion of excess reserves has already reduced corporate bond yields, and we think that banks may also lower lending rates somewhat. However, with appetite for credit fairly subdued, rates will have …
5th February 2016
Despite a small drop last month, consumer confidence remains strong. However, household inflation expectations are now approaching levels last seen before the Bank of Japan launched Quantitative and Qualitative Easing in spring 2013. … Consumer Confidence …
3rd February 2016
With longer-term interest rates falling alongside short-term rates, the introduction of negative rates will not hamper the Bank of Japan’s ability to purchase large amounts of government bonds. Nor will they have a crippling effect on commercial banks’ …
Amid concerns about the sustainability of its large-scale asset purchases, the Bank of Japan now looks likely to rely increasingly on lowering the interest rate on central bank reserves to deliver policy easing. We believe that this rate may lowered to …
1st February 2016
The fact that Japanese firms have fared much worse in China than their competitors since the yen started weakening in 2012 suggests that their competitiveness has waned. However, firms have at least benefitted from higher revenues in yen-terms. And if the …
29th January 2016
The introduction of negative interest rates at today’s BoJ meeting will likely be followed by further cuts in coming months. The upshot is that the yen should continue to weaken against the dollar. … Further cuts in interest rates likely to be …
Today’s activity data were disappointing and suggest that Japan’s economy barely grew last quarter. While activity should recover in Q1, the moderation in underlying inflation suggests that the Bank of Japan still has more work to do to reach its 2% …
Retail sales weakened for the second straight month in December and private consumption probably dropped to levels last seen after the sales tax hike in Q4. … Retail Sales …
28th January 2016
The drop in small business confidence in January partly reflects seasonal patterns, and the bigger picture is that firms remain fairly upbeat. … Small Business Confidence …
27th January 2016
With economic activity recovering and underlying inflation holding up, the recent strengthening of the yen and the plunge in the Nikkei are unlikely to force the Bank’s hand at next week’s meeting. However, underlying inflation looks set to moderate and …
26th January 2016
The trade balance recorded another surplus in December as lower oil prices reduced import values, and a further improvement in coming months lies ahead. … External trade …
25th January 2016
Corporate profits have not risen much in response to lower prices of energy and other raw materials, as the gains have been highly concentrated in a few sectors. Looking ahead, the recent appreciation of the yen will dent profit margins somewhat, …
22nd January 2016
The manufacturing PMI remained strong in January and suggests that economy activity continued to recover at a solid pace. … Flash Manufacturing PMI …
Today’s Senior Loan Officer Survey showed that loan demand remained subdued last quarter. While the survey has not painted an accurate picture of credit conditions lately, it suggests that the recent moderation in bank lending will continue. … Slowdown in …
21st January 2016
Japan’s GDP figures are subject to larger revisions over time than those of any other G7 economy. The pronounced swings in Japan’s economy in recent years provide a partial explanation. But continued large adjustments to historical data going all the way …
15th January 2016
Despite a sharp fall in machinery orders in November, we still think that the recovery in business investment remains intact. … Machinery Orders …
14th January 2016
The Bank of Japan has eased its collateral rules to free up additional JGBs. However, a shift in the composition of government debt away from Treasury bills and loans towards JGBs is providing a bigger boost to the pool of available JGBs. … Monetary …
13th January 2016
The pick-up in current conditions in today’s Economy Watchers Survey mostly reflects seasonal patterns. In fact, the survey still points to broadly stagnant industrial output. … Economy Watchers Survey …
12th January 2016
While the modest improvement in consumer confidence in December is welcome, policymakers at the Bank of Japan should be concerned about the continued decline in household inflation expectations. … Consumer Confidence …
The fall in the current account surplus in November should be followed by a rebound around the turn of the year as the latest fall in crude oil prices has yet to fully feed through to petroleum imports. … Current Account …
There are good reasons for the Bank of Japan to feel confident about the prospects of hitting its 2% inflation target. Economic activity is on the mend, the labour market is tight, and underlying inflation remains solid. But it is far too soon to sound …
11th January 2016
Part-time earnings have picked up speed in recent months. But they are still rising at a slower rate than a few years ago and would have to pick up much further in order for the Bank of Japan to meet its inflation target. … Pick up in part-time earnings …
8th January 2016
The Bank of Japan will probably lower its inflation forecasts and push back the timing for reaching its 2% target yet again later this month. With cheaper energy keeping a lid on inflation, the recent slide in expectations of future price gains may …
The marked slowdown in the annual growth rate of labour cash earnings in November was mostly due to a plunge in volatile bonus payments, whereas regular pay expanded rather solidly. However, much stronger gains in earnings will be needed to reach the Bank …
We took a break at the end of 2015 but Japan’s government statisticians didn’t. This Update recaps the key releases we missed. The main message is that November activity and spending data were weak across the board, but the economy should still have …
4th January 2016
At first sight, Japan’s budget plans suggest that the government is planning to loosen the purse strings next year. In fact, fiscal policy will probably be tightened again. … Is Japan’s government really spending more than …
23rd December 2015
The fall in small business confidence in December partly reflects seasonal patterns. Nonetheless, it confirms earlier signs from the manufacturing PMI that economic momentum has slowed somewhat towards the end of 2015. … Small Business Confidence …
22nd December 2015
An improvement in nominal GDP growth recently has prevented the ratio of private debt to output from rising, despite a rapid expansion in bank lending. This trend should continue for a while. … Monetary Indicators Monitor …
21st December 2015
The policy tweaks the Bank of Japan announced today are mainly aimed at ensuring that the existing volume of asset purchases can be maintained rather than constituting a genuine expansion in stimulus. But we think policymakers will come under pressure to …
18th December 2015
