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The Bank of Japan (BoJ) left rates unchanged today but the accompanying policy statement was more cautious on the outlook. This is a positive step but the BoJ will probably stay reluctant to implement the further quantitative easing measures which are …
7th September 2010
The Bank of Japan’s recent decision to loosen monetary policy further has had little impact on Japan’s asset markets and the yen, which have continued to take their cue from developments overseas. We expect this to remain the case. But while our year-end …
6th September 2010
The last of Japan's key activity data for July were pretty good, with industrial production, retail sales and housing starts all better than the consensus (as was last week's unemployment report). The slump in the manufacturing PMI in August illustrates …
31st August 2010
The Bank of Japan's decision to loosen monetary policy further at an emergency meeting today simply brought forward the move that was widely expected to take place early next month. The economic impact will be negligible and any impact on the yen will be …
Japanese government officials have stepped up their expressions of concern about the strength of the yen, but they appear to favour additional fiscal measures and further easing from the Bank of Japan rather than physical intervention in the FX markets. …
30th August 2010
The welcome fall in the unemployment rate in July starts to bring it back in line with the improving trends in other indicators of the health of Japan's labour market. Household spending fell back slightly month-on-month after a big jump in June, while …
27th August 2010
There is little that the Japanese government can do to engineer a fundamental shift in sentiment towards the yen, which is being driven by developments elsewhere. A change in rhetoric from the Bank of Japan might at least make the markets pause for …
25th August 2010
Japan's July trade data confirm that the surge in the yen is hurting export revenues. Nonetheless, export volumes still picked up again at the start of the third quarter. Imports have also slowed sharply after their unexpected strength in Q2 had played a …
Looking on the bright side, the fact that GDP was unexpectedly weak in the second quarter should at least have prepared the way for growth to pick up again in the second half of the year. But the increased uncertainty is clearly unwelcome and the rising …
23rd August 2010
The disappointing data for the second quarter have prompted us to revise down our forecast for Japan’s GDP growth in 2010. At the same time we are nudging our 2011 forecast higher, and our numbers for both years are probably above-consensus (certainly so …
19th August 2010
Japan's economy barely grew at all in the second quarter as domestic demand fell and rising imports offset most of the smaller boost from slowing exports. The markets are still focused on the yen, but it is worth watching fiscal developments too: today's …
16th August 2010
Fears about the impact the rising yen will have on exporters are overdone. Deflation has ensured that Japan remains internationally competitive. The bigger threat is slowing demand in overseas markets. … How uncompetitive is the …
A small fall in consumer confidence last month still leaves the headline measure at a high level, while the survey detail provides further evidence that the labour market is not as weak as the unemployment figures suggest. This should offset some of the …
12th August 2010
The Bank of Japan made only small tweaks to its policy statement today and, contrary to some expectations, introduced no policy shifts in response to the rise of the yen. Its ability to make a lasting difference to the exchange rate is in any case …
10th August 2010
The yen has continued to strengthen, while the economic outlook seems to be weakening. But the Bank of Japan is probably not in a position to do much in response on either front at its meeting this week. However, with deflationary pressure still very …
9th August 2010
The current conditions index of the Economy Watchers Survey (EWS) climbed back to a multi-year high in July. The survey raises some questions about the outlook, but, overall, its high level should be reassurance that momentum remains strong. … Bank Credit …
The rush of data at the end of July has added to doubts about the durability of the economic recovery, with sentiment in the equity market not helped either by further strength in the yen. However, growth appears to be slowing to a more sustainable rate, …
2nd August 2010
Today's headline data for June were bad, with the unemployment rate unexpectedly rising from 5.2% to 5.3% and industrial production unexpectedly falling by 1.5% m/m. However, these figures probably overstate the extent of the inevitable slowdown from the …
30th July 2010
The slowdown in the annual growth of retail sales reflects both the fading of the boost from government subsidies for car purchases and changes in fuel price inflation. Sales excluding both autos and fuel are continuing to recover, albeit at a much slower …
29th July 2010
Japan's smaller companies remain upbeat about business conditions, emphasising that fears of a double-dip here at least are exaggerated. … Small Business Confidence …
28th July 2010
The Bank of Japan’s apparently relaxed attitude to the strength of the yen can largely be explained by the fact that there is very little that the central bank can do about it anyway. The currency’s status as a safe haven is also, at least in part, a vote …
26th July 2010
The contribution of net trade to the quarterly increase in Japan’s GDP in Q2 was probably similar to the 0.7 percentage points in Q1, suggesting that overall growth was faster than generally anticipated as well. However, exports are already faltering when …
Japan's equity markets have taken their lead today from the overnight weakness in the US and the strength of the yen, but the May activity index at least was consistent with another healthy gain in GDP in the second quarter. … All Industry Activity Index …
22nd July 2010
The Bank of Japan’s latest Senior Loan Officer Survey confirms that banks are more than willing to lend. Demand for loans remains weak, especially from firms, but there is no support here for the claim that a lack of credit is holding back the economic …
21st July 2010
Japan’s trade surplus with China in the first quarter is not enough to justify talk of a fundamental shift in the balance of trade between the two countries. A closer look at the recent data suggests that the surplus was a temporary feature of the global …
20th July 2010
The success of “Your Party” in the Upper House elections has put the idea of an explicit inflation target for the Bank of Japan back on the policy agenda. A decent case can be made for at least a temporary target of 1% or more. But with household …
19th July 2010
The Bank of Japan’s policy statement today was cautious in its assessment of the economic recovery, revising up the growth forecast for this year to reflect the latest data but leaving next year’s growth forecast and the projections for the CPI …
15th July 2010
The further improvement in consumer confidence in June supports other survey evidence that Japan’s economic recovery still has plenty of momentum, despite the recent uncertainty in the financial markets and signs of weakness in some of the labour and …
13th July 2010
Japan’s economy has recently been growing at an annualised rate of around 5%, so some slowdown from here is inevitable. The consumer and business confidence surveys suggest that momentum is holding up well. We are also much less concerned than many about …
12th July 2010
The persistent sluggishness of bank lending has encouraged talk that a shortage of credit is undermining the recovery in Japan’s economy. We still do not find this argument remotely convincing. All the survey evidence suggests that weak lending by the …
The relapse in machinery orders in May was not quite large enough to conclude that the investment recovery is over before it has really begun, but it is unwelcome. The resilience of sentiment in the Economy Watchers Survey is at least reassuring. … …
8th July 2010
Looking back over the first half of the year, we have been right to be relatively bullish on the strength of the economic recovery in Japan. However, the yen has remained stronger and Japanese government bond (JGB) yields lower than we had anticipated, as …
5th July 2010
The third successive monthly increase in the unemployment rate will add to concerns that the recovery in domestic demand is too fragile to offset any slowdown in exports as a result of weakening global demand and the strong yen. In fact the labour market …
29th June 2010
We are not as worried as some about the impact of a stronger yen on the Japanese economy, but the past week saw two timely reminders of why it cannot be ignored completely. The recovery in export revenues (although not volumes) appears to be faltering, …
28th June 2010
May’s external trade data revealed two interesting developments. The first is a growing divergence between trends in the value of exports compared to the volume, probably a consequence of the stronger yen. The second is a sharp pick-up in imports. This …
24th June 2010
In our view the government’s mid to long-term growth strategy and fiscal plan is a triumph of spin over substance. Nonetheless, the markets appear willing to give the new administration the benefit of the doubt, perhaps helped by some misleading headlines …
21st June 2010
The manifestos for next month’s Upper House elections published today show a worrying lack of urgency or ambition in their commitments to sort out Japan’s dire public finances. In particular, the governing DPJ plans to wait until 2021 before starting to …
17th June 2010
The Bank of Japan’s new loan scheme is essentially a tool of industrial policy (and a clumsy one at that) rather than a significant easing of monetary conditions. As such, it will not help the Bank’s credibility or reduce concerns about its independence. …
15th June 2010
Today’s Business Outlook Survey provides further evidence that Japanese companies are much less worried than the markets appear to be about the damage to economic prospects from the crisis in Europe and the strength of the yen. … Firms shrug off financial …
14th June 2010
We have become a bit more positive about the prospects for real progress on Japan’s public finances following the first week of Naoto Kan’s premiership. Nonetheless, the first real test will come at the G20 summit later this month. … New PM makes a good …
GDP growth was unexpectedly revised very slightly higher in the first quarter, keeping the Japanese economy on track to grow by at least 4% this year. Our well-above consensus forecast of 4.5% remains challenging but achievable, especially with consumer …
10th June 2010
The appointment of PM Kan’s cabinet has been accompanied by a flurry of tough rhetoric on the need to bring the public finances under control, echoing the shift of emphasis in this weekend’s G20 statement. The fiscal plan due this month will be the first …
8th June 2010
Speculation that the elevation of Finance Minister Kan to the premiership makes FX intervention more likely is a pretty poor reason to sell the Japanese currency. Nonetheless, we do expect political and fiscal risks to undermine the yen further. … Yen to …
7th June 2010
At face value, the weakness of business spending revealed in today’s Ministry of Finance (MoF) survey points to a downward revision to Q1 GDP, although not necessarily a very large one (perhaps from +1.2% to +0.8% q/q). More importantly, there is every …
3rd June 2010
The markets are probably right to shrug off the resignation of Japan’s Prime Minister, but the fragility of the government is a serious concern given the urgent need for a credible plan to tackle the huge public debt. The likely elevation of current …
2nd June 2010
Today's data were mixed, with weak industrial production and housing starts offset by better news from the manufacturing PMI and the labour market. However, all have been somewhat overshadowed by the Social Democratic Party's decision to quit the …
31st May 2010
The second successive monthly rise in the unemployment rate in April (to 5.1%) has been widely interpreted as a sign that the recovery in the domestic economy is already faltering. We are unconvinced. Most indicators of the health of Japan’s labour market …
Today’s April data on unemployment (up), household spending and prices (both down) were all worse than expected, although they do not yet make a convincing case that the recovery is faltering. … Unemployment, Spending & CPI (Apr …
28th May 2010
Japan’s exports will continue to rebound for several quarters yet, despite the problems in Europe and the surge in the yen. A significant deterioration is unlikely until 2011, by when we expect the world economy to be slowing again. … External Trade …
27th May 2010
The continued rebound of small business confidence in Japan is a good example of the disconnect that sometimes happens between the worries of financial markets and reality on the ground. … Small Business Confidence …
26th May 2010
