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On the basis of figures released today, Japan’s recovery appears to be on track. But recent data have not been uniformly positive and the next few months are likely to be bumpy. … Economic outlook improving but challenges …
10th May 2012
We have little doubt that the Japanese economy returned to growth in Q1 but it is looking increasingly likely that growth will slow sharply again in Q2 and we wouldn’t completely rule out a renewed contraction. Although the economy will grow over the year …
7th May 2012
The increase in labour cash earnings in March could be an early sign of improvement in the Japanese economy. Although base effects played an important part, other labour market indicators suggest conditions are improving, and this could eventually show …
2nd May 2012
Aggressive monetary easing alone will not be enough to boost prices and activity in the real economy: structural changes to the supply side of the economy are also necessary. Reducing regulation, increasing participation in the labour force and easing the …
30th April 2012
Today’s data releases were inevitably overshadowed by the outcome of the Bank of Japan’s Policy Board meeting, but they were disappointing too. Indeed, they suggest that Japan’s economic recovery may already be stalling again after the likely return to …
27th April 2012
The Bank of Japan’s Policy Board failed to impress with the additional monetary “stimulus” announced today. Any market impact from the ¥10 trillion increase in outright purchases of JGBs was offset by an extension of the period over which the buying will …
Expectations that the Bank of Japan will announce a further increase in asset purchases alongside the publication of updated economic forecasts on Friday are now so high that the Policy Board will have to loosen policy again or risk reversing the …
24th April 2012
Many commentators appear to believe that Japan’s economy could recover from deflation and grow more strongly if only the Bank of Japan were willing to step up its asset purchases. Some also argue that the additional policy measures announced in February …
23rd April 2012
In this Weekly we present our updated GDP forecasts. The Japanese economy looks set to return to growth in Q1 after contracting in four of the last five quarters. We expect the economy will continue to expand over the rest of the year as …
According to the Bank of Japan’s latest Senior Loan Officer Survey (SLOS), loan demand from firms and households jumped in Q1. The pick-up in household demand is particularly encouraging. The survey therefore adds to the evidence that the economic …
20th April 2012
Strong annual export growth in March was flattered by the disruption caused by the Great East Japan Earthquake last year and is still heavily dependent on the recovery in the US. Nonetheless, net trade will have provided a positive contribution to GDP …
19th April 2012
Signs of a recovery in the Japanese economy are becoming more evident as early indicators for March show activity has picked up after a slow start to the year. Confidence is increasing and the eco-car subsidy is providing a strong prop to retail spending. …
18th April 2012
March’s consumer confidence survey, released today, shows sentiment continuing to recover, although it remains below last year’s pre-disaster level. Consumer inflation expectations are also rising again. … Consumer Confidence …
17th April 2012
As if the Bank of Japan were not facing enough political pressure to ease policy further, some commentators have cited the recent contraction in the monetary base as additional evidence that a lot more needs to be done. Our sympathies lie with the central …
16th April 2012
The unexpected jump in core machinery orders in February is clearly welcome but, contrary to many of the headlines this morning, it does not signal a strong recovery in Japan’s capital spending. … Machinery Orders …
11th April 2012
The focus has quickly shifted to the second April meeting of the Bank of Japan’s Policy Board after the widely anticipated decision not to announce any further easing measures today. The publication of updated economic forecasts on the 27th might provide …
10th April 2012
The employment component of the Tankan provided some welcome good news in an otherwise lacklustre survey. The employment index fell to its lowest level in four years, indicating that Japanese firms have now eliminated much of the over-employment that has …
9th April 2012
The Bank of Japan’s Policy Board two-day meeting, which concludes on Tuesday (10th), has been made more interesting by two recent developments: the disappointingly weak Tankan survey and another spike in political pressure for further easing. But while we …
4th April 2012
The Bank of Japan’s quarterly Tankan survey showed business conditions in Japan remained lacklustre in Q1 despite some recent improvements in the monthly data. Respondents forecast only a marginal further improvement in Q2, suggesting the chances of a …
2nd April 2012
The government has finally succeeded in submitting a bill to parliament to increase the consumption tax. This is has been a long time coming and is an important step forward in putting the public finances on a sustainable path. However, the passage of the …
The surprisingly strong rise in Japanese retail sales in February largely reflects a number of temporary factors, including an extra shopping day due to the leap year and earthquake-related insurance payouts. As these props fade, sales could fall sharply. …
29th March 2012
The Bank of Japan’s Tankan survey for March (to be released on Monday) will probably show a small improvement in business conditions in the first quarter, consistent with a return to growth in GDP, as well as a slightly brighter outlook. However, the …
27th March 2012
Confidence among Japan’s small and medium-sized enterprises (SMEs) jumped sharply in March after several months of small declines. However, sentiment is clearly fragile as firms expect conditions to deteriorate again in April. … SME Confidence …
Analysis of conditions for small and medium sized enterprises tends to be overlooked in favour of conditions for large manufacturers despite the importance of the sector to the economy. In this Weekly we take a brief look at Japan’s SMEs and the business …
26th March 2012
Japan’s export figures saw a marked improvement in February amid signs of recovery in the global economy. As things stand, net exports could boost Q1 GDP by up to 0.4%, helping the economy return to growth. … Net exports on course to boost Q1 …
22nd March 2012
The Japanese economy appears to have paused in January after the contraction in activity in the fourth quarter. The only support came from the government subsidy on fuel efficient cars which provided a big boost to retail sales and auto production. …
21st March 2012
The Bank of Japan’s extension last week of its program to support growth sectors is unlikely to make a major contribution to lifting Japan’s relatively low potential growth rate of just 0.5%. Although increasing access to capital would in theory support …
19th March 2012
The government’s Business Outlook Survey indicates conditions deteriorated slightly Q1, consistent with a further contraction in both the Q1 Tankan and GDP. However, the survey also suggests a rapid rebound later in the year as reconstruction-related …
14th March 2012
In 2011, Japan recorded its first full-year trade deficit since 1980. The three main factors responsible were the Great East Japan Earthquake, the slowdown in global demand and the increase in commodity prices. However, the appreciation of the yen during …
13th March 2012
The Bank of Japan’s decision to extend its support for lending to “growth sectors” rather than add to its Asset Purchase Program (APP) today appears to have disappointed some but was the outcome that had looked most likely. Additional asset purchases will …
February’s household survey, released today, suggests that Japan’s consumers still lack confidence in the recovery, while the January data on core machinery orders do not yet justify hopes of a strong rebound in business investment. We continue to expect …
12th March 2012
In this Weekly we look at how last year’s disaster has changed Japan’s economy in the long-term. In our view, the legacy stems mainly from the nuclear catastrophe which will have lasting effects on the energy sector, industry, trade and public finances. …
The Bank of Japan is likely to have been pleased with the market response to the policy measures it announced in February, especially as neither the additional asset purchases nor the tweaks to the language on the price stability target were quite as big …
8th March 2012
Japan’s current account swung into deficit in January, but this was mainly the result of seasonal factors and the deficit is likely to be reversed in February. Nonetheless this acts as a reminder of the growing structural pressures on the current account …
The reintroduction of a government subsidy on fuel-efficient vehicles propelled a big increase in retail spending and industrial production in January. The subsidy should provide some support to auto production and sales this year, but we expect the …
5th March 2012
January’s increase in industrial production and forecasts for further rises in February and March point to a return to GDP growth in Q1. However, further increases in output beyond Q1 are far from assured as firms will soon be dealing with tight …
29th February 2012
The sharp rise in retail spending in January does not herald a resurgence in consumer spending. Sales are likely to drop back when one-off supports, such as the temporary reintroduction of the eco-car subsidy, run their course in the coming months. That …
28th February 2012
Japan’s stock market has been on a roll. We do not expect the good times to last. Although we are revising up our end-2012 and end-2013 forecasts for the Nikkei 225 slightly, to 7,750 (versus 7,500 previously) and to 8,100 (versus 7,600), respectively, …
27th February 2012
Recent increases in the price of oil to their highest level since 2008, and the possibility that they may climb even higher, raise questions over the sustainability of Japan’s economic recovery. In this Weekly we look at whether higher prices pose a …
The yen has fallen to its lowest level against the dollar in more than six months, with the exchange rate now just a whisker below 80. The principal catalysts for the weakening of the currency have been a shift in the relative prospects for unconventional …
21st February 2012
Economic conditions took a turn for the worse in November, as output, spending and exports all declined. Sentiment indicators for December were mixed with business confidence mostly stable, but falling amongst smaller firms, while consumer confidence …
Japan recorded its largest ever single-month trade deficit in January, as Chinese New Year holidays elsewhere in Asia caused exports to slump. Although the deficit should fall in February as the effect passes, other pressures remain and the country is …
20th February 2012
The Bank of Japan’s latest increase in its asset purchase program has caused asset prices to rally and the yen to weaken. However, it remains to be seen whether the effect will be sustained and translate into stronger economic growth remains to be seen. …
We welcome today’s move by the Bank of Japan to expand its Asset Purchase Scheme and formalise its inflation target. Although these moves should help support the economy and ease tensions in financial markets, they are only a small step in the right …
14th February 2012
The Japanese economy contracted in Q4 but is already showing signs of recovery. Reconstruction spending should initiate a return to growth in 2012, but it will be from a low starting point and in replacing lost assets the economy will be no better off …
13th February 2012
A large stream of income from Japan’s record holdings of overseas assets was the main reason the country did not record a current account deficit in 2011. With trade surpluses likely to be a thing of the past, a surplus on the income account is Japan’s …
Today’s report on core machinery orders in December adds to the evidence that GDP contracted in Q4. However, it also points to a recovery in non-residential investment this year that should help the economy to return to growth. Rising consumer confidence …
9th February 2012
Recent survey evidence has pointed to a further pick-up in economic activity in January, but also highlighted the considerable uncertainty in the economic environment. The results of January’s Economy Watchers’ Survey, published today, are a reminder of …
8th February 2012
The February meeting of the Bank of Japan’s Policy Board is likely to be uneventful, unless the Ministry of Finance orders another round of intervention in foreign exchange markets. If the Bank intervenes, it will almost certainly also expand its asset …
7th February 2012
The renewed rise in the yen against the dollar and growing evidence of the damaging effect on the real economy have brought further warnings from Ministry of Finance over the inappropriate strength of the currency. But whether the ministry intervenes …
6th February 2012
