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By committing today to meet a 2% inflation target in two years, Governor Kuroda can justifiably claim to have set the Bank of Japan on a new path. But while markets have welcomed the announcement, the credibility of this pledge is soon likely to be called …
4th April 2013
For all the optimism engendered by “Abenomics”, the recent hard data on Japan’s economy have been disappointing. Of course, it is too soon for the arrival of a new group of policymakers to be having much effect on the ground. But it is a concern that some …
3rd April 2013
The Bank of Japan’s Tankan survey for March (to be released on Monday) will probably show that large manufacturers thought business conditions were less negative in the first quarter and might even turn marginally positive in the second. This would be a …
1st April 2013
It is a near certainty that at least one of the two Bank of Japan Board meetings in April will result in a further loosening in monetary policy. Indeed, we would not be surprised to see both meetings conclude with announcements of some form of additional …
27th March 2013
The headlines from the latest small business survey are positive but the detail includes some potentially worrying signs that the economic recovery may already be running out of steam. … Small business survey raises some warning …
26th March 2013
The latest Flow of Funds report, published today by the Bank of Japan, confirms that the surge in equity prices on the back of the “Abe trade” has boosted the value of household assets, but also that this boost is relatively small. Hopes of a significant …
25th March 2013
A slew of data in the coming week will provide a check-up on the health of the Japanese economy as we approach the end of the first quarter. Surveys of consumer and business confidence show no sign that the Prime Minister Abe’s honeymoon period is waning, …
The seasonally-adjusted trade deficit widened to a new record in February, reflecting a mix of sluggishness in key export markets, Lunar New Year distortions and the impact of yen weakness on the cost of the commodities that Japan has to buy abroad. As …
21st March 2013
A look back at the Bank of Japan’s actions under Governor Shirakawa suggests that many commentators have been judging him too harshly. Monetary policy was loosened much less aggressively in Japan than in the US or the UK in the wake of the global …
18th March 2013
High hopes are resting on the ability of the Bank of Japan’s new leadership to revitalise the economy. A look at the latest monetary aggregates underlines the challenges they face. … Monetary Indicators Monitor …
14th March 2013
The improvements in the headline indices from the government’s quarterly Business Outlook Survey and the latest monthly report on consumer confidence provide further evidence that Japan’s economy is returning to growth, but we knew that already. The …
13th March 2013
The slump in machinery orders in January illustrates the divergence between the improvement in sentiment in financial markets and what is actually happening on the ground. Of course, it is too soon to expect “Abenomics” to transform the incoming economic …
11th March 2013
After what proved to be only a brief pause, the slide in the yen and associated surge in the Nikkei have both resumed with a vengeance. A yen/dollar exchange rate of 100 and a further rally to 13,000 on the Nikkei are certainly plausible targets for the …
The Bank of Japan’s decision to leave policy on hold today was widely expected in the light of the leadership changes due later this month. Two Board members did propose tweaks to the framework which might find more favour once the new …
7th March 2013
The second estimate of Japan’s Q4 GDP, due on Friday (8th), is likely to show that the economy was not quite as weak as initially thought at the end of last year. In fact, there is a good chance that output increased fractionally. More timely data suggest …
6th March 2013
The year-on-year increase in labour cash earnings in January was flattered by late payments of winter bonuses. Underlying wage growth is still negative, meaning that households have been relying on falling prices to maintain spending. … Higher inflation …
5th March 2013
One of the policy changes that the new Bank of Japan Governor is likely to consider is a further clarification of the 2% inflation target. Mr Kuroda himself has reportedly suggested an explicit horizon of two years. As it happens, the consumption tax …
4th March 2013
The smaller-than-expected increase in industrial production in January is a reminder of the fragility of the recovery in Japan, and perhaps in global activity too. The output projections made by firms for the following two months and the further pick-up …
28th February 2013
The two-day meeting of the Bank of Japan’s Policy Board which concludes next Thursday (7th March) will of course be overshadowed by the imminent departure of Governor Shirakawa and his two Deputies. The Board will probably be happy to sit on the sidelines …
27th February 2013
The recent sideways trading in the yen and the Nikkei may simply be a pause in the trends, which would not be unusual following such rapid moves. Nonetheless, we do have three more fundamental concerns. The first is that any further decline in the yen …
25th February 2013
While the headlines have focussed on the size of Japan’s merchandise trade deficit last month, the more important development in the latest trade data was the strength of exports. We suspect that a revival of global demand rather than the slide in the yen …
20th February 2013
The government is due to announce its nominee for Bank of Japan Governor in the next few days, with expectations running high that the successful candidate will set policy-making on a new course. The emergence of a new front-runner for the post suggests …
18th February 2013
The small contraction in Q4 and revisions to back data mean that Japanese GDP fell in each of the last three quarters of 2012. However, more timely monthly indicators and surveys already show that the economy is picking up at the start of 2013. The weak …
14th February 2013
The jump in consumer confidence in January underlines just how big a task the Abe government has to meet the high expectations now spreading well beyond the financial markets. However, the improvement in sentiment should help to kick-start the economic …
12th February 2013
We expect the two-day meeting of the Bank of Japan’s Policy Board to conclude this Thursday (14th) without any major policy initiatives. A weak Q4 GDP figure might still prompt the Board to add another ¥10 trillion to the asset purchases scheduled for …
11th February 2013
Hopes that a new leadership team at the Bank of Japan will deliver real change probably have a little further to run, even though the transition could still become quite messy. However, the latest Economy Watchers Survey has underlined just how big a task …
The continued recovery in machinery orders in December suggests that business investment is on the mend. On balance, we still think that GDP contracted for a second successive quarter in Q4 2012, which would do nothing to discourage talk of more …
7th February 2013
Bank of Japan Governor Shirakawa’s announcement that he intends to leave office in March, a few weeks early, might ease the transition to a new leadership team. However, his move may not advance the process that much, depending on how accommodating the …
5th February 2013
The consensus is that Japan avoided two successive quarters of contracting GDP at the end of 2012, albeit only just. In contrast, we still expect a small decline. Looking ahead, we are tweaking our forecasts for 2013 and 2014. Most commentators are …
4th February 2013
Japan’s economy appears to have suffered a second successive quarterly contraction at the end of 2012. The weakness was broad-based. Measures of industrial output, investment, consumer spending and exports all declined in Q4. But this is arguably old …
31st January 2013
Hopes that yet more fiscal stimulus will transform the prospects for Japan’s economy, or at least make a meaningful difference to GDP in the next year or so, are overdone. The government’s credibility on this issue is already being undermined by mixed …
30th January 2013
Despite the headlines, the policy overhaul and additional asset purchases announced by the Bank of Japan last week were timid rather than “bold”. That was the initial reaction in the financial markets too. However, the focus has swiftly moved on to the …
28th January 2013
Japan’s record trade deficit in 2012 mainly reflected the fragility of the global economic recovery and a persistently high bill for energy imports, with currency strength playing a secondary role. Nonetheless, this is unlikely to prevent some officials …
24th January 2013
A lack of demand, rather than the level of interest rates or problems with credit supply, remains the key factor holding back broad monetary growth in Japan. … Monetary Indicators Monitor (Dec. …
23rd January 2013
The Bank of Japan’s adoption of an explicit 2% inflation target after this was called for by the new government has added to fears that central banks worldwide will be forced to monetise public debt and engage in competitive currency devaluations. …
Despite the much-hyped announcement of “open-ended easing” to meet a new 2% inflation target, today’s policy overhaul by the Bank of Japan disappoints in many respects. In particular, the ceiling on asset purchases in 2013 is unchanged, the additional …
22nd January 2013
Markets have, somewhat implausibly, welcomed the returned of Prime Minister Abe as signalling something of a fresh start for Japan. But there is a risk that today’s investor optimism will turn to disillusion if the change of tack loudly heralded by Mr. …
21st January 2013
We expect the two-day meeting of the Bank of Japan’s Policy Board to conclude next Tuesday (22nd) with a joint statement on policy cooperation between the Bank and the government, the unveiling of a “new” inflation target of 2%, and another increase of at …
16th January 2013
The announcement of the government’s ¥10.3 trillion supplementary budget on Friday has been widely welcomed. However, it is unlikely to provide the boost to the economy the Cabinet Office expects. In practice, the budget just rolls over the extra spending …
14th January 2013
In announcing yet another fiscal stimulus package, heavy on public works spending and subsidies for popular projects, Japan’s new government is simply repeating what the others have done before. If anything, the measures cast further doubt on the …
11th January 2013
Expectations that a higher inflation target and a “new accord” with the government will prompt much more aggressive monetary easing have continued to weaken the yen. However, a closer look at the proposed reforms at the Bank of Japan does not reveal any …
9th January 2013
Vehicles sales increased for a third month running in December suggesting that demand is rebounding following the expiry of the eco-car subsidy. However, demand for other consumer durables remains weak and, with labour market conditions remaining …
7th January 2013
With the return to power of the Liberal Democratic Party the yen has weakened sharply and the Nikkei has strengthened on the belief that the incoming government will push the Bank of Japan into greater monetary easing and further loosen the fiscal purse …
In this final Weekly of the year we take a look ahead to some of main events and themes that will shape Japan’s economy in 2013. Key among these are the incoming LDP government’s first budget and the replacement of Mr Shirakawa as Bank of Japan Governor. …
24th December 2012
At its Policy Board meeting today, the Bank of Japan extended its asset purchase program and announced a review of its inflation target. Since Sunday’s election, the incoming LDP government has stepped up the pressure on the Bank to engage in more …
20th December 2012
The incoming LDP government is likely to put increasing pressure on the Bank of Japan to enact more aggressive monetary easing. But the latest data show that monetary conditions are already extremely loose, and the constraint is a lack of demand rather …
19th December 2012
The yen has weakened markedly over the last month on anticipation of more aggressive monetary easing as the incoming LDP administration turns the screws on the Bank of Japan. However, the Bank is already committed to significant further easing in order to …
18th December 2012
As had been widely expected, Sunday’s election has returned the Liberal Democratic Party of Japan to power after a three-year absence. We can expect a two-pronged assault on deflation with significant fiscal stimulus and a push for more aggressive …
17th December 2012
At the time of writing, the outcome of the 16th December Lower House election is not yet clear. However, the dire Q4 Tankan survey, released on Friday, underlined the scale of the challenges facing the new government. In this Weekly we look at the key …
The Bank of Japan’s Tankan survey showed business conditions deteriorated sharply in Q4, adding to evidence that the economy is likely to have contracted for a third consecutive quarter. The winner of Sunday’s Lower House election is likely to seize on …
14th December 2012
