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Ueda leaves door open to acting before full review Bank of Japan Governor Ueda spoke on Tuesday in the Diet and mostly repeated what he said in the Bank’s post-meeting press conference on 28 th April, when he left monetary policy settings unchanged in his …
12th May 2023
Pay at small firms not keeping up with large firms While wage growth has been very strong by historical standards in recent months, wages have risen faster for employees of larger firms than at smaller firms. (See Chart 1.) Chart 1: Labour Cash Earnings …
5th May 2023
Export downturn not over yet Export volumes rose for the second consecutive month in March and with PMIs in Japan’s main trading partners rebounding, the further fall in export volumes we had pencilled in for Q2 looks increasingly unlikely. We’ve now …
28th April 2023
Note: We’ll be discussing the BOJ’s April decision and the fate of YCC in a 20-minute online briefing at 09:00 BST/16:00 SGT on Friday, 28 th April . Register here . BoJ will signal inflation target close to being met The Bank of Japan will release …
21st April 2023
Ueda has his eye on wage growth Bank of Japan Governor Kazuo Ueda noted in his inaugural press conference this week that more time is needed to see if wage growth can be sustained at a level where it will support inflation at or above the 2% target. So …
14th April 2023
Tankan paints gloomy picture This week’s Q1 Tankan headline indices supported our assessment that Japan’s economy will slip into a mild recession in the first half of this year. The Bank subsequently released the comprehensive data from the survey on …
5th April 2023
BoJ facing dilemma The economic data released this week underline the dilemma facing incoming Bank of Japan Governor Ueda. On the one hand, price pressures continue to strengthen. Inflation excluding fresh food and energy rose from 3.1% to 3.4% in the …
31st March 2023
No visible uptick in financial risks There have been no signs of stress in Japan’s financial markets as a result of the banking crises in the US and the demise of Credit Suisse. For starters, there hasn’t yet been a spike in the Bank of Japan’s foreign …
24th March 2023
Global financial risks creeping up The troubles at Silicon Valley Bank and Credit Suisse have dominated the headlines this week and have further weakened the case for the Bank of Japan ending Yield Curve Control (YCC). Market expectations for the Fed …
17th March 2023
Case for end of YCC a touch weaker but still strong Contrary to our expectations, the Bank of Japan did not make any changes to Yield Curve Control (YCC) at today’s meeting. And the case for abandoning the policy now looks a little less compelling than a …
10th March 2023
Large fall in January industrial output The 4.6% m/m plunge in industrial production in January partly reflected disruptions caused by the early start to the Lunar New Year this year. Oddly, unlike export volumes, which typically show an equally strong …
3rd March 2023
Fight over yield ceiling resumes Yield Curve Control (YCC) remains on borrowed time. The 10-year Japanese government bond (JGB) yield has consistently closed above the 0.5% ceiling since Monday last week and this week the Bank has once again had to step …
24th February 2023
Export volumes fell again in January The 0.2% q/q rise in Q4 GDP was weaker than most had anticipated and is consistent with our view that the economy will do much worse this year than anyone expects. Indeed, the early indications are that economic …
17th February 2023
The main development of the week happened in the past few hours: the reported nomination of Kazuo Ueda as the next BoJ Governor. Our initial response is here . While analysts and investors are looking for clarity on Mr Ueda’s views, there is little to …
10th February 2023
Regional utilities seek electricity rate hike Seven regional utility companies (of 10 in total) that together serve around 60% of Japan’s population have now applied to the government to raise the rates on their regulated electricity contracts with …
3rd February 2023
PM Kishida, demographic doomsayer In his speech on Monday kicking off the first Diet session of the year, PM Kishida proclaimed that it is “now or never” when it comes to addressing Japan’s demographic decline. To that end, he pledged to double spending …
27th January 2023
10-year JGB yield retreats from ceiling Following the Bank of Japan’s decision on Wednesday to keep its short-term policy rate and Yield Curve Control (YCC) settings unchanged, 10-year Japanese Government Bond (JGB) yields fell to as low as 0.37% that …
20th January 2023
Services inflation on the rise The timely Tokyo CPI showed that inflation jumped from 3.7% to 4.0% in December, twice the BoJ’s 2% target. Our measure of “core” goods inflation accelerated further, but below the surface there are clear signs of a …
13th January 2023
Q4 industry slump won’t prevent GDP rebound We warned in December that the surge in manufacturing inventories in the Tankan signals a sharp downturn in industrial activity. As it happens, industrial production only fell marginally in November. But that …
6th January 2023
Yet another surprise from Governor Kuroda The Bank of Japan surprised everyone on Tuesday by widening the tolerance band around its 0% target for 10-year Japanese Government Bond (JGB) yields by 25bp to 0±50bp. The Bank argued that this decision was …
23rd December 2022
Large build-up in manufacturing inventories One important detail in the Bank of Japan’s Q4 Tankan this week that we didn’t fully address in our Data Response was the large build-up in manufacturing inventories. These are a coincident indicator of economic …
16th December 2022
Q3 private consumption revised down Q3 real GDP growth was revised up to a contraction of 0.2% q/q from a 0.3% fall in the second estimate released yesterday. However, private consumption was revised down from a 0.3% q/q rise to 0.1% q/q. Rather than …
9th December 2022
China’s EV push a major threat The 2.6% m/m drop in industrial production in October was the second consecutive fall. And while motor vehicle output rebounded from the plunge in September, it was still 16% below its 2019 level. Firms are still pinning …
2nd December 2022
Foreign visitor numbers jump but services struggle Japan received 461,000 foreign visitors in October (seasonally adjusted), almost double the September figure. This is helping businesses in accommodation and transport, which media reports say are …
25th November 2022
Media blaming weak yen and virus for Q3 GDP fall The economy shrank by 0.3% q/q in Q3 due to a surge in real imports, as well as disappointing private consumption and investment growth. Some media outlets have blamed the weak yen and COVID for the …
18th November 2022
Consumption resilient against Q3 virus wave The seventh COVID wave in Q3 has been the worst on record so far in terms of daily infections. Yet the Cabinet Office’s monthly estimate of private consumption for July and August was 0.6% above the Q2 average …
11th November 2022
Business investment strong in Q3 Data released on Monday showed that capital goods shipments fell by 4.1% m/m in September. But across Q3, capital goods shipments rose 11.4% q/q to the strongest they have been since Q4 2018. Meanwhile, the Bank of Japan’s …
4th November 2022
MoF likely intervened again We revised up our inflation forecasts last week to reflect the further weakening of the yen to 150 against the dollar last week. As it happens, the yen jumped from a low-point of 152 against the dollar to 146 late on Friday, …
28th October 2022
German economy overtakes Japan’s With the yen weakening to 150 against the dollar this week, we estimate that Germany has overtaken Japan as the world’s third largest economy in dollar terms. (See Chart 1.) Chart 1: Nominal GDP (US$bn, 4Q Sum) Sources: …
21st October 2022
Yen tumbles again after strong US inflation data Following another strong inflation reading from the US, the yen today weakened slightly past the 147.6 trough it hit in 1998, reaching its weakest against the dollar since 1990. It then rebounded, sparking …
14th October 2022
Regular pay rising at the fastest rate in 25 years The preliminary estimate of labour cash earnings released today showed a 1.6% annual rise in regular pay in August, the largest rise in 25 years. We wouldn’t be surprised if that figure was revised …
7th October 2022
Travel subsidies to return in October The government announced this week that it will once again be providing travel subsidies, this time under the National Travel Discount (NTD) program, from 11 th October through December. Prefectural governments get …
30th September 2022
First intervention to buy yen since 1998 In the wake of the Fed’s hawkish 75bp rate hike on Wednesday, the yen approached 146 against the dollar for the first time since 1998. Back then the government intervened to shore up the yen and it did so again …
23rd September 2022
GPIF could shift back to domestic assets The release of stronger-than-expected US inflation figures on Tuesday contributed to a further rise in US long-term interest rates. They are now the highest they’ve been since mid-June. With the Bank of Japan …
16th September 2022
Intervention unlikely but inflation would rise Despite warnings from the government that it would intervene against “rapid and one-sided moves” in the yen, the exchange rate fell this week to a 24-year low of 144 against the dollar and, so far, there …
9th September 2022
Adult population shrinking more quickly While Japan’s population peaked in 2010, it only edged down over the subsequent decade as positive net migration cushioned the decline in the “natural” population that was caused by deaths outstripping births. …
2nd September 2022
Nuclear restarts still in the balance The timely Tokyo CPI showed that inflation jumped from 2.5% to 2.9% in August. That was partly due to the fading drag from last year’s mobile phone tariff cuts, but another key driver was the 29% y/y surge in …
26th August 2022
Productivity growth slowing further The 0.5% q/q rise in Japan’s Q2 GDP brought output closer to its pre-virus peak, with productivity up by 0.4% y/y. However, the bigger picture is that the pandemic has further slowed the sluggish productivity gains …
19th August 2022
Net migration worsened population decline Japan’s population fell by 726,342 (0.6%) last year. The figure would have been less alarming if not for negative net migration of 107,202, which is a trend we do not think will last. (See Chart 1.) Chart 1: Net …
12th August 2022
Shifting energy mix to renewables The Tokyo Metropolitan Government is planning to mandate the installation of solar panels on new homes. The plan follows a proposal at the national level to install solar panels on public buildings across Japan and …
5th August 2022
Falling yields ease pressure on yield target Long-term government bond yields have retreated from their recent highs in both the US and Japan, with the yield on 10-year Japanese government bonds (JGB) now the lowest it has been since mid-March. (See Chart …
29th July 2022
Mobility softening as virus cases surge New Covid-19 cases are now nearly twice as high as they were at the peak of the Omicron wave in February. The government has so far ruled out declaring another state of emergency, which makes sense as the number of …
22nd July 2022
Tax revenues surging The Bank of Japan’s flow of funds figures show that the budget deficit was a still large 6.6% of GDP in the year to March. (See Chart 1.) In fact, we estimate that the deficit widened sharply in Q1 to around 10% of GDP in …
15th July 2022
Capital spending plans strongest on record The most striking development in the Q2 Tankan was the surge in capital spending plans for the fiscal year that started in April. (See Chart 1.) Chart 1: Tankan Capital Spending Plans & Business Investment (% …
8th July 2022
Industrial output slumping The activity data released this week suggest that output won’t rebound as rapidly as we had been anticipating and we’re lowering our estimate of Q2 GDP growth from 1.5% q/q to 0.5%. The 0.6% m/m rise in retail sales values was …
1st July 2022
Election puts focus on inflation Campaigning for the 10 th July Upper House election has formally begun. There is little question that the LDP will win – the only question is by how much. The scale of victory could have a bearing on the outlook for policy …
24th June 2022
Yen to hit 140 even if yield ceiling raised While Bank of Japan Governor Kuroda insisted today that Yield Curve Control has no limits, defending the 0.25% ceiling on 10-year yields with the kind of heavy JGB purchases seen this week is unsustainable over …
17th June 2022
Overtime hours surpass pre-virus levels In a dovish speech on Monday, Bank of Japan Governor Kuroda argued that the main reason why inflation in Japan remains much lower than elsewhere is the rigidity of services prices. In turn, he argued, that reflects …
10th June 2022
Recovery in services spending gaining momentum The 1.3% m/m fall in industrial production in April is a clear sign that supply shortages remain a major headwind for exposed sectors such as carmaking. It left manufacturing output around 4% down on both its …
3rd June 2022
Tax reform unlikely to change behaviour The government’s planned mix of tax hikes and tax breaks to promote corporate investment and discourage saving is unlikely to have the teeth required to significantly alter corporate behaviour. Media reports suggest …
27th May 2022