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The latest activity data suggest that GDP contracted at the start of the year, but a rebound is very likely over the coming quarters. Goods inflation should keep slowing rapidly, but strong wage growth will keep inflation above the BoJ’s target for most …
24th April 2024
GDP has fallen for two consecutive quarters but we don’t think the economy is in recession and should return to growth this year. While the gap between nominal wages and inflation is closing fast, the wage-price virtuous cycle will receive a boost when …
20th February 2024
This is a special Global Economics Chart Pack that provides clients with key analysis to make sense of the macro and market impact of the disruptions to maritime shipping. The charts in this document come from our brand-new shipping dashboard , which …
25th January 2024
We expect GDP growth to slow to a crawl this year, weighed down by weak consumption growth and sluggish export growth. While the virtuous cycle between prices and wages has shown signs of a slowdown in recent months, it will soon receive a boost when …
17th January 2024
GDP growth should rebound modestly in the fourth quarter but we expect it will remain soft in 2024. Meanwhile, weak job openings data suggests the labour market should loosen slightly in the short term. However, there are mounting signs that a virtuous …
14th December 2023
GDP growth appears to have all but stalled in Q3 but that was after a very strong first half. There are mounting signs that a virtuous cycle is forming between wages and prices. This is making the Bank of Japan increasingly confident that it can steer …
9th November 2023
Our latest Chart Pack on Japan's economy is embedded below. With the economy growing at an above-trend pace, the labour market should soon start to tighten again. There are mounting signs that a virtuous cycle between wages and prices is starting to form …
9th October 2023
We no longer expect the economy to enter a recession. But with real disposable incomes falling, we expect domestic demand to remain sluggish. Meanwhile, falling import prices and extension of energy subsidies should bring inflation down before long. While …
11th September 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
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
Governor Ueda presided over his first policy meeting late last month and opted to keep all monetary policy settings, including Yield Curve Control (YCC), completely unchanged. To be sure, Mr Ueda also announced that the Bank will conduct a thorough review …
11th May 2023
Japan has escaped the recent banking turmoil in the US and Switzerland relatively unscathed. While banks face some risks arising from their lending exposure overseas , there are no signs of liquidity stress. And unrealised losses on bonds are less of a …
12th April 2023
The government formally nominated Kazuo Ueda as the next Bank of Japan Governor at yesterday’s Diet session. Since the initial announcement of his candidature last Friday , analysts and investors have been looking for clarity on Mr Ueda’s views. So far …
15th February 2023
In less than two months, we should know who will replace Bank of Japan Governor Kuroda Haruhiko, whose term ends on 8 th April. Whoever replaces him will be under increasing pressure from the government to abandon Yield Curve Control (YCC), which has an …
9th January 2023
Headline inflation shot up to 3.7% y/y in October , the strongest since December 1990 while inflation excluding fresh food and energy rose from 1.8% to 2.5%. Although this puts inflation well above the Bank of Japan’s target, the case for tightening is …
21st November 2022
With the yen currently trading just below 149, it now appears to be a question of when and not if policymakers step in again. But as recent weeks and the Asian Financial Crisis have shown, such interventions alone can’t reverse yen weakness. An even …
17th October 2022
Strong US CPI data this week triggered a renewed slide in the yen to the brink of 145 and warnings from the Ministry of Finance that it could intervene ( 1 ).The Bank of Japan is also reported to have resorted to a yen rate check – calling dealers to …
14th September 2022
With a record virus wave sweeping across the country and consumer confidence slumping, we’re slashing our forecast for Q3 consumption growth from 0.8% to 0.2%. While the government has refrained from declaring another state of emergency, spending was …
8th August 2022
While inflation is still far lower in Japan than in most places, rapid increases in the prices of some everyday purchases have made it a political focus. A Nikkei poll following the Bank of Japan’s meeting at the end of last week found that nearly half of …
21st June 2022
The Bank of Japan’s attempt to relieve pressure on the Yield Curve Control framework by offering to buy an unlimited amount of 10-year Japanese government bonds (JGBs) at yields of 0.25% for as long as necessary appears to have done the trick so far. …
23rd May 2022
With all domestic restrictions gone and the booster rollout further severing the link between cases and deaths, the conditions for a reopening bounce are in place. Moreover, consumers have ample room to splash the cash. The household savings rate remained …
19th April 2022
Governor Kuroda admitted last week that inflation could hit the Bank of Japan’s 2% target in April but stressed that “that in no way signifies there will be a revision of our current monetary policy”. Even if rising import costs cause inflation to …
21st March 2022
Services spending jumped to only 3% below its pre-virus level in Q4 2021 despite having begun the quarter on a weak footing with curfews still in place for bars and restaurants across many regions in October. (See Chart 1.) It will have been knocked …
21st February 2022
Skyrocketing infections and a 10-day isolation requirement for close contacts of positive cases have resulted in a wave of staff absences in Japan. Domestic carmakers already struggling with chip shortages appear to have been among the first victims of …
24th January 2022
Q4 is shaping up to be strong in line with our forecast. Mobility data point to another sizeable rebound in consumer spending, and strong export data and optimistic firm forecasts suggest that industrial production has bounced back sharply. (See Chart 1). …
22nd December 2021
While October’s trade data showed good exports still depressed by the recent collapse in domestic car production (see Chart 1), there is growing anecdotal evidence that the auto sector is on the cusp of a rapid rebound. Toyota said that its global …
18th November 2021
While parts of Japan’s manufacturing sector remain under severe pressure from global supply chain shortages, domestic headwinds to the recovery have dissipated further in recent weeks. That supports our view that a strong rebound is brewing. Breaking …
19th October 2021
The race to become the new LDP leader – and with it PM – formally began on Friday. With Delta cases plunging and the vaccination rate having caught up with many other advanced economies, whoever wins should be able to lift domestic restrictions and ride a …
20th September 2021
With daily cases surging to unprecedented levels and states of emergency extended to mid-September this week, there may not seem to be much light at the end of the tunnel for Japan’s economy. However, we’re cautiously optimistic that a strong recovery is …
20th August 2021
While infections are now rising sharply nationwide – particularly in Tokyo where the Delta variant has the strongest hold – most of the vulnerable population are now fully vaccinated so we doubt restrictions will have to be tightened any further. …
22nd July 2021
Japan’s now fast-moving vaccine rollout is set to gather more speed. PM Suga’s one-million-a-day goal could be hit on a 7-day average basis as soon as tomorrow. 18-to-64-year-olds have from today been able to fill vacant slots at large-scale vaccination …
16th June 2021
Off the back of the weak Q1 GDP data, we now expect output to only rise 2% across 2021. The economy is unlikely to recover much in Q2 as cases are close to record highs and calls for a nationwide state of emergency growing. Moreover, only 4% of the …
19th May 2021
Tokyo, Hyogo and Kyoto are soon expected to join Osaka in asking the central government to declare a third state of emergency. While together those four prefectures only generate a third of national output, the experience during the second state of …
21st April 2021
With mobility rebounding and the state of emergency finally being lifted across all prefectures this weekend, economic activity should enter Q2 with some momentum. While the second state of emergency has been less restrictive and more targeted than the …
18th March 2021
The strong rise in output in Q4 2020 to just 1.2% below Q4 2019 levels bolsters our view that Japan’s economy will be back to the level it reached before the tax hike and close to its pre-virus path by mid-2022. (See Chart 1.) Daily virus cases have …
22nd February 2021
Our forecast for a 1.5% q/q fall in consumption in Q1 rests on the assumption that some businesses in virus hotspots will be forced to close in order to contain Japan’s most severe wave of the pandemic yet. But signs that new infections may already have …
20th January 2021
PM Suga’s decision on Tuesday to halt the Go To Travel campaign for two weeks from 28 th December may put the recovery in services spending into temporary reverse. It comes after authorities in Tokyo, Osaka, and Nagoya this week extended requests for bars …
17th December 2020
Japan is in the midst of a third wave of COVID-19. Daily infections have already reached their previous early-August peak. (See Chart 1.) Only the Hokkaido Government has responded with countermeasures so far, asking Sapporo residents to consider …
17th November 2020
Inflation has held up better than we had anticipated in recent months. The surge in spare capacity suggests that it could weaken more sharply as social distancing measures are relaxed. But we only expect underlying inflation average -0.2% next year. One …
12th October 2020
The government has issued ¥95tn in government securities since the start of the current fiscal year in April, equivalent to a huge 17% of pre-virus GDP. It intends to issue another ¥35tn by March 20201. (See Chart 1.) Most of those funds have been issued …
17th September 2020
Despite the reintroduction of states of emergency in some prefectures, and renewed calls for jishuku (“self-restraint”) in many others, the steps taken by local authorities to curb the “second wave” of coronavirus cases have so far been tentative and …
13th August 2020
With coronavirus cases hitting record-highs in Tokyo and rising in other urban areas, the government announced on Monday that it plans to give local governments greater power to request business closures. That could include penalties for firms that ignore …
21st July 2020
The recent spike in COVID-19 cases in Tokyo linked to nightlife establishments in Shinjuku underlines just how slow the road back to normality could be. Renewed outbreaks are likely to prevent a straightforward and swift economic recovery. Indeed, many …
18th June 2020
Economic activity remained severely damaged by coronavirus containment efforts in early May. In particular, the retail sector usually receives a substantial boost during Golden Week but the number of restaurant goers was extremely low throughout this …
15th May 2020
A second wave of virus cases driven by rising infections in Tokyo and Osaka has triggered a major shift in economic behaviour. And while new cases in the two lynchpins of the Japanese economy have stabilised in recent days, yesterday’s declaration of a …
17th April 2020
Surveys and timely data from late-February onwards show that the economy is in the midst of a deep downturn. Cinema sales, restaurant reservations and the Economy Watchers Survey all point towards consumer spending having collapsed at the end of last …
18th March 2020
While October’s sales tax hike and Typhoon Hagibis were partly to blame for the sharp drop in manufacturing output in Q4, the bigger picture is that any recovery this year rests on a pick-up in external demand. Japanese industrial production fell …
17th February 2020
The fall in long-term bank lending rates in November will reinforce the concerns of some BoJ Board members that ultra-loose monetary policy is harming the profitability of private banks. November’s drop in long-term lending rates was the sharpest since …
16th January 2020
The available data on retail sales, household spending as well as the Bank of Japan’s consumption activity index show that consumer spending fell broadly as much in October as in April 2014, when the sales tax was raised from 5% to 8%. Even so, our …
11th December 2019
The jump in the unemployment rate in September is evidence that the labour market has entered a loosening phase. (See Chart 1.) The Bank of Japan reiterated that the output gap was its key gauge of price pressures in the economy at its meeting last week. …
7th November 2019