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Note: We’ll be discussing the China growth/stimulus question, the BOJ’s policy outlook, Indian food price inflation and more in our monthly Asia Drop-In on Thursday, 31 st August . Register here to join the online briefing. This page has been updated with …
31st August 2023
29th August 2023
Momentum behind price rises starting to slow The economic data released this week suggest that the case for policy rate hikes in response to above-target inflation is still not compelling. For a start, the Tokyo CPI showed that inflation excluding fresh …
25th August 2023
This page has been updated with additional analysis since first publication. Underlying inflation losing momentum While underlying inflation remained at a 40-year high in the August Tokyo CPI, the momentum of price increases has slowed markedly which …
This page has been updated with additional analysis since first publication. PMIs point to continued strength in economic activity The composite PMI remained high in August which points to continued strength in GDP growth, but a slowdown from the bumper …
23rd August 2023
We estimate that firms have now passed on all of the increase in import costs to consumer prices which suggests that inflation will slow sharply over the coming months. Japan’s import prices have fallen sharply in recent months. However, goods inflation …
22nd August 2023
Economy starting to run hot Given that our GDP tracker pointed to a much smaller rise, it’s possible that the blistering 1.5% q/q rise in Q2 GDP will be revised down. But that strength is consistent with the composite PMI, which hit a decade-high in May. …
18th August 2023
This page has been updated with additional analysis since first publication. Underlying inflation will peak soon Headline inflation was unchanged in July as falling energy prices offset a further pick-up in underlying inflation. While we expect goods …
This page has been updated with additional analysis since first publication . Net trade boost reversing in Q3 The July trade data suggest that the huge boost from net exports in Q2 will unwind this quarter, which will result in a sharp slowdown in GDP …
17th August 2023
We no longer expect the economy to enter a recession across the second half of the year. But with external demand set to remain soft and real household incomes declining for a while yet, the recent strength in activity won’t last. And with plunging import …
16th August 2023
Most of the plunge in import volumes last quarter reflects lower energy imports. With the Ukraine war rekindling concerns about energy security and energy prices remaining stubbornly high, import volumes may continue to fall in future even if domestic …
15th August 2023
This page has been updated with additional analysis since first publication. Above-trend growth won't be sustained Japan’s economy expanded at an extremely rapid pace last quarter, but we expect a renewed slowdown across the second half of the year. The …
Wage growth & external demand holding up Data released this week showed that overall wage growth remained above 2% for the second consecutive month as a slowdown in regular earnings growth was offset by a strong contribution from bonus payments as firms …
11th August 2023
This page has been updated with additional analysis since first publication. Wage growth should slow as labour market slackens Wage growth remained strong in June as summer bonuses rose, but regular pay growth slowed and is unlikely to become strong …
8th August 2023
10-year yield continues to rise The Bank of Japan’s defence of Yield Curve Control (YCC) has devolved this week into a rearguard action. Since last Friday’s policy tweak to allow the 10-year Japanese government bond (JGB) yield to rise above 0.5%, the …
4th August 2023
Labour market may hold up better than we expect The fall in the job-to-applicant ratio to its lowest in a year suggests that labour market conditions are continuing to loosen despite a fall in the unemployment rate in June. The labour force increased by …
1st August 2023
This article has been updated with additional charts and analysis since it was first published. Firms downbeat about output in Q3 June’s activity data were broadly positive for Q2, with both the industrial production and capital goods shipments data …
31st July 2023
The BoJ’s decision earlier today to, in effect, end its long-standing Yield Curve Control (YCC) policy means that long-term government bond yields in Japan will become more responsive to economic conditions and developments in global markets. While that …
28th July 2023
The Bank of Japan announced today that it will allow 10-year yields to rise above the 0.5% ceiling – which it says it is retaining – to a new “just-in-case” cap of 1.0%. With signs mounting of a virtuous cycle between inflation and wages, the chances of …
Real household incomes falling at rapid pace Data released last week underline that Japanese households are struggling to cope with rising living costs. While labour income rose at a robust pace, a slump in government transfer payments resulted in a 1.6% …
The Bank of Japan announced today that it will allow 10-year yields to rise to 1.0% instead of the current ceiling of 0.5%. We still think that a slowdown in inflation will convince the Bank to keep its short-term policy rate unchanged over the coming …
This article has been updated with additional charts and analysis since it was first published. Upside risks to our services inflation forecasts Headline inflation was unchanged in Tokyo this month, but a jump in services inflation helped power a renewed …
Comparing the proper inflation gauges reveals that core inflation in Japan remains far lower than elsewhere. And with most of the recent pick-up in core inflation reflecting soaring imports costs, the Bank of Japan’s assessment that above-target inflation …
26th July 2023
Japan bulls have proposed a range of explanations to justify the outperformance of the TOPIX relative to other equity indices over recent months. While there are some signs that firms are enjoying stronger pricing power, we aren’t convinced that a …
24th July 2023
Note: Join our Asia Drop-In on whether China is in a balance sheet recession, the July BOJ meeting and more at 09:00 BST/16:00 SGT on Thursday, 27 th July . Register here . This article has been updated with additional analysis and charts since it was …
Note: Join our Asia Drop-In on whether China is in a balance sheet recession, the July BOJ meeting and more at 09:00 BST/16:00 SGT on Thursday, 27 th July . Register here . Tax revenue disappoints According to the Bank of Japan’s flow of funds accounts, …
21st July 2023
Bank will revise up 2023 inflation forecast Early signs that virtuous cycle between wages and prices has finally arrived However, widening of tolerance band would risk renewed bond market sell-off At the upcoming meeting, the Bank of Japan will revise …
This article has been updated with additional charts and analysis since it was first published Inflation should fall back towards target through year-end Electricity tariff hikes that went into effect last month led to a rise in headline inflation. …
This article has been updated with additional charts and analysis since it was first published Exports picking up but downturn still on the cards The trade deficit narrowed in June as export values rose faster than import values, largely reflecting the …
20th July 2023
Shunto may be more influential than we thought Regular wage growth hit 1.8% y/y in May, the biggest rise in almost thirty years. It’s still too early to tell but the May data might mark the start of the elusive virtuous cycle between rising wages and …
14th July 2023
Last year’s sharp weakening of the yen hasn’t boosted goods exports, not least because most exports are invoiced in foreign currency and exporters haven’t slashed prices. Instead, it has lifted corporate profits which has encouraged firms to invest more …
13th July 2023
This article has been updated with additional analysis and charts since it was first published. Business investment probably still grew in Q2 The fall in “core” machinery orders in May points to a significant fall in spending on machinery and transport …
12th July 2023
Underlying inflation is set to fall through the coming quarters as the price shock from the war in Ukraine and the yen selloff last year dissipates. What’s more, the economy is set to enter a mild recession in the second half of the year, dragged down by …
11th July 2023
China has stepped up its support of the renminbi and Japan appears to be edging closer to direct intervention to prop up the yen. While pressure from higher US interest rates may well continue in the short term, we think that both currencies will rebound …
7th July 2023
China to restrict germanium and gallium exports Retaliating against joint American-Dutch-Japanese efforts to limit Chinese access to American semiconductor technology, China announced on Monday that it will restrict exports of germanium and gallium. These …
Strong wage growth in May won’t last Regular wage growth hit a near three-decade high in May and bonus payments surged, resulting in a jump in labour cash earnings. But we wouldn’t read too much into the result, since it appears to be mostly driven by a …
Processed food inflation hit a fresh high in May but the recent moderation in food import prices as well as likely declines in domestic fertiliser prices suggest it will soon start to moderate. Food inflation reached an eye-watering 15.5% in the euro-zone …
5th July 2023
This page has been updated with additional analysis and charts since it was first published Economy probably won’t do as well as Q2 Tankan suggests Today’s Tankan survey showed a turnaround for the flagging manufacturing sector, while the services sector …
3rd July 2023
Tailwind from weaker yen won’t be sustained The recent surge in the Topix to a post-1990 high has prompted many commentators to declare that Japan has finally overcome years of stagnation. There’s certainly little evidence for that in the broader …
30th June 2023
This article has been updated with additional analysis and charts since it was first published Downhill from now for underlying inflation The end-month data rush mostly affirms our view of the economy. The first fall in underlying inflation in Tokyo in …
Central bankers have struck a hawkish tone at the ECB’s forum in Sintra this week, suggesting that rates haven’t yet peaked and cuts are not on the cards for some time. But there were some interesting differences in tone. Most notably, the ECB and BoE …
28th June 2023
At first glance, there’s little sign of friend-shoring among Japanese firms as they have directed a rising share of their outward foreign direct investment at China. However, this largely reflects China’s rising economic heft and firms are reducing their …
26th June 2023
Strength in inflation not prompting a rethink A Reuters survey published before last week’s Bank of Japan meeting showed that two-thirds of analysts polled expected the Bank to scale back policy easing this year, with 43% predicting it would happen as …
23rd June 2023
This page has been updated to include additional analysis and charts. PMIs suggest economic downturn might have started in June The fall in manufacturing PMI readings in June’s flash estimates suggest the recession we’re expecting in the second half might …
This page has been updated to include additional analysis, charts and a table. Inflation should fall below 3% by year-end Nationwide inflation played out largely in line with the timelier Tokyo CPI data in May. Headline inflation fell largely due to a …
Inflation to dip below 3% by year-end Headline inflation fell nationwide largely in line with the timelier Tokyo CPI data, while once again, underlying inflation rose despite that. As falling import price inflation brings down inflation in consumer prices …
Note: We’re talking inflation and the BOJ, slowing Indian growth, and regional monetary easing in our Asia Drop-In on Thursday, 22 nd June. Register now . The female participation rate has surged over the past decade but more favourable attitudes among …
19th June 2023
Note: We’re talking inflation and the BOJ, slowing Indian growth, and regional monetary easing in our Asia Drop-In on Thursday, 22 nd June. Register now . The Bank of Japan left its monetary policy settings and assessment of the economy unchanged today. …
16th June 2023
Note: We’re talking inflation and the BOJ, slowing Indian growth, and regional monetary easing in our Asia Drop-In on Thursday, 22 nd June. Register now . Car exports catch up with other exports The external trade figures released this week suggest that …
More inaction to come As was widely expected, the Bank of Japan didn’t make any policy changes to either the short-term policy rate or Yield Curve Control (YCC) at Governor Ueda’s second meeting today. There was also no change to the Bank’s less upbeat …
