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After a period of uncertainty and disappointing data, which contributed to Prime Minister Abe’s decision to postpone the sales tax hike, the clouds have started to clear. There are good reasons to expect the initial estimate of Q3 GDP to be revised up …
3rd December 2014
Wage growth slowed in October, but may see a boost from higher winter bonuses by year-end. However, growth in base pay is unlikely to accelerate much further. … Labour Cash Earnings …
2nd December 2014
The Ministry of Finance’s survey on corporate finances points to an upward revision of non-residential investment in the second estimate of Q3 GDP. … Capital Expenditure …
1st December 2014
Japanese exporters commonly “price to market”, meaning they don’t allow the impact of exchange rate shifts to feed through fully into the prices paid by their foreign customers. This has become an increasingly popular explanation for the failure of export …
28th November 2014
Following a surge in industrial output and retail sales in September, we are not too worried about the small drops in October. Indeed, the labour market remains tight despite sluggish demand. However, price pressure continues to moderate, underlining the …
Despite a small rise this month, small business confidence remains subdued. However, shrinking spare capacity and higher input costs point to rising price pressure. … Small Business Confidence …
26th November 2014
The sharp fall in the yen over the last two years seems to have slowed the long-term rise in imports of manufactured goods relative to domestic production. However, even a further weakening of the exchange rate may not bring it to a complete halt. Export …
25th November 2014
To some, the continued fall in output last quarter is proof that Abenomics has failed. However, the economy has actually done fairly well over the past two years considering the strong demographic headwinds and the drag from this year’s sales tax hike. …
21st November 2014
While the flash manufacturing PMI edged lower in November, it still indicates that activity in the sector will continue to recover. … Flash Manufacturing PMI …
20th November 2014
Japan’s trade deficit shrank in October, and is set to narrow further due to a falling energy import bill. … External trade (Oct.) …
The Bank of Japan left policy settings unchanged today as widely expected. While a more upbeat economic outlook suggests that additional easing is not imminent, we think that it will still eventually be required. However, Governor Kuroda’s comments in …
19th November 2014
The direct impact of Prime Minister Abe’s decision to delay next year’s sales tax hike is to boost the outlook for growth and also for underlying inflation, though headline inflation will of course be lower. We still expect inflation to fall short of the …
18th November 2014
The surprising fall in Q3 GDP suggests that PM Abe will call off the planned increase in the sales tax next October. … GDP (Q3 Preliminary) …
17th November 2014
The question of whether to go ahead with next year’s sales tax hike will remain in the spotlight with Monday’s release of the Q3 GDP data, which Prime Minister Abe previously said would inform his decision. In our view, concerns about the economic damage …
14th November 2014
The Bank of Japan’s decision to step up the pace of asset purchases at the end-October meeting has resulted in a sharp fall in the yen, which should lift consumer prices in coming months. What’s more, the Bank has extended the timeframe for achieving the …
13th November 2014
Despite the fourth monthly rise in machinery orders in a row, we still expect a small decline in business investment last quarter. However, sentiment surveys suggest that capital expenditure will start to recover soon. … Machinery Orders …
The latest money supply figures have been encouraging, but we expect the slowdown in the housing market to weigh on loan growth in coming months. … Monetary Indicators Monitor …
12th November 2014
A snap election could have the virtue of giving the government a stronger mandate as it struggles to push ahead with structural reform. But it would not be a long-term positive if coupled with a delay in the tax hike currently scheduled for October 2015. …
11th November 2014
The sharp fall in the Economy Watchers Survey in October adds to other survey evidence pointing to a sluggish economic recovery. … Economy Watchers Survey …
Consumer confidence fell for a third straight month in October and remains barely higher than immediately after the sales tax hike. … Consumer Confidence …
The current account surplus climbed to a fresh high in September, and the weaker exchange rate should provide additional support in coming months. … Current Account …
Rather than harming the domestic manufacturing sector, outward investment by Japanese firms has boosted domestic activity and exports. Accordingly, the growth of offshore investment should not be blamed for the widening of Japan’s trade deficit. Our …
10th November 2014
Several factors determine how currency weakness affects firms in different export sectors. Over the past two years, the chemical industry and the car industry have seen the biggest gains in export values, but chemical firms have had to contend with a …
7th November 2014
The Nikkei has soared following the Bank of Japan’s decision to step up the pace of monetary easing. The yen has also weakened, which is good news for exporters. Less widely noticed is that, after a period of weakness after the tax hike, the recent data …
6th November 2014
The Bank of Japan’s decision on Friday to step up its pace of asset purchases has raised the chance that the sales tax will be increased again next year, but the decision is not yet a foregone conclusion. … Coordinated policy moves raise likelihood of …
5th November 2014
Wage growth slowed further in September, and will likely continue to fall short of inflation as the labour market is no longer tightening. … Labour Cash Earnings …
Despite a significant acceleration in the pace of JGB purchases, a shortage of available assets will not pose a constraint on QQE anytime soon. … Asset shortage no constraint on …
4th November 2014
The weakness of demand after the recent consumption tax hike pushed the Bank of Japan on Friday to ease policy and could prompt the government in coming weeks to cancel the second hike currently scheduled for next year. The prospects for household …
31st October 2014
It always looked likely that the Bank of Japan would be forced to step up its pace of easing but the change of tack has come sooner than the market (or we) had expected. Given the recent downward trend in inflation, the Bank could well end up increasing …
The renewed rise in unemployment last month shows that the labour market is no longer tightening, and we think it will start to slacken in earnest soon. Meanwhile, inflation continues to slow, and should moderate further due to lower energy prices. … …
The surge in manufacturing output in September suggests that the sector has finally turned the corner, but a strong recovery is not on the cards. … Industrial Production …
29th October 2014
The third decline in small business confidence in a row suggests that the economy is not quite as strong as the jump in the flash manufacturing PMI in October indicated. … Small Business Confidence …
28th October 2014
The jump in retail sales in September confirms that private consumption is recovering from the slump caused by the sales tax hike. But wages will have to rise faster for spending to increase further. … Retail Sales …
Just a few months ago, a sizeable number of analysts were expecting the Bank of Japan to provide more stimulus at the upcoming meeting, but only a few are still holding on to that view. We expect that the Bank will merely confirm at this week’s meeting …
27th October 2014
Recent comments by PM Abe suggest that next year’s scheduled hike in the sales tax might be delayed. Concerns about the economic impact of a further tax hike are understandable given the weakness of recent data. But the threat of a short-lived period of …
24th October 2014
The rebound in the flash manufacturing PMI in October indicates that industrial production should stop falling soon. … Flash Manufacturing PMI …
23rd October 2014
Japan's trade deficit edged higher in September, against expectations, but a weaker yen, falling commodity prices and the sluggishness of domestic demand should combine to deliver a narrower deficit over the months ahead. … External trade …
22nd October 2014
Amid questions over the government’s commitment to the planned second consumption tax hike, the positive impact of the first hike on revenue is already being felt: Japan’s budget deficit has fallen to its lowest level since 2009. What’s more, the deficit …
20th October 2014
Japan is emerging from its second-quarter slump but weak household consumption and business investment, combined with further fiscal austerity, are likely to keep domestic demand sluggish. What’s more, the sharp depreciation of the yen has not translated …
17th October 2014
While bank lending continues to expand robustly, credit in aggregate is growing less rapidly. In fact, household debt reached a fresh low relative to output in Q2. … Monetary Indicators Monitor …
15th October 2014
The impact of the recent weakening of the yen on consumer prices will be dampened by lower crude oil prices. The upshot is that CPI inflation is still likely to moderate towards year-end rather than pick up as expected by the BoJ . … Inflation still …
13th October 2014
The weaker yen hasn’t resulted in the hoped-for improvement in export competitiveness. It has boosted corporate profits, but the pass-through to business investment has been weaker than usual. Meanwhile, yen weakness has contributed to price rises that …
10th October 2014
The continued decline in consumer confidence in September adds to the impression from last month’s business sentiment surveys that the recovery remains sluggish. … Consumer Confidence …
Even though machinery orders continued to recover in August, their current level still points to falling business investment in Q3, as does the ongoing decline in capital goods shipments. But the recovery in capital expenditure should resume soon. … …
9th October 2014
The ongoing slide in industrial production and the weakness of the Tankan have raised concerns that Japan’s economy is in recession. It will be a close-run thing, but more important is what happens next. We think that firms have mostly now adjusted to the …
8th October 2014
The renewed deterioration in the outlook component of today’s Economy Watchers Survey suggests that a rapid recovery of Japan’s economy is not on the cards. … Economy Watchers Survey …
The current account surplus rebounded in August, and may rise a touch further in coming months as a result of the fall of the yen against the dollar. … Current Account …
With policy settings again left unchanged, the key development at today’s Bank of Japan meeting was policymakers’ acknowledgement of the recent sluggishness of the economy. However, we still think that a more aggressive pace of asset purchases will only …
7th October 2014
The latest Tankan survey suggests that the economy shrank again in the third quarter, as does the prolonged fall in industrial production. However, we think the recent decline in output reflects the fact that firms have been slow to respond to the …
3rd October 2014
The latest data still show a sluggish recovery, but recent BoJ communication remains upbeat. The upcoming meeting is therefore unlikely to result in any changes to policy or tone. Instead, we think policymakers will wait until the late-October meeting to …
2nd October 2014
