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Industrial production surprised on the upside in December, and survey evidence points to another strong month in January. Whilst it is nice to get some good news on the Japanese economy, it is hard to see how this rebound can be sustained as global demand …
31st January 2012
Growing uncertainty about the future of Japan’s power supply will accelerate the hollowing out of industry as electricity shortages discourage investment in Japan and encourage a shift of production abroad to find secure, and cheaper, power sources. … …
30th January 2012
Japan today announced that it ran a full year merchandise trade deficit in 2011. Although one year’s deficit is relatively unimportant, we expect it will be repeated over the coming years. … The end of Japan’s trade …
25th January 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 …
23rd January 2012
The Japanese Finance Minister has floated the possibility of another round of intervention in foreign exchange markets, this time aimed at stemming the rise of the yen against the euro. However, this would not necessarily require purchases of the European …
The January meeting of the Bank of Japan’s Policy Board will yield updated forecasts for GDP and inflation but probably little else. We don’t expect any changes in the Board’s monetary policy stance, although we think further action will eventually be …
19th January 2012
The rebound in core machinery orders in November reduces but does not extinguish our concerns that the recent upward trend in orders has come to an end. The economic outlook is not conducive to investment spending, increasing the probability that GDP …
16th January 2012
The FY2012 budget has increased our concerns that a tipping point in Japan’s public finances is getting closer. The proposed increase in the consumption tax to 10% would not be enough to put the public finances on a sustainable track. A larger increase is …
Recent survey evidence, including today’s Economy Watchers’ Survey, has indicated a pick-up in activity in December. However, the evidence also suggests that this is unlikely to continue as firms expect business conditions to deteriorate again in the …
12th January 2012
Japan's current account surplus is on a declining trend, with the merchandise trade balance already in annual deficit. These developments will add to concerns over Japan's ability to finance its huge public debt, although for now at least the country's …
9th January 2012
In this Weekly we take a look back at 2011. The devastating earthquake and tsunami in March was undoubtedly the most significant event of the year. Principally a human tragedy, the disaster also had substantial economic and political consequences. The …
22nd December 2011
The weakening global economy and the strong yen are weighing heavily on Japanese exports and will probably mean GDP contracts in Q4. The downgrade by a domestic credit rating agency highlights the government’s limited scope for providing further fiscal …
21st December 2011
Activity and output rebounded in October after the weak performance of monthly indicators at the end of the third quarter. Sentiment and early indicators for November, however, show a turn for the worse with businesses and consumers expecting a further …
20th December 2011
The headwinds facing the Japanese economy are more likely to grow than abate, prompting us to revise down our GDP forecasts out to 2014. A sharp slowdown in the global economy is likely to leave Japanese GDP reliant on domestic demand which will find …
19th December 2011
Worse than expected results from the Tankan survey and deteriorating global conditions have prompted us to revise down our Japan GDP forecasts for 2012 and beyond. We continue to expect a full-year recession in 2011 and a rebound in growth in 2012, but …
15th December 2011
Japan’s staggering level of public debt makes Greek and Italian liabilities look like pocket change. Its financial liabilities over the next few years are many multiples of its euro-zone peers and its politicians remain blind to the need for urgent reform …
13th December 2011
The recovery in consumer confidence came to a halt in October and started to unwind in November. Consumers remain particularly concerned about employment prospects, but are also increasingly worried about their income. … Consumer Confidence …
12th December 2011
The Japanese economy is sinking back into deflation. Domestically-generated inflationary pressures are non-existent, while the appreciation of the yen accentuates the effects of falling global commodity prices by reducing the cost in yen of imports. …
The government’s Business Outlook Survey indicates a marked deterioration in conditions in Q4, and is consistent with a contraction in both the Q4 Tankan survey and GDP. The survey suggests the economy has lost what little forward momentum it had earlier …
9th December 2011
Month-to-month volatility in core machinery orders is nothing new. But the latest drop is unusually large and, coupled with evidence from the Economy Watchers’ Survey that business confidence is falling, suggests that the economy is weakening. … Falling …
8th December 2011
The Japanese government has announced a fourth fiscal budget in a sign it remains reliant on its fiscal firepower to support the economy. But there are limits to how much it can do and it is already living well beyond its means. The new budget can only be …
5th December 2011
Disruption to Japanese industrial production from the floods in Thailand appears to be diminishing, boosting output. Beyond this, there is little momentum and even this is likely to wane as emerging market growth slows and the developed economies teeter …
30th November 2011
Japan’s labour market is weaker than at the start of the year but the sharp rise in the unemployment rate in October makes conditions look worse than they are. The economy is not shedding jobs, but neither is it creating them. … Labour market fragile, …
29th November 2011
Recent events in advanced economies have underscored just how quickly market sentiment towards sovereigns with unsustainable finances can shift. Last week two warning shots were fired across the bow of the Japanese government to remind policymakers that …
28th November 2011
GDP growth turned positive in Q3 but monthly data show the economy had stopped and gone into reverse by the end of the quarter. The first flush of data for October shows that conditions have remained difficult and business sentiment is fragile, although …
22nd November 2011
The sharp fall in exports in October was in part the result of the floods in Thailand. However, exports have been sluggish for over a year and are likely to remain weak due to slowing global growth and the impact of the strong yen, which firms have yet to …
21st November 2011
Temporary factors are likely to cause output in the auto sector to fall in the coming months. The period of restocking that has supported production appears to have largely run its course, both at home and abroad, while the damage caused to Japanese …
Prime Minister Noda’s announcement on Friday that Japan would join negotiations on the Trans-Pacific Partnership free-trade agreement is a step in the right direction. Not only would the pact open up the economy to imports, it would support a struggling …
14th November 2011
Today’s sharp fall in core machinery orders for September signals a slowdown in their upward trend. Worryingly, manufacturers expect this trend to turn negative in Q4. As orders are a good indicator of private capital spending, this suggests that …
10th November 2011
The Bank of Japan is unlikely to make any changes to its policy stance at its November meeting next week. The two main policy options available are a further increase in the size of the Bank’s Asset Purchase Program (APP) and an extension to the maturity …
Recent survey based evidence, including today’s Economy Watchers’ Survey, has indicated a pick-up in activity in October following three consecutive months of decline. However, a continued recovery is far from assured. In today’s other data, the increase …
9th November 2011
The intervention by the Japanese authorities last Monday has succeeded in weakening the yen and reducing exchange rate volatility, for now at least. The Ministry of Finance has a long history of trying to influence the value of the yen but success has …
7th November 2011
Intervention by the Japanese authorities to weaken the yen has failed to prop up the country’s ailing stock market. Admittedly, the slide in equity prices has been due to renewed concerns about the eurozone rather than to doubts about the benefits of a …
1st November 2011
Today’s unilateral intervention has only succeeded in weakening the yen a little (from around 75.6 per dollar to 79.5, then back to 77.9) and is unlikely to be enough to turn the tide. Meanwhile, the latest PMI and housing data underline the fragility of …
31st October 2011
Monthly data for September indicated a disappointing end to an unimpressive third quarter: industrial output and retail spending fell every month of the quarter while inflation turned positive for the first time in two and a half years. Nonetheless, GDP …
Currency markets brushed off the latest expansion to the Bank of Japan’s asset purchase scheme, sending the yen back through 76 to the dollar shortly after the announcement. Although we think it unlikely Japanese authorities will be able to arrest the …
28th October 2011
The Bank of Japan’s Policy Board is highly likely to cut its forecasts for GDP and inflation at its meeting tomorrow. Along with the fragility of financial markets and the strength of the yen, this should prompt a further ¥5 trillion expansion to the …
27th October 2011
The resilience of the yen and a reassessment of the relative strengths of the various pressures on the Japanese currency have prompted us to change the direction of our forecasts. We now expect the yen to appreciate to 70 against the US dollar by 2012 and …
Confidence amongst Japan’s small and medium-sized enterprises (SMEs) dipped slightly in October. Sentiment had recovered rapidly from March’s disaster and although it is expected to rebound in November, it has been broadly stable for several months with …
26th October 2011
A lack of credit is not a constraint on the Japanese economy, a lack of demand is. According to the latest Senior Loan Officer Survey, loan demand from Japanese households and firms has not recovered at all from the depressed levels it fell to after …
25th October 2011
Japan’s beleaguered housing sector is still waiting for a boost from reconstruction-related building activity. When it comes, it may be partially offset by falling demand for housing. Even before the disaster, housing loans had been declining. The …
Japanese GDP growth is almost certain to have turned positive in Q3, ending three consecutive quarters of contraction. However, the outlook is poor and momentum is fading. Consumer and business sentiment remains fragile and below pre-disaster levels, …
20th October 2011
The consumer confidence survey is the only direct gauge of consumer sentiment in Japan. In this Weekly we take a close look the construction of the survey and find it is a good leading indicator of a number of consumer-related variables, employment and …
18th October 2011
Bank lending fell again in September in year-on-year terms, but at its slowest rate in almost two years. Lending has already bottomed out on a month-on-month basis and the annual rate of change is set to turn positive by the end of this year. However, …
14th October 2011
Core machinery orders shot up in August, reversing their decline in July. Despite the month-on-month volatility, the trend is clearly upwards and orders should continue to grow. Nonetheless, they remain well below their pre-financial crisis level. … …
13th October 2011
In this Weekly we present our revised forecasts for Japanese GDP. The tail-end of the recovery from March’s disaster should ensure a return to growth in Q3, but beyond this the outlook has deteriorated. A weakening export environment and sluggish private …
11th October 2011
The services PMI showed activity in the tertiary sector increasing in September but that the outlook for Q4 is weak. The economy is becoming more reliant on public spending to keep it ticking over as private domestic demand has few remaining supports and …
6th October 2011
The decline in labour cash earnings is symptomatic of the deterioration in labour market conditions. With fewer workers employed and each earning less, consumer spending is likely to come under increasing pressure, and there appears little chance of a …
5th October 2011
The improvement in the Tankan survey in the third quarter supports other evidence that GDP will at least temporarily return to growth. However, the outlook appears poor, momentum is weak and without a further policy boost Japan risks a third period of …
4th October 2011
The latest data from Japan painted a gloomy picture of current conditions and suggest the risks of a treble-dip are increasing. GDP should have returned to growth in Q3, but could fall again in Q4. In our opinion, the only thing that will prevent the …
