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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 …
We do not expect any changes in monetary policy from the Bank of Japan next week or for the rest of this year. The Policy Board could again be forced into action by the fallout from global financial markets, but this risk aside, it would take several …
30th September 2011
The sharp fall in retail sales in August was mainly due to the unwinding of special factors that have supported spending over the last three months. Nonetheless, consumer confidence remains low and with employment and earnings weaker than at the start of …
Confidence amongst small and medium sized businesses is back to the level it was before March’s disaster. Economic conditions are generally improving, although firms remain concerned about their financial position. … SME Business Confidence …
28th September 2011
The rout in financial markets last week reflected a realisation that the global economy is slowing and there are limits to how much policymakers can do about it. Japan’s government has little scope to provide an additional stimulus to the economy, with …
27th September 2011
The Japanese economy appears to have largely overcome almost all the initial disruption caused by the earthquake and tsunami in March. As spending and output approach pre-disaster levels, momentum has waned and activity in the economy appears to have …
23rd September 2011
Japan’s exporters face an uphill struggle for further growth due to the strong yen and slowing global economy, while imports are climbing due to Japan’s energy needs. Nonetheless, net trade is likely to provide a boost to GDP in Q3. … Exports struggle …
22nd September 2011
The prospect of a renewed widening of the spread between two-year yields in the US and those in Japan is being cited by some as a good reason to expect the yen to weaken if the Fed implements “Operation Twist”. That view seems overly-simplistic. The …
20th September 2011
The government’s Business Outlook Survey provides further evidence that the Japanese economy returned to growth in Q3, which should also be reflected in next month’s Tankan. However, the recovery has only a little forward momentum. … Recession appears …
13th September 2011
The recovery in consumer confidence stalled in August at a still low level, with sentiment on the outlook for employment worryingly depressed. Although there is nothing to suggest that the economy will have failed to return to growth in the third quarter, …
The renewed falls in confidence revealed in the latest Economy Watchers’ Survey and the decline in machinery orders add to other recent evidence that Japan’s recovery is now faltering again after the rebound from the March earthquake. … EWS (Aug) & …
9th September 2011
The yen initially fell against the dollar following the Swiss move to set a formal limit on the strength of the franc. As it happens, we do not think that the authorities in Tokyo are ready to do the same for the yen. Indeed, the redirection of some safe …
7th September 2011
Domestic vehicle sales in Japan appear to be closely correlated with both consumer confidence and retail sales. Recent sharp gyrations in the monthly retail sales data make understanding their underlying trend more difficult, but vehicle sales seems to …
6th September 2011
3rd September 2011
The slowdown in industrial production growth in July suggests that the recovery in output may have largely run its course and that output may not fully recover to its pre-disaster level. … Industrial recovery peters …
1st September 2011
The election of a new prime minister is as unlikely to mark a change in the politics of Japan as it is to change the economic outlook. Whilst we sincerely hope new Prime Minister Noda can provide the leadership Japan so greatly needs, we suspect his …
31st August 2011
We have revised our Japan GDP and inflation forecasts out to 2013 but still expect a full-year recession in 2011. The smaller than expected contraction in second quarter GDP suggests that the rebound in spending and production that we had anticipated …
30th August 2011
Japan’s government appears to have changed course and dropped its attempt to weaken the yen in favour of mitigating the impact of a strong currency. For now we are sticking to our view that the yen will fall back as the Bank of Japan eases further and as …
25th August 2011
Signs of economic recovery in Japan were overshadowed by a flight from risk in global financial markets which caused sharp movements in equity prices and bond yields. The continued strength of the yen was the focus for policymakers, but intervention in …
24th August 2011
Japan’s policymakers have sat on their hands and watched the yen climb to new highs since intervening in foreign exchange markets earlier this month. We expect recent financial market turmoil to be the catalyst that forces authorities to act to both …
23rd August 2011
Now that the hard work of restoring shipments to pre-disaster levels is all but complete, Japan’s exporters face an uphill struggle to achieve further growth. Exports had been flat for a year before the disaster when the global economy was in better shape …
19th August 2011
Japan’s economy contracted again in Q2, despite a faster-than-expected recovery from March’s disaster. GDP should start to expand in Q3 as output continues to recover and reconstruction-related expenditure kicks in. Nonetheless, headwinds will act as a …
16th August 2011
The revision to the CPI base-year resulted in a marked downward revision to inflation, showing clearly that Japan is still in the grip of deflation. Although the Bank of Japan has only recently expanded its asset-purchase scheme, we would not rule out …
Core machinery orders, which are a reliable and timely indicator of business capital spending, jumped in June, however businesses expect orders growth to fall away sharply in Q3. This does not necessarily mean that investment will also be weak since …
12th August 2011
GDP probably fell in Q2, but not by as much as initially expected thanks to the rapid restoration of supply chains. The direct implications for policy are negligible, and are likely to be overshadowed by policy responses to the recent movements in the yen …
11th August 2011
The recent slide in the Nikkei and the continued strength of the yen point to the economy and the exchange rate moving in opposite directions, driven by different forces. The policy prescription, however, is likely to be the same for both ailments: …
10th August 2011
Consumer confidence continued to recover in July, reaching its highest level since March. Consumers remain particularly concerned, however, about employment prospects leaving overall confidence some way below pre-disaster levels. … Consumer Confidence …
The intervention to weaken the yen was only ever going to meet with limited success so long as the forces pushing the currency higher remain intact. That does not necessarily mean that the hollowing out of Japanese industry will accelerate. … Don’t …
9th August 2011
The success of today’s intervention to reduce the value of the yen may prove short-lived, so long as the strong forces pushing the currency higher remain intact. Nonetheless, we still think the yen is likely to come under gradual pressure against the …
5th August 2011
