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Weak Tokyo CPI may prompt BoJ inaction While we expect the Bank of Japan to lift its policy rate to 0.3% at next week’s meeting (see our BoJ Watch ), only one-third of analysts polled by Refinitiv expect a rate hike at that meeting. The financial markets …
26th July 2024
This website has been updated with additional analysis since first publication. Underlying inflation may moderate faster than we expect The sharp slowdown in inflation excluding fresh food and energy in Tokyo this month reduces the likelihood that the …
Following a wobbly period around the turn of the year, the economy is on the mend and should gather further momentum as real wage growth turns positive in the second half of the year. With goods inflation still having strong momentum, we now expect the …
25th July 2024
Bank has pledged that it will keep tightening policy if inflation evolves as expected If anything, weak yen creates upside risks to Board’s inflation forecasts Bank will hike its policy rate by 20bp in both July and October At its upcoming meeting, we …
24th July 2024
Recovery will retain momentum across second half of 2024 The strong rebound in the composite PMI in July suggests that the recovery of Japan’s economy will continue across the second half of the year. According to the flash estimate released today, the …
23rd July 2024
Mof intervenes again All signs are that Japan’s government sold US dollars to support the yen on Thursday and Friday last week. Bank of Japan data suggest that the intervention was a bit smaller than previous ones, perhaps because the yen was already …
19th July 2024
This website has been updated with additional analysis since first publication. Inflation will remain above target until early-2025 While the Bank of Japan will still see the July Tokyo CPI before its meeting later this month, the June nationwide figures …
Japan’s intervention in support of the yen is not enough in itself to generate a sustained rebound in the yen. But with the FOMC (finally) nearing its first rate cut while the BoJ continues to tighten its policy stance gradually, we think the tide is now …
17th July 2024
Drag from net trade will moderate Q2 GDP rebound While the widening of the trade deficit in June points to a sizeable drag from net exports on Q2 GDP growth, activity should still have rebounded last quarter. The 5.4% y/y rise in export values was weaker …
While higher interest rates will make owner-occupied housing less affordable, the Bank of Japan will only tighten policy gradually so detached house prices will probably hold up well. By contrast, there’s a risk of a sizeable correction in apartment …
15th July 2024
Goods inflation set to remain strong Data released this week showed that producer price inflation has jumped from 0.3% in January to 2.9% in June, though the bulk of that increase is due to a rebound in electricity & gas inflation. Producer prices of …
12th July 2024
The continued weakness of the renminbi and the yen against the US dollar despite the narrowing of interest rate differentials via-a-vis the US is something of a conundrum, but our sense remains that both currencies will rebound against the dollar later …
11th July 2024
While there are tentative signs that Japan’s economy is becoming more dynamic, this has yet to produce significant improvements in aggregate productivity. We still think that a more meaningful pick-up in productivity growth will only happen towards the …
10th July 2024
Regular earnings growth will approach 3% While base pay will probably be revised down somewhat in the final estimate, the preliminary estimate showed it rising the most in three decades and we expect it to accelerate a bit further over coming months. The …
8th July 2024
Government spending probably fell last year In its April WEO, the IMF estimated that Japan’s budget deficit widened from 4.2% of GDP in 2022 to 5.7% last year and will rise further to 6.5% this year. By contrast, we expect the deficit to have shrunk to 3% …
5th July 2024
With unhedged yield gaps still very much in favour of overseas bonds and hedged returns set to improve as overseas central banks slash borrowing costs, Japanese investors won’t respond to higher JGB yields by repatriating capital. And while we expect …
1st July 2024
This website has been updated with additional analysis since first publication. Tankan points to renewed strengthening in price pressures The Q2 Tankan survey suggests that economic activity will remain sluggish but the most striking development was the …
Yen sliding to multi-decade lows The yen continued its descent this week, climbing above the 160 mark against the dollar that triggered foreign exchange intervention in late-April . It has not been this weak since 1986. The Ministry of Finance this week …
28th June 2024
Industrial output set to fall yet again The strong rebound in industrial production in May suggests that Japan’s economy turned a turner this quarter, but if output falls as much as firms are expecting this month, that strength won’t last. The 2.8% m/m …
This website has been updated with additional analysis since first publication. Rebound in underlying inflation allows BoJ to hike rates further The continued fall in the job-to-applicant ratio isn’t translating into a higher labour market and the bulk of …
We are resending this publication because the previous version had the wrong headline. Retail sales point to strong consumption rebound Retail sales rose sharply in May which suggests that consumption may have rebounded even more strongly this quarter …
26th June 2024
Inflation slowdown creates dilemma for BoJ The minutes of the Bank of Japan’s April meeting released this week confirmed that many Board members were concerned about a renewed strengthening of price pressures caused by the weak exchange rate. Those …
21st June 2024
This page has been updated with additional analysis since first publication. Underlying inflation will fall below 2% in second half The jump in headline inflation in May mostly reflected electricity price hikes that have further to run. By contrast, …
Drag from net trade will hold back Q2 GDP rebound Trade volumes were little changed in May which suggests that net trade provided a small drag on GDP growth this quarter. The 13.5% annual rise in export values was a touch stronger than the analyst …
19th June 2024
While the economy has only narrowly avoided a recession, activity should rebound over coming quarters as real household incomes recover. Indeed, with inflation set to remain above the Bank’s 2% target this year and wage growth accelerating, we expect the …
18th June 2024
The Bank of Japan disappointed markets today by announcing that it will only present a detailed plan for reducing its bond purchases at its July meeting. We think it will also deliver a final policy rate hike then . Today’s BoJ meeting was a damp squib . …
14th June 2024
BoJ pledges to unveil taper plans next month With the Bank of Japan today disappointing financial markets by delaying any announcement on the reduction of its bond purchases to its July meeting, 10-year JGB yields initially dropped by around 5bp and …
Bank will deliver a final rate hike in July The Bank of Japan announced today that it will present a detailed plan for reducing its bond purchases at the upcoming meeting in July and we think it will also deliver a final policy rate hike then. Around …
While the official job openings figures have fallen since late-2022, the bulk of the evidence suggests that firms are facing increasingly severe job shortages. One explanation for the fall in job vacancies could be a change in firms’ recruitment …
12th June 2024
Rising car prices explain why US import prices from Japan haven’t fallen despite the sharp weakening of the yen. While growth in car prices has slowed as supply shortages have unwound, this hasn’t boosted export volumes so far and we think that the weak …
10th June 2024
Regular earnings growth hits 30-year high At first glance, the jump in regular earnings growth to a 30-year high of 2.3% in April is a clear sign that the strong pay hikes agreed in this year’s spring wage negotiations (Shunto) are filtering through. …
7th June 2024
Bank may reduce its bond purchases next week, though we think it will wait until July. Next rate hike should happen in July as BoJ increasingly worried about weaker yen. However, sharp slowdown in underlying inflation will forestall a series of rate …
6th June 2024
This page has been updated with additional analysis since first publication. Wage growth will climb above 2.5% this year Base pay rose the most since 1994 in April and we think it will accelerate a bit further as the strong pay hikes agreed in the spring …
5th June 2024
Overview – A rebound in real household incomes should ensure that the recent slump in output should turn into above-trend GDP growth of 1% over the next couple of years. Regardless, inflation will continue to slow as the influence of the previous import …
4th June 2024
Fertility rate may have fallen to fresh lows According to some estimates , Japan’s fertility rate fell from 1.26 in 2022 to 1.21 last year. Although higher than in some other Asian economies, for Japan this would still be a fresh record low. (See Chart …
31st May 2024
This page has been updated with additional analysis since first publication. GDP should rebound this quarter On balance, the modest decline in industrial production and the rebound in retail sales in April point to a decent rebound in GDP this quarter. …
This page has been updated with additional analysis since first publication. Slowdown in underlying inflation has further to run May’s rebound in inflation in Tokyo largely reflects a jump in electricity inflation that has further to run, but underlying …
Inflation rapidly losing momentum The economic data released over the last couple of weeks hardly suggest that the Bank of Japan should tighten monetary policy any further. After all, GDP plunged by 0.5% q/q in Q1 and the April inflation data released …
24th May 2024
This page has been updated with additional analysis since first publication. Underlying inflation will fall below 2% over coming months The sharp slowdown in underlying inflation in April had little to do with the slashing of high school fees in Tokyo …
20th May 2024
BoJ starting to scale back bond purchases The 0.5% q/q fall in Q1 GDP was the second fall over the last three quarters. With GDP unchanged in Q4, Japan barely escaped a recession. What’s more, with real consumption falling for four consecutive quarters, …
17th May 2024
This page has been updated with additional analysis since first publication. Activity set to rebound this quarter The renewed drop in GDP in the first quarter mostly reflects production shutdowns at major carmakers and a pronounced rebound this quarter …
16th May 2024
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
15th May 2024
Production shutdowns now over If we’re right and the GDP data due next week show a 0.6% q/q drop in output, that would mark the second fall in just three quarters. The recent weakness largely reflects a slump in industrial output at the start of the …
10th May 2024
This page has been updated with additional analysis since first publication. Wage growth to gain further momentum While total wage growth slowed sharply in March, this was mostly driven by a plunge in volatile bonus payments. Regular wage growth held up …
9th May 2024
This interactive dashboard allows you to explore all of our forecasts and key data for the Japanese economy. If you have subscriber access to the data underlying this redesigned dashboard, you can download it via the menu options in the top right of each …
Government intervenes in FX market yet again As Japanese markets were closed due to Sh ō wa day, the yen surpassed 160 against the dollar in thin trading on Monday, the weakest it has been since the mid-1980s. While the Ministry of Finance refused to …
3rd May 2024
This page has been updated with additional analysis since first publication. GDP set to rebound this quarter Coupled with solid output forecasts for April and May, the strong rebound in industrial production in March suggests that the likely slump in GDP …
30th April 2024
The Ministry of Finance may have intervened earlier today by selling FX reserves to halt the sharp fall of the yen. However, the economic case for foreign exchange intervention is much weaker now than it was in 2022, when the MoF last sold dollars to …
29th April 2024
The Bank of Japan is getting more confident in meeting its inflation target on a sustained basis and signalled that inflation wouldn’t have to overshoot for policy to be tightened further. Nonetheless, policy rate hikes will become difficult to justify …
26th April 2024
