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Inflation won’t stay negative for long While headline inflation dropped to an 11-year low in November, that was due to weaker energy and fresh food inflation. We expect inflation to recover over the coming months. Headline CPI fell from -0.9% y/y to -1.2% …
22nd January 2021
Trade to help keep growth positive in Q1 While export values failed to reach pre-virus levels again in December they should remain fairly strong at the start of the year, with net trade set to provide another boost to growth in Q1. The 2.0% annual rise in …
21st January 2021
Business investment to recover this year The further rise in machinery orders in November followed a record monthly surge in October and suggests that business investment was rebounding strongly at the end of last year. We expect non-residential …
14th January 2021
Conditions will get worse before they get better The sharp drop in the Economy Watchers Survey in December suggests that the third wave was weighing heavily on consumer sentiment even before the declaration of a state of emergency in Greater Tokyo last …
12th January 2021
Wage growth will still turn positive later this year While wage growth weakened sharply in November it should recover strongly this year as overtime hours and bonuses recover and the labour market begins to tighten again. According to today’s preliminary …
7th January 2021
Third wave weighing on activity The recovery in consumer confidence flipped into reverse in December amid surging coronavirus infections. We think confidence will deteriorate further this year as tighter restrictions damage economic activity. That said, …
6th January 2021
Underlying inflation should soon start to recover While headline inflation fell sharply again in November due to weaker fresh food and energy inflation, we think it will recover early next year. Headline CPI fell from -0.4% y/y to -0.9% y/y last month …
18th December 2020
PMI suggests third wave not derailing recovery The rebound in the composite PMI in December is consistent with our view that the third virus wave will slow the recovery but won’t derail it. The survey for the December flash PMI was conducted a week …
16th December 2020
Tailwind from net trade to fade While export values edged down again in November, they should rise above pre-virus levels. That said, due to the weakness in services exports, overall exports won’t return to pre-virus levels until the middle of next year. …
Recovery to surprise to the upside The sharp rebound in the Q4 Tankan supports our view that the economy will rebound relatively swiftly from the dislocation caused by the pandemic. And while firms’ capital spending plans point to weakness in business …
14th December 2020
Business investment on the road to recovery The surge in machinery orders in October supports our view that non-residential investment began to recover this quarter. We expect them to rebound further over the coming months. The 17.1% m/m rise in machinery …
9th December 2020
Recovery to slow but not reverse The drop in the Economy Watchers Survey in November still leaves it consistent with solid growth in consumer spending. As such, the survey is consistent with our view that the third wave will slow rather than derail the …
8th December 2020
Recovery to surprise to the upside The sizeable upward revision to Q3 GDP and the sharp rise in “core” household spending in October support our view that Japan’s economy will recover from the pandemic faster than the consensus expects. Meanwhile, wage …
Unemployment rate close to peaking While the unemployment rate rose in October, with the job-to-applicant ratio edging up , it’s unlikely to rise much further. Meanwhile, capital spending data suggest that business investment may have fallen a little less …
1st December 2020
Third wave may weigh on consumer spending Retail sales rose in October, but as both values and volumes are now above pre-virus levels they’re unlikely to rise much further and could edge down amidst the third wave. Meanwhile, industrial production rose …
30th November 2020
PMI still consistent with rebound in activity While the decline in the composite PMI could be an early sign that the third wave is resulting in a renewed drop in activity, the survey still points to a further rebound in industrial output and consumption. …
20th November 2020
Core inflation unlikely to weaken much further Headline inflation fell sharply in October due largely to last year’s sales tax hike dropping out of the annual comparison, and we think it will weaken slightly further before recovering early next year. …
Boost from net trade to fade Although export volumes returned to pre-virus levels in October, import volumes bounced back more strongly. That supports our view that the boost to growth from net trade will now fade. The 0.2% annual fall in export values in …
18th November 2020
Strong rebound in output should continue Output rose sharply in the third quarter and should recover further this quarter provided the third wave of coronavirus infections doesn’t spiral out of control. According to today’s preliminary estimate, GDP rose …
16th November 2020
Recovery in business investment unlikely until next year Machinery orders fell in September and we expect non-residential investment to have weakened last quarter and to be flat across Q4. Further ahead, we think business investment will be weak link in …
12th November 2020
Rapid recovery set to continue The further surge in the Economy Watcher’s Survey (EWS) in October suggests that Q4 could surprise to the upside. However, further ahead the recovery will slow as the economy gets closer to pre-virus levels. The rise in …
10th November 2020
Household incomes should rebound further Wage growth improved in September and should recover further over the coming months as overtime hours continue to rebound – besides a hit from a fall in end-of-year bonus payments. Meanwhile, the rise in “core” …
6th November 2020
Recovery may surprise to the upside The strong rise in industrial production in September is consistent with our view that Japan’s economy will rebound faster than most anticipate. Meanwhile, the unemployment rate was unchanged in September and may not …
30th October 2020
Recovery in consumption will slow in Q4 Retail sales were broadly unchanged in September, remaining a smidge below pre-virus levels in volumes terms. That’s consistent with our view that consumption rebounded strongly last quarter, although we think the …
29th October 2020
Recovery shifting into slower gear The composite PMI only edged up marginally in October, consistent with our view that the recovery will slow in the fourth quarter . The manufacturing PMI recorded the fifth consecutive improvement and climbed from 47.7 …
23rd October 2020
Japanese inflation to remain around zero Headline inflation dropped to zero September, and we think it be negative over the coming months before hovering around zero throughout most of next year. Headline CPI fell from +0.2% y/y to 0.0% y/y last month …
Exports to return to pre-virus levels by year-end Exports continued to rise at a strong pace in September and we think they should return to pre-virus levels before the end of the year. By contrast, the recovery in imports has only just begun so net trade …
19th October 2020
Unemployment rate might not reach 4% The unemployment rate edged up again in August and it will undoubtedly rise further over the coming months. But with the jobless rate only creeping higher in recent months, our forecast for it to reach 4% by year-end …
2nd October 2020
Recovery set to be slow going The rebound in the Q3 Tankan fell short of expectations and suggests that the recovery could be protracted. And while the survey indicates that the labour market will soon turn the corner, firms’ capital spending plans point …
1st October 2020
Recovery in activity to continue Retail sales rebounded back to pre-virus levels in August as the second wave began to dissipate, and we expect consumer spending to recover further over the coming months. Meanwhile, industrial production edged higher in …
30th September 2020
Recovery to continue despite stagnation in PMIs The September flash PMIs didn’t improve much further even as Japan’s second virus wave has abated. Nevertheless, the survey points to a continued pick-up in consumption, exports and industrial output. The …
23rd September 2020
Underlying inflation to weaken much further While headline inflation fell in August, excluding the government’s domestic travel subsidy scheme it showed a renewed pick up. However, we still think inflation will fall much further into negative territory …
18th September 2020
Huge boost to GDP growth from net trade in Q3 Exports continued to recover in August while import volumes fell. Indeed, we expect net trade to provide a sizeable boost to growth this quarter following a huge drag in Q2. The 14.8% annual fall in export …
16th September 2020
Business investment hasn’t bottomed out yet While machinery orders rose in July we still expect non-residential investment to weaken further in Q3. And with business sentiment set to remain weak for the forseeable future, any rebound in business …
10th September 2020
Rebound in household incomes to continue Wage growth improved in July and household incomes are likely to rebound further as more workers who lost their jobs during the state of emergency find employment again. Meanwhile, the second estimate of Q2 GDP …
8th September 2020
Unemployment rate to hit 4% The unemployment rate edged higher in July, and we expect it to rise further over the coming months despite a continued recovery in economic activity. Meanwhile, the further fall in the number of furloughed workers supports our …
1st September 2020
Activity will recover further in second half of year While retail sales fell in July, consumer spending should continue to recover over the coming months. Meanwhile, industrial production rose sharply in July and should also rebound further. The 3.3% m/m …
31st August 2020
Economy to pick up again over the coming months The stagnation in Japan’s composite PMI in August is consistent with our view that the second virus wave has brought the recovery to a standstill but won’t cause a renewed downturn . According to today’s …
21st August 2020
Underlying inflation to turn negative Inflation excluding fresh food and energy was just over zero in July and we think it won’t be long before it turns negative. We expect sluggish demand to overwhelm the impact of social distancing measures. The pick-up …
Net trade to boost growth in Q3 The July trade data are consistent with our view that net exports will provide a large boost to Q3 GDP growth. However, the fall in machinery orders to a seven-year low bodes ill for business investment The 19.2% annual …
19th August 2020
Japan to recover faster than most Despite its less severe restrictions on activity, Japan’s economy was hit just as hard by the virus in Q2 as many other large economies. However, we think GDP will converge to its pre-virus path rather quickly. According …
17th August 2020
Household incomes should continue to rebound Wage growth improved a little in June and household incomes are rebounding now that most furloughed workers are back in work. Meanwhile, the surge “core” household spending in June supports our view that …
7th August 2020
Unemployment will rise further The sharp drop in the number of furloughed workers and the rise in industrial production in June bodes well for the recovery in economic activity in the second half of the year. But while the unemployment rate edged down in …
31st July 2020
Consumer spending should continue to recover The surge in retail sales in June suggests that consumer spending will rebound across Q3 even if some restrictions on activity are reimposed to curb the renewed spread of the virus. The 13.1% m/m rise in retail …
30th July 2020
Recovery set to be slow going Both the manufacturing and the services PMI only improved a little bit in July which suggests that the recovery from the pandemic will be more protracted than elsewhere. The flash estimate of the manufacturing PMI edged up …
22nd July 2020
Underlying inflation to weaken much further While headline inflation was unchanged for the third-straight month in June, we expect it to fall much further over the medium-term. We think inflation will turn consistently negative in the second half of the …
21st July 2020
Trade to rebound soon Export volumes were little changed in June but they should rebound soon as many of Japan’s trading partners are on the mend. By contrast, import volumes never fell much despite the slump in domestic demand and we think they will …
20th July 2020
Business investment to fall sharply despite slight rise in orders The slight rise in machinery orders in May suggests that non-residential investment may have slumped a little less than we were anticipating in Q2. However, with business sentiment …
9th July 2020
Wage growth to weaken further even as household incomes rebound Wage growth weakened further in May, but we think household incomes are recovering as furloughed workers either return to work or receive their mandatory leave allowance. According to today’s …
7th July 2020
Business investment to hold up well While business conditions collapsed in the Q2 Tankan, with economic activity now recovering that probably marks the trough. And surprisingly resilient investment forecasts for the upcoming fiscal year suggest weak …
1st July 2020