Filtered by Subscriptions: Japan Economics Use setting Japan Economics
Business investment still languishing The fall in machinery orders in January suggests that business investment may not recover much this quarter from a disappointing 2021. But with corporate profits recovering strongly last year, firms have plenty of …
17th March 2022
Exports to disappoint again this quarter Exports fell again in February, though they should rebound over the coming months provided the recent Omicron outbreak in China doesn’t cause major supply chain disruptions to resurface. The 19.1% annual rise in …
16th March 2022
High savings rate to cushion the blow The Ukraine war is dominating the headlines, but the virus is still the main threat to Japan’s economy. Revised data show that Q4 GDP didn’t rebound as sharply as initially reported, leaving output still 1.1% below …
11th March 2022
War in Ukraine will lift inflation above 2% But Bank has made clear it will look through transitory, cost-push inflation Kishida will probably appoint a continuity candidate to replace Kuroda While the war in Ukraine will lift Japanese inflation to the …
10th March 2022
The recent spike in energy prices will lift import prices in Japan by around 10%, but the increase would be twice as large if Russian energy exports were banned. Japan’s flagship manufacturing sectors have sufficient pricing power to pass on those cost …
9th March 2022
Wage growth will remain around 1% The pick-up in wage growth in January was broad-based. However, with regular pay growth still around 0%, the coming energy-driven surge in inflation towards the BoJ’s 2% target won’t be sustained. The 0.9% annual rise in …
8th March 2022
Governor Kuroda’s successor to be more hawkish PM Kishida’s decision to replace arch-dove Kataoka Goushi with centrist Takata Hajime from Okasan Securities at the Bank of Japan could create a slightly less dovish policy board. But it probably won’t make …
4th March 2022
Employment to shake off Omicron Employment fell back yet again in January after a strong rebound in December. But while employment might have fallen a bit further in February due to the Omicron wave, it should soon bounce back fast and push the …
Consumer spending will fall this quarter The falls in both retail sales and industrial production in January confirm that the Omicron surge has knocked back the recovery. We think consumer spending will fall across this quarter, but it should rebound …
28th February 2022
Russia-Ukraine crisis highlights fossil fuel reliance The spike in energy prices following Russia’s invasion of Ukraine has highlighted just how reliant Japan still is on imported energy. Imported fossil fuels still made up 85% of Japan’s energy supply in …
25th February 2022
A spike in energy prices caused by significant disruption to Russian exports would lift Japanese inflation to 2% from April until the end of this year. However, the BoJ wouldn’t respond by lifting its policy rate as it wouldn’t be able to argue that …
23rd February 2022
If the Bank of Japan shortened the duration of its yield target, the impact on economic activity and inflation would probably be small but it could improve the long-term health of insurers and pension funds. It’s not clear though what could prompt such a …
22nd February 2022
Services spending jumped to only 3% below its pre-virus level in Q4 2021 despite having begun the quarter on a weak footing with curfews still in place for bars and restaurants across many regions in October. (See Chart 1.) It will have been knocked …
21st February 2022
Strong rebound from sizeable Omicron hit The February flash PMIs suggest that the Omicron wave has dealt a significant blow to economic activity. But with that wave now having broken, we think Japan’s economy is set for a rebound stronger than the …
Services spending rapidly recovering The 1.3% q/q rise in Q4 GDP was a touch weaker than anticipated but left output just 0.2% below its Q4 2019 level, a similar performance to the euro-zone or the UK. Particularly encouraging was the marked rebound in …
18th February 2022
Inflation will break past 1% in April Inflation slowed in January but that was entirely down to the base effects boost from the Go To Travel campaign disappearing. While underlying inflation is unlikely to reach 1% until later in the year, we think …
Exports to be a tailwind to recovery Exports were broadly unchanged in January despite Omicron surges at home and abroad. We think they’ll rebound further this year as external demand for capital goods rises further and motor vehicle exports resume their …
17th February 2022
Economy to bounce back fast from Omicron hit While Omicron will cause Japan’s economy to do little more than tread water this quarter following a rebound in Q4, output should soon resume its recovery and get back on its pre-virus trend by the end of the …
15th February 2022
Bank readies artillery to defend yield target Expectations for a global monetary tightening cycle lifted 10-year Japanese government bond (JGB) yields to just three basis points shy of the top end of the Bank of Japan’s ±0.25% target range yesterday. (See …
11th February 2022
With economic activity still depressed by recurrent virus waves, the sharp slowdown in immigration to Japan has yet to put much upwards pressure on wages. However, looking ahead we think some sectors could be hit by a rise in labour costs if the border …
9th February 2022
A perfect storm of surging house prices, a further worsening of supply shortages, and a pick-up in labour mobility would be needed to cause an inflation surge in Japan. Even if inflation did reach 2%, this wouldn’t necessarily trigger a policy response by …
8th February 2022
Wage growth will bounce back Wage growth turned negative in December due to another fall in end-of-year bonus payments, but it should soon bounce back above 1% y/y this year as the labour market tightens and strong corporate profits feed into a recovery …
Soaring input prices have kept profit margins of manufacturers below their pre-virus peak even as those of services firms have hit record highs. However, manufacturers will catch up before long. As we noted in a recent Weekly , the net profit margins of …
6th February 2022
Signs Omicron wave about to break The 1% m/m falls in both retail sales values and industrial production in December point to Japan’s post-Delta rebound having lost some momentum heading into 2022. As Omicron cases surged in many of Japan’s main trading …
4th February 2022
Output likely to tread water in Q1 The small fall in both retail sales and industrial production in December suggests that the post-Delta rebound was losing steam before local Omicron cases started to surge. And while output is still set to have rebounded …
31st January 2022
Profit margins reach record-high Amidst all the negative news about soaring input prices, supply shortages and production disruptions from Omicron-related staff quarantine, it’s easy to overlook the fact that Japanese firms are in better shape than ever. …
28th January 2022
Skyrocketing infections and a 10-day isolation requirement for close contacts of positive cases have resulted in a wave of staff absences in Japan. Domestic carmakers already struggling with chip shortages appear to have been among the first victims of …
24th January 2022
Manufacturing resilient but services hit by Omicron The January flash PMI suggests that the manufacturing sector continues to expand at a rapid pace, but there are mounting signs that firms are passing on higher input costs to consumers. By contrast, …
Sharp but short Omicron hit With Omicron cases rocketing to record highs, quasi-state-of-emergency declarations are coming thick and fast. Such measures began in 13 more prefectures today – Tokyo among them – and from early next week restrictions are set …
21st January 2022
Inflation will peak around 1% Consumer price inflation reached a two-year high of 0.8% in December, but with energy prices set to fall back, we think that it will peak around 1% by mid-year . The headline rate was a touch below the analyst consensus of …
Exports to remain strong Exports were broadly stable in December after a sharp rebound in November. We think they’ll continue to recover at a decent pace this year as external demand for capital goods continues to rise and motor vehicle exports resume …
20th January 2022
The Bank of Japan today upgraded its assessment of inflation risks to “broadly balanced” for the first time since 2014. However, it reiterated its pledge to keep expanding the monetary base until inflation exceeds 2% and also signaled that it will keep …
18th January 2022
Business investment to continue to rebound strongly The rise in machinery orders in November supports our view that business investment recovered strongly across Q4. And private investment should continue to rebound strongly this year as firms look past a …
17th January 2022
Tokyo readies restrictions We think that Japan’s economy rebounded by 2.4% q/q last quarter and entered Q1 on a strong footing. The Economy Watchers Survey conducted in the second half of December rose to a 16-year high, while the Reuters …
14th January 2022
Omicron supply chain disruption won’t lift consumer inflation much Balance sheet to shrink gradually, but that won’t cause tighter monetary conditions Bank still views weaker yen as positive and won’t respond with tightening While Omicron is likely to …
12th January 2022
Overview - The Omicron surge will cause a renewed fall in consumer spending this quarter. But we still expect GDP to return to its pre-virus path in the second half of the year. And while Omicron and any subsequent outbreaks may exacerbate supply …
Supply problems still lingering The 7.2% m/m rebound in industrial production in November marked the largest rise in the 68-year history of the series. Nearly all of that increase was driven by a 44% m/m surge in motor vehicle output as supply disruptions …
7th January 2022
Wage growth will rise to around 1% this year Wage growth fell to zero in November due a slump in bonus payments, but it should accelerate as the labour market tightens and the recent reopening feeds into a renewed recovery in overtime and bonus payments. …
We expect GDP to return to its pre-virus path in the second half of the year as services spending finally returns to near-normal. However, the risks to that forecast remain tilted to the downside as consumers may remain cautious for longer. Meanwhile, we …
5th January 2022
Underlying inflation to get to around 1% Headline inflation picked up in November due to another acceleration in energy inflation and a further rise in fresh food inflation. Underlying inflation remained weak, and while it will accelerate over the coming …
24th December 2021
Q4 is shaping up to be strong in line with our forecast. Mobility data point to another sizeable rebound in consumer spending, and strong export data and optimistic firm forecasts suggest that industrial production has bounced back sharply. (See Chart 1). …
22nd December 2021
Handbrake off The November external trade data showed an impressive rebound in car exports, but they were still 14% below their 2019 level. (See Chart 1.) Indeed, the recovery has further to run. Despite briefly closing a couple of factories last week …
17th December 2021
While central banks elsewhere are becoming increasingly hawkish, the Bank of Japan kept policy loose today and is set to remain among the most dovish central banks for the foreseeable future . The Bank left its interest rate targets unchanged as widely …
Rebound in exports has further to run The jump in exports in November suggests that most supply chain constraints in the automobile sector had already eased last month. We think that exports will remain strong over the coming months as motor vehicle …
16th December 2021
Services catch-up has further to run The Q4 Tankan survey showed that the services sector has started to narrow the gap relative to manufacturing and we think that process has further to run. The headline index for large manufacturers stalled at 18, which …
13th December 2021
New tax proposal may boost low-skilled pay While PM Kishida’s new plan to offer firms more generous tax deductions for raising wages isn’t a game changer, we think it may push some smaller companies into slightly more aggressive wage hikes. Finalised …
10th December 2021
Emergency lending facility and corporate debt buying scheme to be extended Risks to inflation posed by worst-case Omicron scenario balanced Upside inflation surprise wouldn’t cause Bank to lose control of the yield curve While renewed virus restrictions …
9th December 2021
Wage growth to regain momentum Wage growth stayed weak in October but it should accelerate as the labour market tightens and the recent vaccine-led reopening allows a full recovery in overtime and bonus payments. Meanwhile, the rise in household spending …
7th December 2021
The pandemic has brought a halt to the last decade’s rise in Japan’s participation rate which had allowed the labour force to expand despite challenging demographics. Any post-pandemic recovery is likely to be short-lived: we expect the participation rate …
6th December 2021
Immunity to high inflation won’t wane While there are still far more questions than answers surrounding the new Omicron variant, in a worst-case scenario we think it would temporarily derail Japan’s economic recovery and cause underlying inflation to …
3rd December 2021
