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The increasingly upbeat tone of the Bank of Japan’s comments on the economic recovery has dampened consensus expectations of additional monetary easing (on top of that already planned). However, a closer look at the latest inflation forecasts suggests …
11th July 2013
The fall in consumer confidence in June suggests that the Abe government’s honeymoon period with the public is coming to an end. Sentiment remains at relatively high levels and could pick up again in July (in good time for the Upper House elections), …
10th July 2013
The headline indices from today’s Economy Watchers Survey (EWS) are still at high levels, but the larger-than-expected falls in June point to slower growth in Q2 and beyond than in Q1. While other surveys, including the manufacturing PMI and the Tankan, …
8th July 2013
The Bank of Japan’s two-day July meeting (which concludes on Thursday) is unlikely to result in any major policy changes. Indeed, the Board is probably much happier with recent market developments – particularly what is happening to government bond yields …
The precise results of the upcoming Upper House elections may matter less than commonly thought. While the governing LDP/New Komeito coalition will probably regain a majority of the seats, it is unlikely that it will achieve the two-thirds majority …
The recovery in Japan’s economy seems to have maintained its pace in the second quarter. Survey measures of business and consumer confidence have risen further, shrugging off the recent volatility in financial markets. However, industrial production may …
3rd July 2013
Today’s official release confirmed that labour cash earnings were still subdued in May, but we can already be confident that higher summer bonuses will deliver much better headlines for June and July. The big unknown is whether regular pay will also start …
2nd July 2013
Today’s Tankan survey confirms that Japan ' s economy is continuing to recover, albeit gradually. The survey is based on replies received up until just a few days before publication, so it is relatively timely and should capture any adverse impact from …
1st July 2013
The main factors behind the partial recovery in Japanese equities in the last few days have been external, namely the fading of concerns about the outlook for US monetary policy and the risks of a prolonged credit squeeze in China. However, the mood has …
The improvement in small business confidence in June shows that “Abenomics” is continuing to deliver real benefits despite the volatility in the financial markets. However, the detail of the Shoko Chukin Bank survey illustrates some of the challenges …
25th June 2013
The focus in the past week has been the impact on Japanese financial markets of potential changes to US monetary policy. We have revised our forecasts in the wake of the latest volatility, but the changes are mostly benign: a gradual rise in JGB yields, a …
24th June 2013
As the Fed prepares to taper its program of quantitative easing, there are some concerns in Asia that it could trigger a messy re-run of 1994. We think these concerns are exaggerated. … Monetary Indicators Monitor …
21st June 2013
The double-digit rise in Japan’s export revenues in May is clearly welcome and should be reflected in higher summer bonuses. However, the import bill is also surging and export volumes remain subdued. … Surge in exports not quite as good as it …
19th June 2013
Many commentators have dismissed the government’s 3% target for GDP growth as far too ambitious. But there are two key points that at least some have missed. First, the target applies to nominal income. The Bank of Japan has already committed to raising …
14th June 2013
The rebound in the yen and associated weakness in Japanese equities reflect fears about the outlooks for monetary policy in both Japan and the US. However, these fears look increasingly overdone. … What's behind the rebound in the …
13th June 2013
The drop back in machinery orders in April is not the disaster that the headlines suggest, but hopes of a rapid turnaround in investment are clearly premature. The main headwind is the large amount of spare capacity already available – something that …
12th June 2013
The Bank of Japan’s Policy Board was content simply to upgrade its economic assessment today. This disappointed those hoping for further monetary easing in response to the recent volatility in financial markets. However, the Board is surely right to take …
11th June 2013
The economic data have started the week on a brighter note. Admittedly, the upward revision to Q1 GDP is largely old news and the detail is less positive. However, the May readings on consumer confidence and the Economy Watchers Survey (EWS) suggest that …
10th June 2013
If the recent volatility in Japan’s equity and bond markets was not enough to undermine confidence, the yen has also rebounded in the last few days. However, the partial recovery in the Japanese currency should not be a major concern – whether for …
The Bank of Japan’s two-day June meeting (which concludes on Tuesday) is unlikely to result in any major policy changes. The Board will probably discuss tweaks to its money market operations and asset purchases in response to the recent market volatility. …
6th June 2013
Judging by the initial market reaction and media coverage, PM Abe’s “growth strategy” already appears to be a damp squib. To be fair, it was always unrealistic to expect a Prime Ministerial speech in a Tokyo hotel to provide a lot more detail than has …
5th June 2013
After a strong start to the year, the early signals for the second quarter have been mixed. Business and consumer confidence is still at high levels, although it remains to be seen whether this will be sustained given the recent volatility in financial …
Although barely on the radar of most investors just yet, the Abe government’s decision on whether to press ahead with the planned fiscal tightening in 2014 and beyond may well be the most important policy event in the remainder of this year. Indeed, in …
3rd June 2013
Japan’s inflation rates look set to turn positive soon. Admittedly, nationwide inflation was still firmly negative on a year-on-year basis in April. But the more timely data for the Tokyo CPI in May looked rather better. What’s more, prices were already …
Despite all the hype about “Abenomics” already encouraging a surge in consumer spending, the hard data on retail sales remain subdued. This makes sense given the persistent weakness of employment and wages, which are far more important drivers of spending …
29th May 2013
The incoming economic data are of course being overshadowed by the market volatility, but today’s Shoko Chukin survey suggests that small businesses may be losing a little faith in “Abenomics” too. … Small business survey illustrates risks to …
28th May 2013
If the global financial community was not already following the progress of “Abenomics” closely, Thursday’s slump in the Nikkei has certainly focused worldwide attention on what is happening in Japan. However, we think it would be quite wrong, or at least …
27th May 2013
Today’s slump is not necessarily the end of the bull market in Japanese equities, but the next few months will be much harder going. We continue to expect the Nikkei to fall further, probably below 13,000, before the end of 2013. … Boost to Nikkei from …
23rd May 2013
The Bank of Japan’s inaction today was no surprise, nor was Governor Kuroda’s relatively sanguine attitude to the jump in JGB yields. However, the April external trade data were disappointing and the details were only slightly better than the headlines. … …
22nd May 2013
The Bank of Japan’s two-day meeting (which concludes on Wednesday) is unlikely to result in any major policy changes. Governor Kuroda will want to address the recent jump in JGB yields, although we believe he would be justified in taking a relatively …
20th May 2013
The encouraging first quarter GDP data have prompted us to revise up our growth forecast for 2013 as a whole. However, while “Abenomics” has certainly boosted sentiment, the jury is still out on whether the underlying economic fundamentals will improve …
Japan’s healthy-looking GDP data are the first substantial piece of good economic news under the Abe government. It is debatable just how much of the acceleration is due to “Abenomics” and how much is simply a temporary rebound from earlier weakness that …
16th May 2013
There are some encouraging signs in Japan’s latest monetary aggregates but it remains too early to tell whether the Bank of Japan’s policy shift last month is feeding the hoped-for acceleration in broad money and credit. … Monetary Indicators Monitor …
The election of a new government under Prime Minister Abe has certainly transformed market sentiment towards Japan over the past six months. However, taking a closer look at each of the components of the policies collectively known as “Abenomics”, doubts …
15th May 2013
Japan’s equity markets may still be gripped by euphoria, but the recovery in consumer confidence faltered in April. This coincided with a jump in inflation expectations in the wake of the Bank of Japan’s announcement of “bold easing”, providing further …
The jump in the yields of Japanese government bonds (JGBs) in the last few days probably reflects a confluence of many factors, including speculation that domestic institutions are set to step up their diversification into foreign bonds and local …
14th May 2013
The yen finally weakened past 100 to the dollar on Friday, giving the Nikkei another major boost. The timing has been widely attributed to the release of data showing that Japanese investors were net buyers of overseas bonds for a second successive week. …
13th May 2013
The yen fell sharply against the US dollar immediately after the Bank of Japan announced its aggressive monetary easing on 4th April, while equity markets surged. Equities have continued to rise over the past couple of weeks but the slide in the yen …
7th May 2013
This report is only available as a PDF. Click to download. … Is consumer spending already taking off? …
6th May 2013
Despite the widespread optimism about the benefits that “Abenomics” may eventually bring to Japanese businesses and households, the hard data continue to disappoint. In particular, industrial production was sluggish in March for the third successive …
30th April 2013
The failure of the yen to weaken past 100 to the dollar has caused some second thoughts in the markets, but we continue to expect the Japanese currency to fall substantially further. … What next for the …
29th April 2013
Friday’s Bank of Japan meeting was mainly concerned with tying up loose ends left over after the policy overhaul earlier in April. But it also revealed that some Policy Board members are unconvinced that the Bank can meet its inflation target even after …
The focus at Friday’s meeting of the Policy Board will be on the new GDP and inflation forecasts to be published in the Bank’s “Outlook for Economic Activity and Prices”. Monetary policy itself was overhauled at the first April meeting and it is unlikely …
22nd April 2013
Most commentators appear to have taken official estimates of the scale of the fiscal stimulus in 2013 entirely at face value. At the same time, they are ignoring the elephant in the room – the planned doubling of the consumption tax in two stages in 2014 …
The latest data on Japan’s monetary aggregates, which predate the Bank of Japan’s policy shift earlier this month, illustrate why a radical change was needed. But they also underline that the success of the bold new approach is not guaranteed. … …
19th April 2013
The March data on exports and the overall trade balance were marginally better than the consensus had expected, but the detail is less encouraging. In particular, the improvement in exports probably reflects the recovery in the global economy, which may …
18th April 2013
Consumer confidence rose in March, but by less than expected. What’s more, Japanese households may not view the prospect of an end to deflation quite as positively as businesses and investors. … Boost to confidence from “Abenomics” may be …
17th April 2013
After initially declining, JGB yields are now higher than they were before the Bank of Japan announced its bold monetary easing. This result is not as perverse as it may seem, nor is it necessarily alarming. The fact that JGB yields are slightly higher …
15th April 2013
The much more ambitious policy stance adopted by the Bank of Japan should keep the yen on a weakening trend, but the scope for a further boost to Japan’s stock market may be limited. … More downside for yen than upside for …
8th April 2013
The Bank of Japan upended expectations for monetary easing at its first April meeting and, in doing so, put the ball back into the government’s court. “Abenomics” was always meant to include structural reform alongside monetary stimulus. Forthcoming talks …
