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The Ministry of Finance's survey on corporate finances casts renewed doubts on the recovery in business investment. Nonetheless, very strong corporate profitability suggests that firms should be able to invest in plant and machinery. … Capital …
3rd March 2014
Despite the sharp fall in the yen since 2012, Japanese exporters lost global market share last year. Rising costs and a sluggish world economy have played a part and both factors should fade in importance in the future. But the main reason was that …
Almost one year after the launch of Quantitative and Qualitative Easing (QQE) by the Bank of Japan, the policy is working as well as could reasonably be expected. However, despite initial signs of success, we still think that underlying inflation will …
28th February 2014
Today's data confirm that the economy is picking up speed ahead of the consumption tax hike. However, the first fall in inflation since the start of QQE shows that the BoJ still has more work to do reach its inflation target. … Retail Sales, Industrial …
Slow progress in the talks aimed at setting up the Trans-Pacific Partnership has set back hopes that the trade deal could be a catalyst for structural reform in Japan. Japan’s high tariffs on many agricultural products remain a major obstacle to an …
25th February 2014
The modest fall in small business confidence in February will likely be followed by a further deterioration in coming months as conditions are set to weaken after April's sales tax hike. … Small Business Confidence …
With the yen broadly stable since last May, import price inflation has already started to moderate and will probably fall sharply in the next few months. As wage growth is still muted and spare capacity is unlikely to diminish much further in the …
24th February 2014
January’s trade data indicate that the drag on Japan’s economy from net exports persisted at the start of the new year. With domestic demand surging ahead of the consumption tax hike, the monthly numbers may get worse before they get better. … External …
20th February 2014
Adverse weather in recent days is unlikely to have a major effect on output, as most of it occurred at the weekend and plant closures are unlikely to last long. Historical experience also indicates that heavy snowfall has only limited effects on …
18th February 2014
The Bank of Japan’s decision to extend and expand the special loan facilities that were due to expire next month is a largely symbolic move that will not have a significant impact on financial conditions. Nor should it have surprised the markets as much …
Although the preliminary estimate of GDP growth in the final quarter of last year fell short of expectations, it is not the major blow to the credibility of “Abenomics” that some have suggested. … Q4 GDP not as bad as headlines …
17th February 2014
Weak Q4 GDP figures show that the surge in spending ahead of the consumption tax hike has yet to come. … GDP (Q4 Preliminary) …
Wide divergences have emerged in the results of the sentiment surveys in recent months. These typically reflect the design of each survey, as more backward-looking measures have climbed to record highs while relatively forward-looking measures have …
The Bank of Japan will almost certainly maintain its current policy settings at the conclusion of the two-day Board meeting next Tuesday (18 th ). This means no change to the asset purchase programme, although some special loan facilities that are …
14th February 2014
The annual growth rate of the money supply seems to be levelling off, and is likely to remain broadly stable in coming months. By contrast, bank lending may still accelerate further as loan demand continues to improve. … Monetary Indicators Monitor (Jan …
13th February 2014
January’s sell-off in the equity market and the strengthening yen are unlikely to have much impact on the Japanese economy. Equities have regained some ground over the past week and the Nikkei is still much higher than before Abenomics began. In any case, …
12th February 2014
The sharp fall in machinery orders in December casts doubt on whether the fledgling recovery in business investment will continue. What's more, overall investment is set to weaken in coming months as housing construction will likely plunge after the …
The current account deficit reached a record high in December, but should narrow once domestic demand slows after the upcoming consumption tax. Indeed, today's sentiment surveys point to weakening economic momentum in coming months. … Current Account …
10th February 2014
While some emerging market assets have seen a sharp sell-off in recent weeks, it is premature to speak of a general crisis sweeping the emerging world. In any case, Japan’s exposure to most of the affected countries is low. More worrisome would be a “hard …
The threat to the economic recovery from falling real wages may not be as big as many fear, given the trade-off between higher pay or more job creation. Nonetheless, consumers are understandably far from happy about the return of price inflation. … …
5th February 2014
The last time that the consumption tax was hiked, in 1997, Japan was tipped into recession shortly afterwards by a regional financial crisis. History appears at risk of repeating itself. However, many of the fears now hitting equities seem overdone. …
4th February 2014
The Japanese economy is entering the new year with strong momentum. The data are probably being flattered by spending brought forward ahead of April’s consumption tax hike. But if this spending helps to kick-start a broader recovery, it may still have …
3rd February 2014
Despite a fall in December, retail sales still recorded a solid rise in the final quarter of last year. While there are some indications that consumers have brought forward demand ahead of April's consumption tax hike, the expected surge in spending is …
30th January 2014
The widening in Japan's trade deficit is often attributed to a surge in energy imports as a result of the nuclear shutdown. However, the jump in the energy import bill is mostly due to the impact of yen weakness and higher global oil and gas prices, as …
29th January 2014
Small business confidence climbed to yet another fresh high in January. Conditions seem to be more buoyant in the non-manufacturing sector than in manufacturing, but sentiment will likely deteriorate after the upcoming consumption tax hike. … Small …
28th January 2014
The seasonally-adjusted trade deficit narrowed in December, but the full-year deficit surged. The trade shortfall is likely to widen again in the near-term as domestic demand is brought forward ahead of April's consumption tax hike, but should narrow …
27th January 2014
The government’s proposal to allow residential properties to be built on some areas of commercial land is unlikely to lead to the hoped-for surge in property prices. With a larger supply of residential buildings, residential property prices are more …
The BoJ’s Senior Loan Officer Survey shows that despite some slowdown in household loan demand, overall loan demand continues to accelerate. … Senior Loan Officer Survey …
23rd January 2014
The Bank of Japan threw no surprises in its monetary policy decision today and is under no immediate pressure to announce further easing. But with some board members still unconvinced that the inflation target will be met within the next couple of years …
22nd January 2014
The upcoming gubernatorial election in Tokyo is being widely billed as a referendum on national energy policy, with one prominent candidate running on an anti-nuclear platform. However, the influence of local politicians on energy policy is limited. The …
Prime Minister Abe has promised to deliver a positive "wage surprise" this year by working closely with employers and trade unions. He has drawn inspiration from an agreement reached in the Netherlands in the early 1980s. But conditions in Japan are far …
20th January 2014
The renewed fall in consumer confidence in December shows that households are less satisfied with Abenomics than after its start. … Consumer Confidence …
17th January 2014
The two-day meeting of the Bank of Japan’s Policy Board, which concludes next Wednesday (22nd), is unlikely to result in any significant changes to the asset purchase programme. We continue to favour October for the timing of any announcement of …
16th January 2014
Despite a slowdown in December, the money supply continues to grow at a rapid pace. The growth rate of bank lending reached a fresh high and, with interest rates very low and bank lending attitudes accommodative, lending will likely remain strong. … …
Machinery orders surged to a five-year high in November and point to a renewed recovery in business investment. However, overall investment may still weaken in coming months as residential investment will likely fall sharply after the sales tax hike. … …
The renewed rise in the current activity component of the Economy Watchers Survey shows that conditions remain strong for now. But the prospect of a slump in demand after the upcoming consumption tax is already weighing on the outlook. Meanwhile, although …
14th January 2014
Tourist arrivals to Japan have surged over the past year. While this is good news for businesses that cater to visitors, the broader macroeconomic implication are minor. Tourism-related spending remains small overall. And, as with many sectors in Japan’s …
13th January 2014
The Nikkei rose by 60% in 2013, the largest increase in decades. A similarly stellar performance this year is obviously unlikely, but we still see room for further gains both in 2014 and 2015. While equity valuations are looking stretched, an extended …
The yen is now “undervalued” on most measures. However, deviations from fundamental value can, of course, persist for a very long time and should not prove an obstacle to fresh declines. We continue to expect aggressive easing by the Bank of Japan to …
9th January 2014
The Japanese economy is entering 2014 on a strong footing. Retail sales are at their highest level since the late 1990s, business surveys and the Nikkei have climbed to multi-year highs, and employment is expanding rapidly. However, recent positive …
8th January 2014
The return of inflation prompted by the Bank of Japan's bold monetary easing may not be unambiguously positive for all sectors of the economy. Consumer spending will be weaker than otherwise and any pick-up in investment may need to be complemented by …
6th January 2014
In this final Japan Economics Weekly of the year we take a look at the local events and themes that will shape Japan’s economy and markets in 2014. The single most important scheduled event will be the increase in the consumption tax on 1st April. It will …
23rd December 2013
The Bank of Japan’s widely-anticipated decision to maintain its current policy settings for the tenth successive Board meeting today is a testament to the boldness and clarity of the monetary easing announced in April, which has not required any …
20th December 2013
The weak yen is largely to blame for the recent widening of the trade deficit. As domestic demand accelerates ahead of the consumption tax hike, the deficit may well widen further in the near-term, but we should see a narrowing once the tax has been …
18th December 2013
The Bank of Japan's Tankan survey showed a further improvement in business conditions in the fourth quarter. However, the pace of the improvement has slowed, which points to a slowdown in GDP growth. … Tankan …
16th December 2013
A year after the election that returned Mr Abe as prime minister, the interim verdict on his attempts to revitalise the economy must be that much more still needs to be done. The most radical policy change has been the adoption of a more aggressive easing …
The two-day meeting of the Bank of Japan’s Policy Board, which concludes next Friday (20 th ), is unlikely to result in any major policy changes, despite the recent flurry of speculation that fresh action is imminent. Indeed, the purely economic case for …
12th December 2013
Despite a sharp fall in the money multiplier, the growth rates of bank lending and broad money reached fresh highs in November. … Monetary Indicators Monitor …
11th December 2013
The rise in machinery orders in October leaves the uptrend intact and should ease concerns that the fledgling recovery in business investment has already come to an end. … Machinery Orders …
The Business Outlook Survey shows that companies are sanguine about the impact of the consumption tax hike, but households have lost confidence in Abenomics. … Business Outlook Survey (Q4) & Consumer Confidence …
10th December 2013
