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Imports proving resilient to corona calamity The strength of imports in March and April suggests that our forecast for a double-digit drop in import volumes this quarter was too pessimistic. The Bank of Japan’s data released on Thursday showed a 4% m/m …
22nd May 2020
State of emergency ending in most prefectures Japan declared a state of emergency on 6 th April and extended it nationwide on 16 th April. During the state of emergency, citizens were asked to stay at home This helped reduce the number of new coronavirus …
15th May 2020
Some regions moving to relax restrictions While the government confirmed this week that the nationwide state of emergency will be extended until 31 st May, there are signs that activity may pick up before that date in some regions. Moreover, PM Abe …
8th May 2020
Consumption plummeting as people stay at home Japan’s state of emergency is scheduled to end on Wednesday 6 th May but press reports suggest the government will extend it by one month tomorrow. The number of new coronavirus cases across Japan has fallen …
30th April 2020
Corporate loan demand set to surge According to the Bank of Japan’s latest “Senior Loan Officer Survey”, which was conducted in the month to 10 th April, corporate loan demand was the strongest it has been since the global financial crisis and banks …
24th April 2020
State of emergency extended nationwide At first glance, the number of new coronavirus cases has started to drop back again in recent days. But this follows a familiar pattern as new cases tend do spike on the weekend and then fall back again. The smoother …
17th April 2020
State of emergency opens door for lockdowns The number of new coronavirus infections in Japan has accelerated rapidly recently. (See Chart 1.) The government this week declared a state of emergency in prefectures that generate 47% of Japan’s GDP. This …
9th April 2020
Economy proved resilient in latest batch of data The robustness of the economy displayed in the data released this week is an encouraging sign but there is no doubt that coronavirus disruption will deal a severe economic blow over coming months. The …
3rd April 2020
Surveys point to slump in activity The March flash PMIs confirm our view that the coronavirus outbreak resulted in a sharp fall in economic activity. The output component of the manufacturing PMI fell by more than five points and now points to industrial …
27th March 2020
Loose lockdown relaxed as Europe and US tighten Japan’s coronavirus infections have been relatively stable in recent weeks even as those in Europe and the US have soared. (See Chart 1.) Some thought that Japan’s low infection numbers might just reflect a …
20th March 2020
Activity indicators plunging amid virus There was a 16% y/y jump in grocery sales in the week beginning 24 th February and the Economy Watchers Survey (EWS) conducted at the same time similarly showed that supermarkets reported stronger activity. But this …
13th March 2020
Downside risks to our already bearish forecasts It’s now looking likely that Japan’s economy will contract again this quarter, which would mean the economy is in recession for the first time since 2012. The biggest drag in Q1 is likely to have come from …
6th March 2020
Virus likely to drag on exports and consumption The January activity data released today showed that the economy was recovering from the sales tax hike and the global economic slowdown on the eve of the coronavirus outbreak. What’s more, firms remained …
28th February 2020
Activity data disappoint across the board We have long argued that Japan’s economy will shrink this year and the recent string of bad news has only made that outcome more likely. But we still don’t expect the Bank of Japan to respond with more policy …
21st February 2020
Bank of Japan will prevent a public debt crisis In its Article IV report, the IMF this week called Japan’s public debt trajectory “unsustainable” and proposed a further increase in the sales tax from 10% to 15% to reduce fiscal risks. Arguing that the …
14th February 2020
Coronavirus could hit Japanese industry Two weeks ago we argued that the hit to tourism from the Wuhan virus had the potential to lower GDP by as much as 0.6%-pts this quarter (see here ). Since then, China’s intensified efforts to contain the virus have …
7th February 2020
Dove set to replace Harada on Policy Board The government’s nomination of reflationist Adachi Seiji to the Bank of Japan Policy Board this week doesn’t raise the chances of any fresh stimulus being announced in the near term. Adachi represents a …
31st January 2020
New coronavirus a threat to tourism The Wuhan coronavirus has now spread across China and to most neighbouring countries, including Japan. China has been much more proactive in trying to contain the disease than it was with SARS. But China is also much …
24th January 2020
FSA seeks to change behaviour of regional banks The Financial Services Agency’s (FSA) plans to allow regional banks to diversify into a wide range of business areas is another step in the right direction by Japan’s financial regular. FSA chief Endo …
17th January 2020
Capacity remained tight in Q3 The Bank of Japan has signalled that it would not loosen policy in response to a temporary slowdown in demand as long as capacity shortages remained pronounced. Data released this week show that this was indeed the case on …
10th January 2020
Consumption rebound, manufacturing slump The activity data released over the holiday break confirmed our view that the economy appears to have weathered October’s sales tax hike better than some had feared. Retail sales bounced back by 4.5% m/m in …
3rd January 2020
Consumption weathered tax hike well Assessing the impact of October’s sales tax hike has been complicated by the large number of consumption indicators, each telling a slightly different story. But the most reliable measure, released this week for …
20th December 2019
The BoJ has great expectations for fiscal package Revised GDP data released this week show that the economy approached the sales tax hike on 1 st October with more momentum than initially thought as growth was revised up from 0.1% q/q to 0.4% q/q. (See …
13th December 2019
Falling profits point to weaker investment Data released this week showed that capital spending rose a strong 7.7% y/y in the third quarter. Unfortunately, that strength is unlikely to last. One reason is that investment was bolstered last quarter by …
6th December 2019
Retail sales and industrial output plunge The sharp falls in retail sales and industrial production in October suggest GDP might contract more sharply than the 0.7% q/q drop we have pencilled in for the fourth quarter. The 14.4% m/m fall in retail sales …
29th November 2019
PM Abe surpasses PM Katsura Shinzo Abe surpassed Meiji era leader Taro Katsura to become Japan’s longest serving Prime Minister this week. Overall, his track record on the Japanese economy has been mixed. Under PM Abe GDP growth has hovered around 1%, …
22nd November 2019
Consumption still likely to plunge in Q4 The preliminary estimate of Q3 GDP showed that growth slowed to 0.1% q/q, held back by a sizeable drag from stockbuilding and falling net exports. (See here .) While the 0.4% q/q rise in private consumption would …
15th November 2019
Fiscal rather than monetary stimulus on its way Bank of Japan Governor Kuroda argued this week that fiscal policy should play a larger role in supporting demand in the current environment. The Bank has recently been cutting purchases of bonds with very …
8th November 2019
Bank brings output gap to the fore The Bank altered its forward guidance when it left rates unchanged this week. It had previously pledged to maintain the current extremely low levels of short- and long-term interest at least until spring 2020. Now it …
1st November 2019
Mixed bag of data not weak enough for a cut The upcoming meeting by the Bank of Japan is an important one as the Bank has indicated that “it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price …
25th October 2019
Bank of Japan’s bond holdings on track to fall The Bank of Japan bought ¥5.2 trillion (¥63 trillion annualised) of Japanese government bonds in September and its purchase plan for October foresees purchases of just ¥4.9 trillion (¥60 trillion annualised). …
18th October 2019
Supermarket sales plunge after tax hike Daily data from supermarkets show that there was a sizeable drop in sales in the days following last week’s sales tax hike. But we are not convinced that this is a bellwether for the tax hike’s impact on the wider …
11th October 2019
Not bad enough for another rate cut The rush of data released this week was a mixed bag. Overall, there still isn’t a clear-cut case for the Bank of Japan cutting interest rates when it “re-examines” its policy settings at the end of the month. Amidst the …
4th October 2019
Yield spreads widen as Kuroda targets short end We expect the Bank of Japan’s “reverse twist” to intensify after the next Board meeting. On balance, we still think that the Bank will refrain from cutting short-term interest rates, but we’ll closely watch …
27th September 2019
Sales tax hike looming Japan’s sales tax will be raised from 8 to 10% in 11 days’ time. We expect the hit to consumer spending to be significant but less severe than after previous tax hikes. Countermeasures such as a reduced tax rate for certain items …
20th September 2019
Yield curve worries ease Long-term government bond yields have rebounded around the globe this week, with 10-year Japanese government bond (JGB) yields climbing to -0.19% today from a recent trough near -0.30%. (See Chart 1.) Chart 1: 10-year JGB Yields …
13th September 2019
‘When the mountain is low, the valley is low’ We’ve been arguing that the drag from next month’s sales tax hike will be less severe than the one after previous tax hikes. Finance Minister Aso noted earlier this week the absence of a spending rush as …
6th September 2019
FSA demands change in regional banking sector The regulatory drive for consolidation in Japan’s regional banking sector is gathering pace. The Financial Services Agency (FSA) announced this week a series of carrot and stick measures to stimulate …
30th August 2019
Hiring subsidies for Ice Age Generation This week it was revealed that the government plans to offer a new set of hiring subsidies to help workers find regular employment. This could provide a boost to aggregate wages. Businesses offering training will …
23rd August 2019
Reiwa celebrations or pre-tax spending rush? The preliminary estimate of Q2 GDP showed a strong 0.4% q/q increase in output. One of the drivers was a 0.6% q/q jump in private consumption. Much of the media coverage has attributed this to consumers …
16th August 2019
Yen climbs to 17-month high against dollar Two months ago we predicted that the US would eventually impose tariffs on all imports from China. (See here .) Indeed, President Trump announced last week that he will impose an additional 10% on the remainder …
8th August 2019
Tax hike countermeasures progressing well Implementation of the government’s flagship measure to cushion the blow of October’s sales tax hike is ahead of schedule. Hiroshige Seko, the Minister of Economy, Trade and Industry, said this week that 240,000 …
2nd August 2019
Korea trade spat starting to hurt inbound tourism Local media report that many South Koreans are starting to boycott Japan as a holiday destination. One of South Korea’s largest travel agencies said that bookings of trips to Japan were down 50% y/y in the …
26th July 2019
Spring wage negotiations deliver stable pay hikes This year’s spring wage negotiations between unions and employers (Shunto) ended with a ¥1,560 increase in base pay, equivalent to a 0.5% pay hike, the same as last year. That’s a bit disappointing given …
19th July 2019
Yokohama-Chiba Bank tie-up A reorganisation of Japan’s regional banking sector could be brewing as two of its largest banks announced a tie-up this week. Regional banks’ lending margins and capital ratios have been steadily declining. While ultra-low …
12th July 2019
Abe getting tired of fiscal tightening The Q2 Tankan survey released this week was a mixed bag as it showed a further sharp deterioration in business conditions for manufacturing firms. By contrast, business conditions outside manufacturing worsened only …
5th July 2019
LDP set to dominate Upper House elections PM Abe’s cabinet announced on Wednesday that the Upper House elections will take place on 21 st July. In April, the LDP lost two seats in the Lower House in by-elections in Osaka and Okinawa. However, it still …
28th June 2019