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In contrast to the Bank of Japan, we are far from convinced that QQE has lifted inflation expectations. In fact, wage and price setting behaviour have changed little since the programme was launched. The upshot is that, without additional policy easing, …
24th April 2015
The third straight fall in the manufacturing PMI confirms that the plunge in energy prices has failed to reinvigorate Japan's economy. … Flash Manufacturing PMI …
23rd April 2015
The plunge in import volumes in March likely reflects seasonal distortions rather than a sudden collapse in domestic demand. The upshot is that imports should rebound in April and the trade balance should return into the red. … What explains the plunge …
22nd April 2015
Even though the trade balance returned into the black for the first time since 2011 last month, net trade likely turned into a drag on GDP growth last quarter. … External trade …
The BoJ’s Senior Loan Officer Survey points to a further slowdown in loan demand last quarter. But the survey has not been a reliable guide to the pace of credit growth recently. While we can’t rule out a slowdown in borrowing in coming months, we are …
21st April 2015
Around 20% of all Japanese Government Bonds (JGBs) are currently used as collateral with the Bank of Japan or in private repurchase agreements. However, there are various ways to ensure that a shortage of available JGBs will not hamper the Bank’s asset …
17th April 2015
While consumer confidence continued to recover in March, households have so far preferred to save rather than to spend the windfall from lower energy prices. … Consumer Confidence …
The Bank of Japan’s 2% inflation target remains out of sight despite the benefits of a much weaker exchange rate. With the potential to expand QQE in its current form limited, new approaches are therefore likely to be needed to permanently lift price …
16th April 2015
The Bank of Japan now owns more Japanese government bonds than private pension funds and insurance companies combined. However, with the government pension fund continuing to shed bonds, and usage of JGBs as collateral declining, the outstanding amount of …
14th April 2015
Despite small declines in January and February, machinery orders remain well above their Q4 14 average, so business investment should finally have started to rebound last quarter. … Machinery Orders …
13th April 2015
Despite press reports that suggest the opposite, there is no evidence that Japanese firms have returned manufacturing production to their homeland on a large scale. Even if they did, this would be no reason to cheer. Venturing abroad boosts rather than …
10th April 2015
The Bank of Japan left policy settings unchanged today and Governor Kuroda indicated that the Board doesn’t see the need for additional stimulus at the moment. However, Mr Kuroda has a record of springing surprises and we still expect policymakers to step …
8th April 2015
In contrast to the rather disappointing Tankan survey, the fourth straight rise in the Economy Watchers Survey suggests that economic conditions continue to improve. … Economy Watchers Survey …
The current account surplus dropped in February, but should remain broadly stable going forward as a higher oil import bill should be offset by rising investment income. … Current Account …
While the economic recovery seemed to have picked up pace at the start of the year, recent data have dashed hopes of rapid growth. Consumers are not spending the windfall from lower energy prices, and firms are raising wages by less than anticipated. With …
Revised data show that the base pay hikes agreed upon in last year’s spring wage negotiations were not reflected in aggregate base pay, providing another headwind to higher inflation. … Revised data show that wage growth remains …
7th April 2015
Recent data cast doubt on the strength of the economic recovery while inflation continues to slow. With a disappointing Shunto dashing hopes that the tight labour market would result in robust wage growth, the Bank’s inflation forecasts increasingly look …
The unusually late timing of Chinese New Year may have distorted Japan’s recent activity data by causing a surge in output and exports in January followed by a slump in February. However, firms predict a renewed drop in industrial output in March, by when …
3rd April 2015
The small rise in today’s Tankan index for all industries suggests that economic activity remained sluggish last quarter. … Tankan …
2nd April 2015
Japan’s economic recovery was dealt a severe blow by last year’s sales tax hike, and we think that the immediate outlook for growth is more gloomy than most believe. With inflation well below the 2% target, the Bank of Japan will likely announce …
31st March 2015
The plunge in industrial production in February all but reversed the surge in January. The upshot is that Japan’s economy seems to have slowed in the first quarter of this year. … Industrial Production …
Despite exceptionally strong corporate profits and falling investment, corporate debt increased by the most since 2008 last quarter. With interest costs at record lows, firms seem to be borrowing to lend to other companies. While this is not a concern for …
27th March 2015
While the labour market remains tight, inflation is moving further away from the Bank of Japan’s 2% target. We continue to expect the Bank to step up the pace of easing at the end of next month. … Retail Sales, Unemployment, Household Spending & …
The surge in small business confidence in March is likely to prove short lived, as firms predict a renewed weakening in April. … Small Business Confidence …
24th March 2015
The second straight drop in the manufacturing PMI suggests that the recent strength in industrial activity is unlikely to last. … Flash Manufacturing PMI …
The early results from this year’s spring wage negotiations confirm that the tight labour market has boosted wage pressure. However, this year’s overall increase in labour income will likely still fall well short of the level required to reach the Bank of …
20th March 2015
While corporate debt increased at the fastest pace in years last quarter, the increase has been more than offset by higher corporate assets. With corporate profits at record-highs, firms are well placed to service higher debt. … Monetary Indicators …
18th March 2015
The trade gap widened last month as a plunge in export volumes offset another decline in the cost of oil imports. Net trade should therefore become a drag on GDP growth soon. … External trade …
Despite the recent run of stronger data, the Bank of Japan was no more upbeat on the economic outlook at today’s meeting than before. Consumer price inflation is likely to turn negative soon, threatening the Bank’s efforts to lift inflation expectations. …
17th March 2015
The economy seems to have picked up speed since the start of the year, and the ongoing spring wage negotiations will likely end with a sizeable increase in base pay. However, inflation has continued to moderate and may turn negative in the second quarter, …
16th March 2015
Judging by the unemployment rate alone, the labour market is tight, vindicating the Bank of Japan’s view that price pressure has strengthened since the launch of QQE. But other measures, such as the number of overtime hours worked, suggest that there is …
13th March 2015
While the strong rebound in consumer sentiment in February is welcome, there are increasing signs that household inflation expectations are declining. … Consumer Confidence …
12th March 2015
The reported deterioration in business conditions in today’s Business Outlook Survey partly reflects seasonal factors. Nonetheless, the survey suggests that economic activity will remain sluggish in coming quarters. … Business Outlook Survey …
Despite a drop in January, machinery orders remain well above their Q4 14 average, and we still think that business investment will start to recover soon. … Machinery Orders …
11th March 2015
The jump in February’s Economy Watchers Survey (EWS) suggests that economic conditions are improving strongly. However, the survey still points to a slowdown in manufacturing activity in coming months. … Economy Watchers Survey …
9th March 2015
While the second estimate of Q4 GDP was not as weak as the headlines would suggest, we still think that the Bank of Japan will announce more stimulus next month. … GDP (Q4 Revised) & Current Account …
There are some reasons to believe that the recent strength in export volumes is the result of improvements in competitiveness linked to currency weakness. However, the trade data tend to be volatile from month to month, and indicators of external demand …
6th March 2015
The travails of Japan’s electronics giants are not indicative of a general demise of the sector. In aggregate, the electronics industry is in fact doing quite well. … Is Japan’s electronics sector …
5th March 2015
While the economy didn’t expand as much as many had hoped last quarter, more recent data have been promising. The labour market remains tight and corporate profits have never been higher, so the ongoing spring wage negotiations should result in a strong …
4th March 2015
Wage growth remained strong in January even though the winter bonus season came to an end, and may pick up further after the spring wage negotiations. … Labour Cash Earnings …
3rd March 2015
The Ministry of Finance’s survey on corporate finances confirms that business investment stagnated last quarter. … Capital Expenditure …
2nd March 2015
The recent plunge in the price of energy has reduced the cost advantage of nuclear relative to thermal electricity generation, and rendered a rapid restart of Japan’s nuclear reactors increasingly unlikely. In any case, electricity prices are unlikely to …
27th February 2015
Industrial output surged last month and the job market remains tight despite a jump in the unemployment rate. However, consumer spending is sluggish and the ongoing slowdown in inflation increases the pressure on the BoJ to announce more stimulus. … …
We are not too worried about evidence suggesting that Japanese households now have a negative saving rate. Thanks to a shrinking fiscal deficit and high corporate saving, Japan remains a net lender to the world. … Should we be worried about the …
25th February 2015
Despite a modest rebound in February, small business confidence remains weak. … Small Business Confidence (Feb.) …
24th February 2015
The slowdown in Japanese FDI into China is not reflective of a general pullback in overseas investment by Japanese firms but is instead linked, we think, to political tensions between the two countries. The broader strength of outward investment is …
Once seasonal factors are accounted for, last month's trade deficit was the smallest in nearly three years. The plunge in energy prices still hasn’t been fully reflected in the cost of imported fuels so a further narrowing of the deficit probably lies …
19th February 2015
The Bank of Japan continues to express confidence in its ability to meet its 2% inflation target. But even that would probably not be enough to reduce the public debt burden. In a best-case scenario in which the fiscal deficit was eliminated and interest …
18th February 2015
Governor Kuroda today expressed the usual confidence about Japan’s economic prospects and the likelihood of price pressures picking up. But with the recent economic data disappointing and inflation set to turn negative soon, we still think that …
The Bank of Japan’s 2% inflation target still looks out of reach, but recent data do at least include some promising signs that price pressures are picking up. … Price pressures building …
17th February 2015
