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Stagnant exports a prelude of downturn to come The trade deficit narrowed for an eighth consecutive month in May as both import prices and volumes continued to fall. “Core” machinery orders rebounded in April, but that still points to a fall in capital …
15th June 2023
Renewed strength in regular pay growth won’t last Wage growth fell in April due to a fall in overtime pay and mostly stagnant bonus payments, while regular pay growth rebounded. But labour market conditions should loosen in the second half on account of a …
6th June 2023
Balanced risks to Q2 GDP outlook April’s activity data were a mixed bag. The fall in industrial production and sharp drop in retail sales volumes pose downside risks to our Q2 GDP growth forecast . By contrast, capital goods shipments data suggest …
31st May 2023
Unemployment rate still set to rise in H2 The unemployment rate reversed the sharp rise in March last month and the job-to-applicant ratio stabilised, but a recession in H2 should still see the unemployment rate peak at 3% by year-end. The labour force …
30th May 2023
Inflation to fall below 3.0% by year-end Tokyo headline inflation fell to 3.2% in May largely due to a sharp fall in energy inflation, but inflation excluding fresh food and energy ticked up due to faster gains in “core” goods prices. We still expect a …
26th May 2023
PMIs suggest economy strengthened further in May May’s flash PMI readings were the strongest they’d been in a while and point to gains in both industrial production and services spending, supporting our assessment that the economy continued to grow in Q2. …
23rd May 2023
Business investment in for a tough H2 We already know that business investment rose despite a plunge in capital goods shipments last quarter . As such, we wouldn’t read too much into the fall in machinery orders in March. The bigger picture is that as …
22nd May 2023
Inflation should fall rapidly in H2 on stronger yen, weaker wage growth Underlying inflation pushed past 4.0% for the first time in 40 years partly due to a spike in food inflation. Meanwhile, services inflation set a fresh 30-year high, largely …
19th May 2023
Exports outlook improving in Q2, but not for long The trade deficit narrowed in April as export values rose faster than import values, largely reflecting the faster fall in import prices. Export climate readings suggest export volumes will continue to …
18th May 2023
Exports downturn to drag economy into recession in H2 GDP surprised to the upside last quarter, mainly because of stronger performances in private consumption and business investment than preliminary data had indicated. That suggests that there is …
17th May 2023
Brighter outlook in Q2 The further rise in both the current and outlook readings point to continued upward momentum in services spending this quarter. Meanwhile, manufacturing conditions fell slightly but remained robust, boding well for industrial …
11th May 2023
Gloomy wage growth outlook in H2 2023 Wage growth held steady in March from February, as a further slowdown in regular and overtime pay growth was offset by a decent increase in volatile payments. We still see further scope for wage growth to slow this …
9th May 2023
Economy may not have shrunk in Q1 The end-month data rush only adds to the dilemma the Bank of Japan is facing. While labour market conditions are now easing in earnest, underlying inflation is set to surpass 4% at the national level. On balance though, …
28th April 2023
Exports downturn could prove short-lived April’s flash PMIs point to further upside risks to our GDP forecasts, indicating a broad improvement in both domestic and external demand. That suggests the exports downturn may be short-lived. Meanwhile, services …
21st April 2023
Stronger yen, falling commodity prices to cool decades-high inflation Underlying inflation saw a sizeable increase in March, while headline inflation inched down thanks to falling energy prices. A stronger yen and falling import price inflation should …
The trade deficit narrowed in March as import values fell faster than export values. Data for Q1 so far are still consistent with a negative contribution from net trade to GDP. Export values surprised analysts to the upside, rising by 4.3% y/y in March …
20th April 2023
Another bearish signal on Q1 business investment The fall in “core” machinery orders in February is another bearish signal on business investment last quarter. Domestic machine tool orders suggest a further fall in March, but even if “core” machinery …
12th April 2023
Strong consumption momentum to carry over into Q2 Both the current and outlook readings in March hit their highest in more than a year, capping off a strong first quarter for the EWS. This is another sign that private consumption remained resilient in Q1 …
10th April 2023
Faltering business conditions, investment intentions point to recession Today’s Tankan survey suggests that while the services sector remains resilient, the outlook for the manufacturing sector has worsened materially. The Tankan’s headline index for …
3rd April 2023
Economy still headed for 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 output was much …
31st March 2023
Labour market conditions starting to loosen, upside risks to inflation Labour market conditions loosened in February and should continue to do so over coming months due to a recession. Meanwhile, Tokyo CPI data showed a large increase in underlying …
Slight improvement doesn’t change recessionary outlook 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 …
24th March 2023
Inflation to still fall below 2% target despite higher peak for food inflation Government energy subsidies took 1%-pt off headline inflation last month, but the rise in underlying inflation to a four-decade high underscores the strength in price …
Rebound doesn’t change recessionary outlook 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, but that still points to a fall in capital …
16th March 2023
Worst hit to real wages since GFC could see spending fall in Q1 Wage growth fell sharply in January to its weakest in almost two years due largely to a slowdown in the growth of regular and overtime hours worked. Real wages posted the worst fall since the …
7th March 2023
Broader inflation outlook still intact The unemployment fell slightly in January but we’re still expecting it to rise through mid-year due to an economic downturn. Meanwhile, energy inflation fell by less than we expected in Tokyo as government subsidies …
3rd March 2023
Q4 GDP growth to remain at 0.2% The increase in capital spending reported in today’s “Financial Statements Statistics of Corporations” is broadly consistent with the preliminary Q4 GDP estimate. That means Q4 GDP growth is likely to remain at 0.2% q/q in …
2nd March 2023
Industrial activity should rebound in February We suspect that the early start to the Lunar New Year was partly responsible for the sharp fall in industrial production in January and there should be a strong rebound in February. Meanwhile, retail sales …
28th February 2023
Inflation will fall below 2% by mid-2023 Inflation hit a four-decade high in January and while we still expect inflation to fall below the Bank of Japan’s 2% target by mid-year thanks largely to the government’s energy subsidies, there are now upside …
24th February 2023
February readings reinforce dim economic outlook in Q1 February’s flash PMIs are broadly consistent with our downbeat narrative of the economy in 2023. The manufacturing PMI fell further due largely to a plunge in export orders, while a further rise in …
21st February 2023
Exports downturn well under way The trade deficit was virtually unchanged in January, as volumes and prices of exports and imports fell across the board. With the global downturn weighing on external demand, further export volume contractions are in …
16th February 2023
Still on track for a recession in the first half Japan’s economy returned to growth in Q4, avoiding a technical recession after the contraction in Q3. With business investment slowing even quicker than we anticipated and a lower savings rate leaving less …
14th February 2023
Q1 2023 to still see decent consumption growth Current readings dipped slightly in January's Economy Watchers Survey but the jump in outlook readings, suggests spending growth this quarter will still be decent. “Current conditions” dipped slightly from …
8th 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%, …
7th February 2023
Recession may have already begun The unemployment rate stayed unchanged in December, but labour market conditions are beginning to betray signs of loosening. Similarly, the strong rebound in retail sales is likely to give way to slower growth as the …
31st January 2023
Balanced risks to our 2023 inflation view Tokyo inflation rose to 4.4% in January as fresh food and services inflation rose. But with the boost from the weaker yen fading and lower commodity prices due to feedthrough, inflation should fall this year. …
27th January 2023
Inflation will fall below 2% by mid-2023 Inflation hit 4% in December but due to the government’s energy subsidies we expect it to fall below the Bank of Japan’s 2.0% target by mid-year. The increase in inflation from 3.8% to 4.0% in December was in line …
20th 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 …
19th January 2023
Business investment likely ended 2022 with a whimper “Core” machinery orders fell to their lowest level since February 2022 in November, pointing to a contraction in spending on machinery and transport equipment in Q4 from Q3. The upshot is we now have …
18th January 2023
Wage growth should settle around 1% this year The sharp slowdown in wage growth in November was mostly due to a plunge in volatile bonus payments and wage growth will rebound over the coming months . The slowdown in wage growth in November, from 1.4% to …
6th January 2023
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 Japan’s 2% target by mid-2023. The increase in inflation from 3.7% to 3.8% in …
23rd December 2022
Annual falls in industrial output to continue while services recover December’s flash PMIs point to further annual contractions in industrial output but suggest services spending rebounded towards year-end. According to today’s flash estimate, the …
16th December 2022
Export downturn will start before long While the trade deficit narrowed sharply in November, most of that reflects falling import prices. Export volumes seem to hold up well but with the global downturn weighing on external demand next year, export growth …
15th December 2022
Strong investment intentions won’t survive coming recession 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. Meanwhile, machinery orders were …
14th December 2022
Household real incomes to fall in 2023 despite energy subsidies Labour cash earnings increased by a slower 1.8% y/y in October due mostly to a much smaller gain in volatile bonus payments. However, real wage losses have extended for a seventh consecutive …
6th December 2022
Industrial production looking to end 2022 with a whimper Industrial production saw a steeper contraction in October, while firms’ output forecasts for November and December point to a weak rebound. Industrial production contracted by a sharper 2.6% m/m in …
30th November 2022
Labour market tightening on hold, soaring inflation to drag retail sales The unemployment rate stayed unchanged in October and will hover around 2.5% through 2023 due to a looming economic recession. Meanwhile, retail sales values barely grew in October …
29th November 2022
Nationwide inflation to rise further and drag spending growth 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 …
25th November 2022
Inflation to fall alongside November output price index November’s flash PMIs point to further weakness in the manufacturing sector, corroborating firms’ forecasts. At the same time, services activity appears to be struggling due to the rapid rise in …
24th November 2022
Government intervention to tame inflation Headline inflation set a new three-decade high in October on aggressive rises in food inflation excluding fresh food and will remain near those highs this quarter. That said, government support measures will lower …
18th November 2022