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Output may have contracted again last quarter, but Japan’s growth has actually been fairly healthy by past standards since Mr Abe returned to power, despite stronger demographic headwinds. But the decision to press ahead with the sales tax hike has …
20th November 2015
While the Bank of Japan does not seem to be overly concerned about the recent weakness in activity, we think price pressures will moderate in coming months as spare capacity has risen. Accordingly, we still think that more monetary easing will eventually …
19th November 2015
While export volumes probably edged up in October, external demand is set to remain sluggish for now. … External trade (Oct.) …
Bank lending continues to expand at a robust pace, but the increase in domestic credit is dwarfed by the surge in foreign claims, with their yen-value inflated by the weaker exchange rate. … Monetary Indicators Monitor …
18th November 2015
The renewed widening in spare capacity last quarter suggests that underlying inflation will start to moderate before long. We therefore still think that more easing will eventually be required, with the January meeting perhaps the most likely venue for an …
17th November 2015
The second straight contraction in GDP underlines the downside risks to the Bank of Japan’s growth forecasts. With rising slack dampening price pressures, we remain convinced that more monetary stimulus will eventually be needed. … GDP (Q3 …
16th November 2015
The government has set itself a stringent target for eliminating the budget deficit and currently intends to raise the sales tax again in 2017 to help it achieve that end. The economic weakness that followed the last tax hike suggests a rethink would be …
13th November 2015
Despite a rebound in “core” machinery orders in September, they still fell sharply across Q3 as a whole. The upshot is that non-residential investment probably dropped for the second straight quarter. … Machinery Orders …
12th November 2015
Wage growth edged up in September but still falls short of trend productivity growth. The upshot is that the tight labour market has yet to create noticeable cost pressures. … Labour Cash Earnings …
9th November 2015
The government took the first step towards the privatisation of the Post Bank by selling a 11% stake on Wednesday. Private ownership will force the Bank to shift its investment portfolio from low-return Japanese Government Bonds to more profitable assets. …
6th November 2015
The Bank of Japan left policy settings unchanged at its end-October meeting amid tentative signs of stabilisation in manufacturing activity and an ongoing rebound in its favourite inflation measure. However, we believe that inflation excluding fresh food …
4th November 2015
While the rebound in consumer confidence in October suggests that consumer spending will continue to recover, the renewed fall in household inflation expectations should ring alarm bells at the Bank of Japan. … Consumer Confidence …
The renewed rise in inflation excl. fresh food and energy in September would provide a reason for the Bank of Japan to leave policy settings unchanged later today. But the rebound in underlying inflation rests on shaky ground, and we still see good …
30th October 2015
Japan’s economy probably shrank yet again last quarter, resulting in a renewed increase in spare capacity. With the outlook for growth and inflation both worse than policymakers predict, we continue to expect the Bank of Japan to step up its asset …
The Bank of Japan pushed back the timing for reaching its 2% inflation target today and sees downside risks to economic activity. With underlying inflation likely to stall soon, we expect policymakers to announce more easing in January. … Cautious Bank …
The rebound in industrial output in September and upbeat forecasts for Q4 have reduced the chances that the Bank of Japan will announce more easing tomorrow. … Industrial Production …
29th October 2015
The drop in small business confidence in October undermines the upbeat message from the flash manufacturing PMI and suggests that economic activity is broadly flat. … Small Business Confidence …
28th October 2015
The renewed rise in retail sales in September adds to the evidence that private consumption rebounded last quarter. … Retail Sales …
The recent rebound in underlying inflation provides a reason for the Bank of Japan to stand pat at Friday’s meeting, but not a compelling one. With the economy back in recession and the tight labour market failing to boost wages, we think it more likely …
26th October 2015
The government intends to mitigate the impact of the sales tax hike scheduled for April 2017 by lowering the tax rate on food and other daily necessities. However, the benefits even for low-income households would be small. What’s more, spending on …
23rd October 2015
While the rebound in today’s flash manufacturing PMI for October suggests that the economy may have turned a corner in Q4, the Bank of Japan tends to pay little attention to the PMI surveys. … Flash Manufacturing PMI …
With potential growth near zero, the occasional quarter of negative GDP growth in Japan is notaltogether surprising or necessarily a disaster. However, the point of the Bank of Japan’s aggressivemonetary stimulus is to lift growth above its sustainable …
22nd October 2015
The trade balance was little changed in September despite a plunge in import prices. The upshot is that net trade remained a drag on GDP growth in Q3. … External trade …
21st October 2015
Finance Minister Aso has been downplaying the chances of further monetary stimulus. But given that Japan’s government has previously argued that “surprise” is a key element of effective monetary policy, we don’t think these attempts to dampen expectations …
19th October 2015
A range of indicators suggest that business investment dropped for the second straight quarter in Q3. However, the Bank of Japan is continuing to argue that the outlook for capital expenditure is upbeat, citing an improvement in reported spending plans …
16th October 2015
The doubling of the Bank of Japan’s balance sheet since the launch of QQE has contributed to a strong rise in the money supply and a pick-up in bank lending. With lending rates near record-lows, we think that households and firms will continue to step up …
15th October 2015
While the Bank of Japan remains upbeat about the prospects of hitting its 2% inflation target, the fact that non-energy import prices have just recorded the first fall since the launch of QQE underlines the difficulties it faces. We retain our forecast …
14th October 2015
While consumer sentiment deteriorated in September, the Bank of Japan will welcome that household inflation expectations did not weaken further. … Consumer Confidence …
13th October 2015
Expectations of future price rises among Japanese households and firms have been undermined by the energy-related collapse in observed inflation. Even though the drag from cheaper energy will fade in coming months, we expect inflation to remain below the …
9th October 2015
Today’s Economy Watchers Survey supports other evidence that the economic recovery has run out of steam. … Economy Watchers Survey …
8th October 2015
The third straight fall in machinery orders in August all but confirmed that non-residential investment contracted yet again in the third quarter. … Machinery Orders …
While the Bank of Japan today provided few indications that additional stimulus is imminent, weretain our forecast that policymakers will step up the pace of easing by the end of the month. … Bank of Japan to announce more easing by end of the …
7th October 2015
Japan’s economy probably shrank for a second straight quarter in Q3. With the economic recovery grinding to a halt, the chances of hitting the Bank’s 2%inflation by next summer are dwindling rapidly. What’s more, there are signs that near-zero inflation …
6th October 2015
Much of the focus in Japan in the run-up to the successful conclusion of the Trans-Pacific Partnership talks was on agriculture and vehicles. In practice, the economic significance of the agreement in these areas is easily overplayed. Much more important …
5th October 2015
With the economy very likely now back in recession, an increase in monetary stimulus looks all but inevitable. Policymakers could announce more easing as soon as this week, but our base case remains that they will wait until the end of the month. … BoJ …
Wage growth slowed in August as the summer bonus season came to an end, underlining that the tight labour market has yet to generate noticeable cost pressures. … Labour Cash Earnings …
We do not share BoJ Board member Shirai’s view that the introduction of negative rates would hamper the ability of the Bank to purchase JGBs. However, Ms Shirai’s views have been close to those of the Bank’s leadership in the past. The upshot is that …
2nd October 2015
The renewed rise in “core” household spending in August suggests that private consumption rebounded last quarter. But we still expect GDP to shrink as a result of falling investment and net exports. … Unemployment & Household Spending …
While today’s Tankan was not as bad as most had feared, it nonetheless corroborates other signs that Japan’s economic recovery has ground to a halt. … Tankan …
1st October 2015
The second consecutive drop in industrial production in August suggests that Japan’s economy shrank yet again in the quarter that ends today. Additional easing by the Bank of Japan next month looks all but inevitable. … Industrial Production & Retail …
30th September 2015
Despite a slight rebound in September, small business confidence still points to tepid gains in industrial output, and the moderation in price pressures is worrying. However, the Bank of Japan will place more weight on its own Tankan survey, due on …
29th September 2015
A closely-watched measure of underlying inflation in Japan has rebounded recently, raising hopes that the Bank of Japan’s easing efforts are finally gaining traction. But most of the rebound in “core-core” inflation reflects the lagged effects of yen …
28th September 2015
Prime Minister Abe’s announcement of new targets does not alter the outlook for the economy. In the absence of tangible policies to boost productivity and stem the decline in the working-age population, we believe that output can expand by no more than …
25th September 2015
An onslaught on humanities and social sciences by the Ministry of Education threatens to undermine the competitiveness of Japan’s economy. Encouragingly, the country’s leading universities have refused to obey the government’s diktat to close these …
While the Bank of Japan’s preferred inflation gauge turned negative last month, the rebound in “core-core” inflation bolsters policymakers’ upbeat outlook. But with the economy struggling to return to growth, we still think that the Bank will step up the …
Today’s flash PMI suggests that activity in the manufacturing sector remained healthy in September. But the sharp slowdown in external demand and a moderation in price pressures are worrying. … Flash Manufacturing PMI …
24th September 2015
Some BoJ Board Members have cast doubt on the accuracy of the monthly wage data, which show tepid income growth. By contrast, we think these figures reflect the circumstances of Japan’s workers fairly well. … Are the wages data misleading …
22nd September 2015
We estimate that QQE can continue for at least another five years even if the Bank of Japan steps up the annual pace of expansion of the monetary base to ¥90 trillion in October. As such, the fate of QQE will hinge on its success in boosting inflation …
21st September 2015
The Bank of Japan has blamed weak exports for the recent sluggish performance of the economy, but domestic demand has hardly been vigorous either. We believe the Bank is pointing the finger at developments abroad to deflect attention from its failure to …
18th September 2015
