Filtered by Subscriptions: Japan Economics Use setting Japan Economics
Pick up in core inflation unlikely to last Headline inflation rose sharply in November but we think it will moderate over the coming months as capacity shortages diminish. But we are not convinced that the Bank of Japan will respond by cutting interest …
20th December 2019
Net trade probably boosted GDP growth in Q4 Import volumes probably fell more sharply than export volumes in Q4 so net trade should have provided a boost to GDP growth. That’s hardly a cause for optimism though as the weakness in imports reflects the …
18th December 2019
Manufacturing sector should turn a corner soon December’s flash manufacturing PMI indicates that activity in the sector continues to shrink. However, the rebound in the global manufacturing PMI suggests that the sector will turn a corner soon. According …
16th December 2019
Economy slowing not collapsing The Q4 Tankan was a mixed bag rather than the disaster that many analysts were anticipating. As such, it probably won’t convince the Bank of Japan to ease policy next week. The Tankan’s headline index for large manufacturers …
13th December 2019
Substantial fall in business investment this quarter The sharp fall in “core” machinery orders in October supports our view that there will be a sizeable drop-off in business investment this quarter. We expect a 1.0% q/q fall in non-residential investment …
12th December 2019
No sign of gloom lifting yet November’s Economy Watchers Survey (EWS) points to a slight rebound in consumer spending last month. However, the deterioration in manufacturing and employment conditions underline that the economy will remain weak over the …
9th December 2019
Output set to shrink in 2020 While Japan’s economy expanded more sharply ahead of the sales tax hike than most had anticipated, output probably fell sharply in the fourth quarter. While the consensus expects the economy to keep expanding next year, we …
Wage growth unlikely to accelerate much further Wage growth remained relatively strong in October but with the labour market loosening, we think earnings growth will settle around 0.5%. Meanwhile, the plunge in “core” household spending in October points …
6th December 2019
Weak Q3 GDP growth set to be confirmed Today’s capital spending data suggest that business investment last quarter was in line with what was initially reported. Therefore, we don’t expect a major revision to GDP growth in next week’s second estimate. …
2nd December 2019
Economy to contract sharply this quarter The sharp fall in industrial production in October suggests the economy might have been hit harder by the sales tax hike than we were expecting. And while the unemployment rate remained unchanged in October, we …
29th November 2019
Plunge in sales after consumption tax hike not as bad as it seems Retail sales values fell more sharply in October than after previous sales tax hikes, but that largely reflects the smaller rise in prices this time around. Given that households brought …
28th November 2019
Manufacturing sector remains in the doldrums The manufacturing PMI edged up in November but has yet to break out of the range it’s hovered in since the start of the year. However, the recent improvement in the global manufacturing PMI suggests that the …
22nd November 2019
Free childcare cancels out tax hike price boost The muted rise in inflation in October supports our view that the recent sales tax hike won’t derail consumer spending. And while underlying inflation should weaken further as spare capacity mounts, the Bank …
Domestic demand weathered tax hike well Import volumes fell much less in October than after the 2014 sales tax hike, supporting our view that the tax hike will dent domestic demand less this time around. Export volumes also fell in monthly terms and we …
20th November 2019
Downside risks to Q4 GDP diminishing The slowdown in GDP growth in the third quarter isn’t too worrying as it reduces the chances of a slump in output after October’s sales tax hike. As such, we reiterate our view that the Bank of Japan will keep interest …
14th November 2019
Business investment to slow after tax hike The continued fall in machinery orders suggests that the recent strength in capital goods shipments won’t last. While we expect the preliminary estimate of GDP due on Thursday to show a 1.0% q/q rise in …
11th November 2019
Consumer spending probably slumped in Q4 The surge in household spending in September adds to the evidence of a last-minute spending spree ahead of October’s sales tax hike. While that raises the chances of a deep slump in the following months, we feel …
8th November 2019
Unemployment rate will keep rising The jump in the unemployment rate in September has further to run as new job offers are drying up. That increases the chances that the Bank of Japan will eventually have to cut interest rates. The labour force edged up …
1st November 2019
Manufacturing sector to remain under pressure While industrial production contracted in the third quarter, robust business investment, a boost from net trade and soaring consumer spending should have ensured a strong rise in Q3 GDP. However, the outlook …
31st October 2019
Private consumption will fall sharply in the fourth quarter The surge in retail sales ahead of the sales tax hike on 1 st October was as large as the one seen before 1997’s sales tax hike. We’ve pencilled in a 1.7% q/q slump in consumption in the fourth …
30th October 2019
Headwinds to manufacturing sector persist The decline in the manufacturing PMI to a three-year low in October is consistent with continued falls in industrial output. But a slump in inventories could be a sign that firms have underestimated the resilience …
24th October 2019
Export growth to weaken again before long Export volumes probably rebounded in the third quarter which should provide some relief for the Bank of Japan. But as external demand is set to weaken further, we think export volumes will fall at a faster rate …
21st October 2019
Underlying inflation should fall towards zero next year The fall in inflation to a two-year low in September has further to run, increasing the pressure on the Bank of Japan to provide additional stimulus. The inflation data released today were all in …
18th October 2019
Business investment to slow next year The continued fall in machinery orders in August suggest that a last-minute investment rush ahead of October’s tax hike is looking increasingly unlikely. Either way, business investment will probably slow next year as …
10th October 2019
Wage growth may pick up to 1% Growth in regular earnings has been broadly steady around 0.5% in recent months. And while we expect the unemployment rate to rise, wage growth may climb to 1.0% over the coming months. According to today’s preliminary …
8th October 2019
Conditions holding up better than expected The latest Tankan survey shows that business conditions are holding up better than expected while the labour market remains very tight. And even though firms are turning more cautious about the outlook for …
1st October 2019
Business conditions prove resilient According to today’s Tankan survey, business conditions held up better last quarter than most had anticipated but the further deterioration in firms’ capital spending plans will cause some concern at the Bank of Japan. …
Unemployment to rise to 2.5% by year-end The continued tightness of the labour market is reducing the pressure on the Bank of Japan to provide additional stimulus but we expect unemployment to rise over the coming months. Both the labour force and the …
Consumption to fall sharply in Q4 The surge in retail sales in August underlines that a last-minute spending in spree ahead of the sales tax hike is still possible. That means that consumption may fall by more than the 1.3% q/q drop we’ve pencilled in for …
30th September 2019
Slowdown in inflation has further to run The slowdown in headline inflation in August has further to run once the sales tax hike leads to weaker price pressures. We think that inflation will eventually fall which will raise the clamour for monetary …
20th September 2019
Drag from net trade to ease in Q3 The fall in exports in August still leaves open the possibility of a rebound across the third quarter which means that the previous drag that net trade had on growth may have eased. The big picture though, is that exports …
18th September 2019
Business investment to slump after tax hike The drop in machinery orders in July didn’t reverse the jump in June and we still think that business investment rose at a strong pace in Q3. However, a renewed fall after October’s sales tax hike is likely . …
12th September 2019
Wage growth should settle around 1% The drop in labour cash earnings in July was driven by volatile bonus payments whereas regular earnings accelerated. While we expect the unemployment rate to rise again before long, wage growth should settle around 1%. …
6th September 2019
Labour market has reached a turning point The weakness in retail sales in July underlines that consumers have yet to bring forward spending ahead of October’s sales tax hike. That suggests that consumption won’t fall off a cliff once the tax has been …
30th August 2019
Rise in underlying inflation won’t last Headline inflation fell in July despite a rise in underlying inflation. Allowing for the impact of policy moves, we think that underlying inflation will fall towards zero before long. Headline consumer price …
23rd August 2019
Drag from net trade to persist Today’s external trade figures show that the slump in export volumes is abating. But with imports set to soar ahead of the sales tax hike, net trade will probably remain a drag on GDP growth in Q3. The 1.6% y/y fall in …
19th August 2019
Business investment to slump after tax hike The surge in machinery orders in June supports our view that investment spending will continue to expand at a rapid pace in the third quarter. However, we expect a renewed drop after October’s sales tax hike. …
14th August 2019
Growth set to slow after tax hike GDP rose more quickly than most had anticipated in the second quarter and the details were unequivocally strong. And while the economy will lose momentum after October’s sales tax hike, our view remains that the Bank of …
9th August 2019
Wage growth should settle around 0.5% Wage growth accelerated in June as regular earnings stopped falling and summer bonuses rose. However, wages increased even faster once we allow for sampling changes that will probably only disappear from the beginning …
6th August 2019
Growth probably slowed in Q2 While industrial production rebounded in the second quarter, we still expect GDP growth to slow. Meanwhile, we think that the labour market won’t remain as tight as it is now as subdued economic activity takes its toll on …
31st July 2019
Private consumption to remain strong ahead of tax hike Retail sales values were flat in June but broader measures of consumer spending still suggest that private consumption picked up in the second quarter. Some of that strength in Q2 was probably due to …
29th July 2019
Underlying inflation may fall to zero by early next year Inflation was unchanged in June and while the consumption tax and the introduction of free childcare will muddy the waters, we expect underlying inflation to fall towards zero in 2020. The 0.7% rise …
19th July 2019
Drag from net trade to persist The sharp narrowing of the trade deficit in June isn’t indicative of developments in trade volumes across the second quarter as import volumes outpaced export volumes. We expect the resulting drag from net exports on GDP …
18th July 2019
Wage growth should pick up in 2020 Wages kept falling in May even though the labour market remained very tight. That reflects sampling changes which have lowered the aggregate wage level. As those distortions start to fade, wage growth should pick up even …
9th July 2019
Business investment set to slow further Despite a slump in May, machinery orders point to broadly stable capital spending in the second quarter. Even so, we expect investment growth to slow sharply over the coming quarters. The 7.8% m/m plunge in …
8th July 2019
Economy may be past the worst The Tankan’s all industry index fell at a slower pace in the second quarter than in the first, which suggests that the economy may be past the worst. That said, the slowdown has started to ease capacity shortages and dampen …
1st July 2019
Economy probably continued to expand in Q2 While the labour market remains tight, the drop in the job-to-applicant ratio is an early sign that it will slacken over coming months. Meanwhile, the jump in industrial production and capital goods shipments in …
28th June 2019
Private consumption gaining momentum The solid rise in retail sales values in May suggests that consumption growth will be quite strong in the second quarter and we think that it will continue to expand at a rapid rate in the third quarter. The 0.3% m/m …
27th June 2019