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Labour market loosening in earnest Labour market conditions loosened visibly in March and there’s room for it to loosen further given the recession we’re expecting in the second half. Meanwhile inflation reversed course and increased in April. Our …
27th April 2023
PMIs suggest exports downturn may be short-lived April’s flash PMIs point to further upside risks to our forecasts, pointing to a broad improvement in both domestic and external demand and suggesting that the exports downturn will be short-lived. …
20th April 2023
Lower import price inflation will tame underlying inflation March data were very much in line with the Tokyo CPI. Underlying inflation saw a sizeable increase in March, while headline inflation inched down thanks to falling energy prices. A stronger yen …
Preliminary volume data confirms Q1 drag from net trade The trade deficit narrowed in March as import volumes fell faster than export volumes. Data for Q1 so far are still consistent with a negative contribution from net trade to GDP. Export values …
19th April 2023
Another bearish sign for business investment in Q1 “Core” machinery orders fell by 4.5% m/m in February, following a 9.5% rise in January. Orders from the manufacturing sector saw a strong 10.2% m/m rebound, largely due to a huge spike in orders from the …
11th April 2023
Tankan points to sharp investment slowdown The Tankan’s headline index for large manufacturers fell for the fifth consecutive quarter from +7 to +1, broadly consistent with decline indicated by the monthly Reuters Tankan (Bloomberg consensus: +3, CE …
3rd April 2023
Rebound in industrial output won’t prevent recession While industrial production bounced back and retail sales recorded a strong increase in February, we still think that the economy entered a recession this quarter. The 4.5% m/m rebound in industrial …
31st March 2023
Unemployment still has higher to climb, upside risks to inflation The unemployment rate rose from 2.4% to 2.6% in February, and the job-to-applicant ratio fell for the second month running from 1.35 to 1.34. Those movements are largely in line with our …
29th March 2023
PMIs continue to paint gloomy picture March’s flash PMIs corroborate our view that the economy will see a mild recession this year. The manufacturing PMI improved but was still contractionary, as demand remained weak. Meanwhile a further rise in the …
23rd March 2023
Government energy subsidies take 1%-pt off inflation Headline inflation fell from 4.3% in January to 3.3%, largely in line with our 3.2% forecast. The main driver of the slowdown was energy inflation, which flipped from 14.6% into outright deflation at …
Investment outlook still gloomy despite upside machinery orders surprise The trade deficit narrowed in February as export volumes picked up and import volumes continued to fall. “Core” machinery orders surprised to the upside in January, pointing to a …
15th March 2023
BoJ still likely to end Yield Curve Control The Bank of Japan didn’t make any policy changes at Governor Kuroda’s last meeting today but we expect incoming Governor Ueda to abandon Yield Curve Control in April. We were among the few who expected the Bank …
10th March 2023
Wage growth should rebound in February We think the surprise sharp fall in wage growth in January was at least in part the result of Lunar New Year disruptions and there should be a rebound in February. The much slower wage growth in January, falling …
6th March 2023
Tokyo CPI data suggest some upside risks to our inflation forecasts The unemployment rate edged down in January but the job-to-applicant ratio held steady, suggesting the labour market doesn’t have room to tighten much further. Meanwhile, Tokyo inflation …
2nd March 2023
Industrial output set for February rebound Industrial production contracted sharply in January and we suspect the early start to the Lunar New Year was partly responsible and there should be a strong rebound in February. Meanwhile, retail sales volumes …
27th February 2023
Upward momentum in food inflation appears spent Inflation hit a four-decade high in January but due to stalling food inflation and the government's energy subsidies, we expect it to fall below the Bank of Japan's 2.0% target by mid-year. Headline …
23rd February 2023
Manufacturing downturn gathering speed According to today’s flash estimate, the manufacturing PMI fell deeper into contraction from 48.9 in January to 47.4 in February. The output sub-index fell to 44.9, the weakest reading since July 2020. Firms are …
20th February 2023
Exports and machinery orders to trend down in H1 The trade deficit was virtually unchanged in January, as volumes and prices of exports and imports fell across the board. Export volumes likely fell for the second consecutive month and with the global …
15th February 2023
Weak investment momentum makes recession even likelier Japan’s economy returned to growth in Q4, avoiding a technical recession after the contraction in Q3. However, the rebound was subdued, let down mostly by contractions in business investment and …
13th February 2023
The nomination of Kazuo Ueda to lead the Bank of Japan could be read as a sign that the Kishida government is seeking a shift away from ultra-loose policy, but we aren’t fully convinced that this is the case. According to media reports, Japan’s government …
10th February 2023
Decades-high wage growth won’t be sustained The large jump in wage growth in December was mostly due to a surge in volatile bonus payments and it will slow over the coming months. The much quicker wage growth in December, rising from 1.9% y/y to 4.8%, …
6th February 2023
Weakening industrial production outlook heralds recession Retail sales rebounded in December and industrial production was mostly flat in December. However, firms’ forecasts are consistent with sharp contractions in industrial output over the coming …
31st January 2023
Unemployment rate to rise before long The unemployment rate stayed unchanged in December, but labour market conditions are beginning to betray signs of loosening. We are expecting unemployment to rise to 2.8% by mid-year due to a recession. The labour …
30th January 2023
January print likely the peak for inflation Tokyo inflation rose to 4.4% in January as fresh food and services inflation rose, signalling a similar jump at the national level. But due to the government’s energy subsidies we expect it to fall below the …
26th January 2023
Government measures to lower inflation from January Inflation hit 4% in December but due to the government’s energy subsidies we expect it to fall to around 3.0% in January, and further below the Bank of Japan’s 2.0% target by mid-year. The increase in …
19th January 2023
Exports heading into 2023 on the backfoot While the trade deficit narrowed further in December, most of that reflects falling import prices. Export volumes likely fell slightly and with the global downturn weighing on external demand, export growth will …
18th January 2023
New Governor will ditch Yield Curve Control in April The Bank of Japan kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes …
Further signs of investment slowdown Weakness in the manufacturing sector led to “core” machinery orders falling to their lowest level since February 2022, and points to a slowdown in investment last quarter. “Core” orders crashed by 8.3% m/m in November …
17th January 2023
Wage growth will settle around 1% The sharp slowdown in wage growth in November was mostly due to a plunge in volatile bonus payments and it will rebound over the coming months. The slowdown in wage growth in November, from 1.4% y/y to 0.5%, was more …
5th January 2023
We are resending this publication due to an error in the previous version. Inflation will fall below 2% by mid-2023 Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of …
22nd December 2022
Bank won’t follow band widening with rate hikes The Bank of Japan today widened the tolerance band around its yield target but we don’t expect it to hike its short-term policy rate anytime soon. The Bank’s decision to keep its short-term policy rate at …
20th December 2022
Divergence between manufacturing and services to continue According to today’s flash estimate, the manufacturing PMI fell slightly deeper into contraction from 49.0 in November to 48.8 in December. The output sub-index rose to 46.4 but is still the second …
16th December 2022
Exports downturn has begun The trade deficit narrowed substantially in November and has further scope to do so again in December. But with the global downturn weighing on external demand next year, further progress towards a more balanced goods trade …
14th December 2022
Services race ahead while manufacturing struggle Today’s Tankan survey suggests that while the services sector is going from strength to strength, the outlook for the manufacturing sector continues to worsen. The Tankan’s headline index for large …
Regular earnings growth to maintain quicker pace Labour cash earnings increased by a slower 1.8% in October due mostly to a much smaller gain in volatile bonus payments. Regular earnings held steady due to high inflation and the boost from the reopening, …
5th December 2022
Production to rebound in last two months of 2022 Industrial production saw a steeper contraction in October but firms' output forecasts for November and December point to a rebound. Industrial production contracted by a sharper 2.6% m/m in October, …
30th November 2022
Soaring inflation weighing on retail sales Retail sales values barely grew in October from September and soaring inflation points to risks that growth will remain muted this quarter. Growth in retail sales values slowed sharply from 1.5% m/m to 0.2% m/m …
29th November 2022
Halt to labour market tightening as recession looms The unemployment rate stayed unchanged in August and will hover around 2.5% through 2023 due to a looming economic recession. The job-to-applicant ratio rose from 1.34 to 1.35, the highest it has been …
28th November 2022
Tokyo prices point to further rises in nationwide inflation Headline inflation in the capital set a new three-decade high in November on aggressive rises in food inflation excluding fresh food and industrial goods inflation. The upshot is that nationwide …
24th November 2022
Downbeat readings reinforce 2023 recession narrative November’s flash PMIs point to further weakness in the manufacturing sector, corroborating other data. At the same time, services activity appears to be struggling under the weight of rising inflation. …
Bank of Japan to maintain policy despite soaring inflation Headline inflation remained set a new three-decade high in October and will remain near those highs this quarter. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy …
17th November 2022
Yen rally to help narrow trade deficit The trade deficit widened but stayed below the record high in August, but with the yen strengthening significantly in recent weeks, the deficit should narrow later this quarter. Export values rose by a slower 25.3% …
16th November 2022
Imminent rebound in orders to be soft “Core” machinery orders fell for a second consecutive month in September due to weakness in manufacturing orders. While the usual see-saw patterns in orders point to a rebound that should materialise in October’s …
15th November 2022
Economy to rebound in Q4 after Q3 contraction Japan’s economy contracted in Q3, with both private consumption and business investment posting far weaker results than timelier data had suggested. The single largest drag was from net trade due mostly to a …
14th November 2022
Inflation and reopening boost to keep earnings growth high Overall earnings rose 2.1% y/y in September, the fastest since 1997, but we don’t think this can be kept up consistently, given that a large spike in volatile bonus payments was key to hitting …
7th November 2022
Weakening global economy weighing on manufacturing outlook Industrial production declined in September whereas retail sales values saw another relatively strong rise. We are expecting a strong fourth quarter for retail sales, but industrial output looks …
31st October 2022
Window for tighter policy is closing The Bank of Japan revised up its medium-term inflation forecasts while keeping policy unchanged today, but we still think that it won’t snuff out the budding virtuous cycle between prices and wages. As widely …
28th October 2022
Tokyo inflation to start falling next month The unemployment rate rose slightly in September on the back of a large jump in the labour force and a continued rise in the job-to-applicant ratio suggests that the labour market will continue to tighten. …
Weaker yen means higher inflation for longer Headline inflation remained at a three-decade high in September and will climb slightly higher by early 2023. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy monetary policy. …
21st October 2022
Weaker yen an obstacle to deficit narrowing again The trade deficit narrowed from its record high in August, but with the yen weakening dramatically in recent days, any further narrowing of the deficit will likely be delayed. Export values accelerated to …
20th October 2022
