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Green shoots for second half of the year Due to the economy faring worse than we had expected in Q1, we’ve revised down our 2021 GDP forecast to from +3.0% to +2.0% (see here ). Much of the 1.3% q/q drop in GDP in Q1 was down to a 1.4% q/q in private …
21st May 2021
Logistics still holding back vaccine rollout While the vaccine campaign has picked up pace, the number of daily jabs administered averaged just 0.15 per 100 people in the week to Thursday – far short of the 0.75 required to meet the government’ target of …
14th May 2021
Restrictions will probably be tightened further With daily cases not coming down at the nationwide level, the government is set to expand countermeasures across more regions of the country. That will weigh on activity which has held up well in Q2 so far. …
7th May 2021
Q1 holding up well, but Q2 could yet be weaker At first glance, the 2.2% m/m rebound in industrial production in March suggests that the chip shortages that have been plaguing Japan’s manufacturing sector in recent months are easing. With industrial …
30th April 2021
Round Three With the government set to this evening declare a state of emergency for the prefectures of Tokyo, Osaka, Hyogo and Kyoto, Japan’s economic recovery is likely to have stalled across the first half of 2021 (see here ). The emergency measures …
23rd April 2021
More state of emergency declarations looming The continued surge in daily infections means it’s now increasingly likely that some businesses will be asked to temporary close to curb the virus spread. We expect a state of emergency to soon be declared for …
16th April 2021
Fourth wave could force draconian measures The Bank of Japan’s broad measure of consumption released this week suggests that the hit to consumer spending from the third wave was harder than first appeared. While the measure rose 1.2% m/m in February, …
9th April 2021
Strong start to Q2 The 2.8% m/m rise in retail sales volumes in February to their highest level since September 2019 supports our view that the economic damage from the second round of emergency declarations was far more limited than that from the …
1st April 2021
Shifting our focus from Nikkei to TOPIX Despite upward revisions to our long-term US Treasury yield forecasts this week, we’ve generally left our upbeat forecasts for DM equities unchanged (see here ). And we still expect the outperformance of Japanese …
26th March 2021
Inoculations will gather more pace Many initial concerns over Japan’s vaccine rollout centred on supply constraints. Japan has been entirely reliant on imports of the Pfizer vaccine in the early stages of its rollout. However, supply hasn’t been an issue …
19th March 2021
More resilient to external shocks since Fukushima Yesterday marked 10 years since the meltdown at Fukushima Daiichi nuclear power station. The triple blow from the earthquake, tsunami and nuclear meltdown on 11 th March 2011 caused a devastating loss of …
12th March 2021
Tokyo caution won’t prevent strong end to Q1 The 2.9% m/m drop in the consumption activity index (CAI) last month was a bit larger than we had anticipated, but revised data show that spending reached a fresh virus-era-high in December despite soaring …
5th March 2021
10-year yields reaching highest level since 2016 The 10-year JGB yield rose to 0.18% today, the highest it has been since the launch of negative interest rates in January 2016. (See Chart 1.) One explanation is that the Bank of Japan is widely expected to …
26th February 2021
The 3.0% q/q jump in GDP in Q4 was stronger than most had anticipated. And while it still left output 2.9% below the peak reached ahead of 2019’s sales tax hike, other economic data released this week are consistent with our view that the economy will …
19th February 2021
Light-touch restrictions beginning to relax We flagged last week that the state of emergency currently covering 10 prefectures was likely to be lifted before its scheduled end on 7 th March. Indeed, the government is considering lifting the declaration …
11th February 2021
SoE extension not a major worry The government this week extended the state of emergency by a month for ten of Japan’s eleven prefectures. Tochigi was the only prefecture that was excluded as it met all six of the metrics required to lower the status of …
5th February 2021
Higher consumption forecasts The modest 0.3% m/m fall in retail sales volumes in December suggests that consumer spending had built up some immunity to surging coronavirus infections. While we assume that overall household spending performed a little …
29th January 2021
Slower virus spread not enough? Some commentators have suggested that winter surges in infections in “light-touch” countries such as Japan and Sweden are the final nail in the coffin for voluntary containment measures. Draconian restrictions on economic …
22nd January 2021
Consumers becoming more cautious Japan’s recovery was gathering momentum before surging infections began to take their toll. Machinery orders were 14.5% above Q3 levels across October and November, pointing to a sharp rebound in business investment last …
15th January 2021
Nationwide state of emergency looms With Japan recording a record 7,000 virus cases on Thursday, the government yesterday declared a state of emergency in Tokyo and the three surrounding prefectures of Kanagawa, Saitama and Chiba that will last until 7 th …
8th January 2021
Recovery will lose steam Survey data released this week suggest that economic activity continues to recover in the face of the most severe wave of coronavirus in Japan yet. The recovery in the Q4 Tankan beat consensus expectations, with the “all industry” …
18th December 2020
The Nikkei 225 this week reached levels last seen in 1991, buoyed by a flurry of upbeat data releases. Revised figures show that GDP expanded by 5.3% q/q in Q3, a touch stronger than the preliminary estimate. The 17.1% m/m jump in machinery orders in …
11th December 2020
Containment measures may need more teeth Daily cases have started creeping higher again at the national level driven by a renewed rise in infections in Tokyo and Osaka. (See Chart 1.) However, across most of the country the virus is a long way off …
4th December 2020
Olympics unlikely to boost recovery While daily cases have showed signs of levelling off in virus hotspots such as Tokyo and Hokkaido in recent days, the third wave is increasingly likely to weigh on economic activity over the near term. The number of …
27th November 2020
Restaurant discounts boosted recovery… Output recovered just over half of its H1 plunge last quarter and the economy has got off to a strong start in Q4. The onus is on services consumption to recover most of the remaining half. Despite a 6.6% q/q rise in …
20th November 2020
Vaccine could be available in first half of 2021 The Nikkei 225 hit a 29-year high this week. This was primarily a spillover from the surge in US stocks as it became clear that the election had returned a divided Congress. That will prevent US …
12th November 2020
October looking good Japan’s economy has been performing well over the autumn months. Indeed, the early evidence points to a further recovery in economic activity having taken place in October. New car registrations surged 22% m/m last month and were …
6th November 2020
Activity data support our optimistic view The latest activity data are consistent with our above-consensus GDP forecasts. For a start, the 4.0% m/m rise in industrial output in September was stronger than most had anticipated and marked the fourth …
30th October 2020
Revising up our Q3 forecasts The Cabinet Office’s monthly measure of consumption released this week showed a substantial upward revision for July, indicating that the second wave of infections didn’t hit spending as much as first thought. The index also …
23rd October 2020
Government mulling fresh fiscal support We explained last week that Japan is starting to lag behind other large advanced economies in terms of the fiscal support provided during the pandemic. The government duly responded. According to press reports, PM …
16th October 2020
FY 2021 budget looks timid We published our Q4 Outlook this week, where we explain that Japan’s economy is on course to recover to its pre-crisis level at a similar pace to the US but much quicker than is likely in the euro-zone. This is largely because …
9th October 2020
Nationalisation over deregulation One of Prime Minister Suga’s central pledges on the campaign trail was that he would lower mobile phone tariffs. This week’s announcement by state-owned Nippon Telegraph & Telephone that it will delist its mobile phone …
2nd October 2020
Back to normal? The 4.1% m/m fall in private consumption in July announced by the Cabinet Office this week suggests that the second wave of coronavirus infections prompted consumers to curtail spending. But with that wave now over and mobility surging …
25th September 2020
First new Prime Minister since 2012 Despite its similarity to PM Abe’s cabinet – which faced mounting disapproval – public support for PM Suga’s new cabinet has surged. Suga Yoshihide became PM on Wednesday having won a landslide victory in the LDP …
18th September 2020
Outlook for business investment not great The second estimate of Q2 GDP released this week was broadly in line with the preliminary estimate. However, the Cabinet Office now estimates that business investment plunged by 4.7% q/q instead of the previous …
11th September 2020
Suga favouring more monetary easing Chief Cabinet Secretary Yoshihide Suga has secured the backing of a majority of LDP lawmakers and is widely expected to win the party’s leadership election on 14 th September. That means he would become Japan’s next …
4th September 2020
LDP to remain in charge After racking up a record number of consecutive days as Prime Minister on Monday, Mr Abe announced today that he will step down due to health concerns. A chronic bowel condition already forced Abe to cut short his first term as PM …
28th August 2020
Net trade to provide large boost to Q3 GDP The 7.8% q/q plunge in GDP in Q2 wiped out all the gains since PM Abe returned to power in 2012, but timelier data suggest that a strong rebound is now underway. The 7.4% m/m rise in export volumes in July was …
21st August 2020
Is the second wave breaking? While it’s too early to jump to any firm conclusions, the slowing spread of the virus over the past week lends support to our view that the economy will be able to rebound strongly in the second half of the year. But with the …
14th August 2020
More containment measures, but still a light touch Over the past few days, three of Japan’s 47 prefectures have reintroduced states of emergency to curb the spread of the coronavirus. And with some other local authorities also rolling out fresh …
7th August 2020
Activity holding up despite surging cases The 13.1% m/m jump in retail sales in June points to a strong rebound in consumption even if spending on services recovered less rapidly. And while Japan is in the midst of a “second wave” of coronavirus cases, …
30th July 2020
Economy trumping virus containment in Osaka With cases now rising fast across most major Japanese cities and hitting a record high at the national level this week, many local governments are now facing a choice between containing the virus and keeping the …
24th July 2020
Governor Koike sounds the alarm This week’s raising of the alert level in Tokyo to red – its highest level – has no major automatic consequences. But it brings the city government to the brink of once again asking some businesses to close. New infections …
17th July 2020
Renewed outbreak in Tokyo manageable for now New confirmed coronavirus cases in Tokyo hit a record high of 224 today, exceeding the peak of 206 during the state of the emergency in April. While authorities in Australia and the US are responding to renewed …
9th July 2020
May activity data consistent with our views The May activity data were weaker than most had anticipated but broadly consistent with our below-consensus forecast of a 9% q/q drop in Q2 GDP. While consumption soared in the US and many European countries …
3rd July 2020
Money stuck in the admin pipeline The flagship measure of April’s supplementary budget was the plan to distribute ¥100,000 to every resident. That was deemed a faster and more effective way of lifting consumption out of its coronavirus slumber than the …
26th June 2020
Bureaucracy hampering wage subsidy programme Some companies which have had to furlough workers appear to have judged that applying for the government’s employment adjustment subsidy is more trouble than it’s worth. The labour ministry simplified the …
19th June 2020
All restrictions to be lifted from next Friday The Tokyo Metropolitan Government announced on Thursday that it will join the rest of the country and follow the central government’s plan to lift all requests for businesses to close from the 19 th June. …
12th June 2020
Unprecedented slump in services spending We learned last week that retail sales plunged 9.6% m/m in April while Japan was in a state of emergency. Household spending on services is usually more stable than retail sending. But it has also been hammered …
5th June 2020
Consumption plunging in April The slump in activity in April was worse than most had anticipated. While domestic demand will rebound now that the state of emergency has come to an end, we think it will take until 2022 for output to return to pre-virus …
29th May 2020