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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’ …
3rd February 2016
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
Economic activity is set to strengthen next year as consumers bring forward spending ahead of the sales tax hike scheduled for April 2017. However, demand will surely slump once the tax has been raised. With underlying inflation set to moderate in coming …
While net trade probably provided another boost to GDP growth this quarter, a slowdown in export volumes lies ahead. … External trade …
17th December 2015
The decision to exempt food from the sales tax hike due in 2017 will not make much difference to theblow it causes to economic momentum. It may however make an early election more likely. … Exemptions for food won’t dampen blow from sales tax …
16th December 2015
While the headline manufacturing PMI was little changed in December, the moderation in the output component suggests that the recovery has lost some momentum. … Flash Manufacturing PMI …
With economic activity recovering and underlying inflation holding up, there is little immediate pressure on the Bank to step up the pace of easing. However, we still believe that price pressures will moderate before long, so the odds are still tilted …
15th December 2015
The upside surprise in today’s Tankan survey will support the Bank of Japan’s upbeat view on the economy and suggests that policymakers will leave the pace of asset purchases unchanged at least until January. … Tankan …
14th December 2015
One of the government’s latest measures to promote growth is a proposal to increase the number of nursing home beds so that fewer workers quit their jobs to take care of family members. The plan could boost the workforce by about 0.2% per annum in coming …
11th December 2015
Despite suggestions that wages are now increasing at a record rate, wages have in fact barely increased at all this year. Looking ahead, we suspect that the upcoming spring wage negotiations will deliver base pay hikes that are no better than those …
10th December 2015
The jump in machinery orders in October suggests that non-residential investment will continue to increase this quarter. … Machinery Orders …
9th December 2015
Today’s Economy Watchers Survey dropped back even allowing for seasonal distortions, and once again points to stagnant industrial activity. … Economy Watchers Survey …
8th December 2015
Revised data show that GDP rebounded in Q3 rather than shrinking as initially reported. With the recovery continuing this quarter, the Bank of Japan will probably leave policy settings in January. … GDP (Q3 Revised) & Current Account …
There is a good chance that tomorrow’s revised GDP data will show that output was broadly flat rather than falling in Q3. Whatever the outturn, the early figures point to a return to growth this quarter. Meanwhile, underlying inflation remains high by …
7th December 2015
Firms have responded to the sharp fall in corporate tax rates since Mr Abe returned to power by stepping up investment abroad rather than at home. With bleak demand prospects as a result of poor demographics, we doubt that the additional tax cuts planned …
4th December 2015
With households the most upbeat since late 2013, the prospects for consumer spending look fairly bright. … Consumer Confidence (Nov.) …
The pick-up in wage growth in October reflects a surge in bonus payments rather than an acceleration in base pay. The big picture remains that labour cash earnings are not rising fast enough to create noticeable cost pressures. … Labour Cash Earnings …
The strong rebound in capital spending excluding software last quarter suggests that GDP may have been flat last quarter instead of shrinking slightly as initially estimated. … Capital Expenditure …
1st December 2015
The second straight rise in industrial production indicates that the economy returned to growth this quarter following two straight contractions in output. … Industrial Production & Retail Sales …
30th November 2015
Prime Minister Abe has expressed his desire to lift the minimum wage by 3% per year to boost earnings and consumer spending. However, we estimate that aggregate labour income would rise by less than 0.1% per annum as a result, which would create no more …
27th November 2015
The Bank of Japan’s new favourite price gauge last month recorded the first drop since February. With sizeable amounts of slack dampening price pressures, this slowdown should continue in coming months. … Unemployment, Consumer Prices, Household …
The fact that Japan’s main trade union federation says that it will not demand stronger pay hikes in the upcoming wage negotiations than it did last time around provides another reason to think that the Bank of Japan will struggle to lift inflation. We …
26th November 2015
Following the uptick in yesterday’s flash manufacturing PMI, the renewed rise in small business confidence in November adds to the evidence that activity will rebound this quarter. … Small Business Confidence …
25th November 2015
The manufacturing PMI climbed to a fresh high in November and suggests that Japan’s economy returned to growth this quarter. … Flash Manufacturing PMI …
24th November 2015
We believe that the recent strength in the Bank of Japan’s new core inflation measure reflects the lagged pass-through to prices of the weaker yen rather than a pick-up in domestic price pressures. But import price inflation has slowed sharply lately, so …
23rd November 2015
