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Employment should rebound from recent slump Employment fell sharply again in October despite the lifting of states of emergency declarations at the start of the month. However, it should rebound sharply across November and December in line with the …
30th November 2021
Spending to keep rising as disruptions start to ease Retail sales kept rising in October despite another drop in motor vehicles sales. With supply disruptions now starting to ease and mobility picking up, they should continue to increase . The 1.1% m/m …
29th November 2021
Mid-range chip production boost While the breakdown of PM Kishida’s new ¥31.6 trillion (6% of GDP) supplementary budget released today was dominated by measures already leaked to the media last week, it did reveal that only ¥22 trillion (4% of GDP) will …
26th November 2021
Industry set to recover as shortages ease November’s flash PMI points to a rebound in industrial output amidst early signs that supply shortages are diminishing. But while the services sector is now on the mend, the recovery there is lacking vigour . …
24th November 2021
Media reports that suggest that the Bank of Japan is losing control of short-term interest rates due to its “Special Deposit Facility” encouraging banks to park reserves at the BoJ are wide of the mark. The scheme does not threaten the viability of the …
22nd November 2021
Large stimulus locks in strong rebound The stimulus unveiled today by PM Kishida’s new cabinet was broadly in line with expectations and should provide a meaningful boost to the recovery in consumer spending over the coming months. But some of the …
19th November 2021
Underlying inflation to continue to disappoint Headline inflation edged down in October despite an acceleration in energy inflation. Hit yet again by weaker mobile phone tariff inflation underlying inflation weakened further into negative territory. We …
While October’s trade data showed good exports still depressed by the recent collapse in domestic car production (see Chart 1), there is growing anecdotal evidence that the auto sector is on the cusp of a rapid rebound. Toyota said that its global …
18th November 2021
Car exports set for rapid rebound The recovery in exports in October suggests that supply shortages were beginning to ease in the automobile sector. We think that the rebound in exports will pick up pace over the coming months as production at Japanese …
17th November 2021
Domestic demand to bounce back strongly While the economy contracted yet again in Q3 as supply shortages and the Delta wave softened domestic demand, output should now be rebounding sharply. With most domestic restrictions removed, we expect GDP to regain …
15th November 2021
Large stimulus set to be unveiled next week The latest survey data paint a mixed picture of the health of Japan’s consumers. While October’s Economy Watchers Survey was the strongest it has been since immediately before 2014’s sales tax hike, the Reuters …
12th November 2021
Post-delta recovery well underway The surge in October’s Economy Watchers Survey is the strongest sign yet that the economy is rebounding rapidly now that the bulk of the population is fully vaccinated and new virus cases have plunged. “Current …
9th November 2021
Wage growth set to recover Wage growth weakened in September as the Delta wave resulted in a drop in overtime working hours. But with the economy now rebounding and the labour market tightening, we still expect wage growth to climb above 1% next year. …
Kishida delving in the Abenomics playbook PM Kishida’s comfortable Lower House election victory on Sunday should enable him stay clear of the revolving door to the Prime Minister’s office for longer than the year his predecessor PM Suga managed. That …
5th November 2021
Continued caution by the elderly is a downside risk to our upbeat forecasts for private consumption, but we’re already assuming that households won’t return to their old ways anytime soon. 90% of Japan’s seniors are now double-jabbed, but recent analysis …
3rd November 2021
The supplementary budget that PM Kishida will compile by year-end will probably contain only half as much fiscal support as was provided last year. However, given that government spending will still be significantly larger than it was in 2019 even as …
1st November 2021
No more 8pm last orders The Bank of Japan revised down its near-term GDP growth forecasts in this week’s “Outlook” report, citing continued weakness in services consumption and supply shortages as the key factors. Indeed, while mobility has picked up as …
29th October 2021
Carmaking should soon rebound from September slump While employment fell sharply again in September it should rise strongly across Q4 as economic activity gets back to near normal now that most restrictions have been lifted. Meanwhile, the sharp fall in …
The Bank of Japan shocked no one in keeping its interest rate targets unchanged today, a status quo we think will last for years. The Bank also revised down its growth forecasts for the current fiscal year and signalled that policy will have to remain …
28th October 2021
Consumption held back by supply disruptions While retail sales rebounded in September as the Delta wave ebbed, supply shortages in the car industry may prevent a full recovery until year-end . The 2.7% m/m rise in retail sales was stronger than the …
The weaker yen and higher energy prices will reduce the purchasing power of households a bit. But with the household savings rate still very high, this won’t prevent a strong rebound in services spending. Some commentators have been arguing that the …
26th October 2021
Firms pulling in their horns in face of disruptions Following the huge plunge in car sales last month, the September trade figures corroborate that Japan’s carmakers have been hit hard by supply shortages. While exports of other products were broadly …
22nd October 2021
Underlying inflation to rebound Headline inflation in September turned positive for the first time this year due to spikes in fresh food and energy inflation. As the drag from mobile phone tariffs fades in the first half of next year, underlying inflation …
New PM Kishida won’t touch yield curve control Weaker yen unlikely to faze Governor Kuroda Near term growth forecasts to be revised down on supply shortages Sitting comfortably with continuity candidate PM Kishida in charge, the Bank of Japan won’t alter …
21st October 2021
Exports should be able to shake off supply shortages The sharp fall in exports in September suggests that supply shortages are severely hampering manufacturing activity in some sectors. However, we think exports will soon bounce back as supply shortages …
20th October 2021
While parts of Japan’s manufacturing sector remain under severe pressure from global supply chain shortages, domestic headwinds to the recovery have dissipated further in recent weeks. That supports our view that a strong rebound is brewing. Breaking …
19th October 2021
Ruling coalition set to win another majority PM Kishida dissolved the lower house yesterday for a 31 st October general election with his ruling coalition well placed to win a majority. In polls conducted since Kishida became PM, on average 44% have …
15th October 2021
Recovery in business investment to gather pace The fall in machinery orders in August supports our view that the recovery in business investment stalled a little across Q3. But private investment should rebound more strongly in Q4 and into next year …
13th October 2021
The continued weakness in Japan’s inflation is partly due to the recent plunge in mobile phone tariffs and the long lags between global energy prices and household utility bills. Indeed, inflation is set to rise next year. But more muted cost pressures …
12th October 2021
Parts shortages severely denting car industry The huge fall in new car registrations to their second-lowest September level since 1968 suggests that supply shortages are starting to hamper goods consumption. According to our seasonally adjusted figures, …
8th October 2021
Wage growth to strengthen further Wage growth recovered a touch further in August and it should rise higher over the coming months as the labour market tightens and vaccines allow a full recovery in overtime and bonus payments. Meanwhile, the sharp drop …
Overview - With the Delta wave having ebbed and the majority of the population now fully vaccinated, we expect a strong rebound in domestic demand over the coming months. But the inflation concerns that hang over other major developed economies won’t …
7th October 2021
The August activity data suggest that Japan’s economy is still struggling to gain momentum. The 4.1% m/m plunge in retail sales was par for the course given the severe Delta wave. More worrying is the 3.2% m/m drop in industrial output coupled with a …
1st October 2021
Services sector to recover, but manufacturing running into supply shortages The latest Tankan survey was stronger than most had anticipated, supporting our view that the economy will recover rapidly as the Delta wave has ebbed. However, there are mounting …
Employment to bounce back strongly While employment fell sharply in August, that was due to the Delta wave and should only prove a temporary setback. We expect the jobless rate to fall further over the coming months as the lifting of virus restrictions …
Output may fall across Q3 The sharp falls in both retail sales and industrial production in August indicate that activity weakened significantly at the height of the Delta-driven fifth wave. But while that suggests that the economy may have contracted …
30th September 2021
Incoming PM Kishida has provided mixed signals on fiscal policy, pledging a large near-term stimulus while retaining ambitious medium-term consolidation plans. Given that he blamed deregulation for widening inequality, structural reforms will move further …
29th September 2021
Freedom may be PM Suga’s parting gift Local media reports suggest that PM Suga is eager to lift all state of emergency declarations before leaving office next week. That would be good for our view that the economy will stage a strong rebound back to …
24th September 2021
Services recovering, manufacturing struggling September’s flash PMIs suggest that while the services sector is bouncing back as the delta wave has ebbed, the manufacturing sector is suffering from weaker demand and mounting supply shortages . According to …
Inflation to peak at +1.0% y/y Headline inflation stayed negative in August as a boost from Go To Travel base effects was offset by a major drag from fresh food inflation. But looking through one-off factors such as Go To and April’s mobile phone tariffs …
Japan’s reliance on fixed, long-term contracts for its natural gas supply should limit the impact on consumers of the recent surge in gas spot prices currently being felt most acutely across parts of Europe. Japanese liquefied natural gas (LNG) importers …
22nd September 2021
The Bank of Japan left policy settings unchanged today and while a new Prime Minister could appoint a more hawkish BoJ Governor, we expect the Bank to keep interest rates unchanged for years. As universally anticipated, the Bank of Japan kept its interest …
There are good reasons to think that the natural stalling in globalisation underway won’t do much damage to Japanese manufacturers. And while an abrupt severing of supply chains between China on the one hand and the US and its allies on the other would be …
21st September 2021
The race to become the new LDP leader – and with it PM – formally began on Friday. With Delta cases plunging and the vaccination rate having caught up with many other advanced economies, whoever wins should be able to lift domestic restrictions and ride a …
20th September 2021
Japan will remain the inflation outlier We launched our CE Spotlight series on inflation this week and one of the key messages is that the inflation outlook is more nuanced than the current polarised debate suggests. For example, while inflation is now …
17th September 2021
LDP leadership favourite Kono Taro may set his sights on shrinking BoJ balance sheet Next PM likely to be involved in choosing Governor Kuroda’s successor Both short- and long-term policy rates won’t be touched any time soon Dug in for an extended hold, …
16th September 2021
Japan’s exports set to surpass pre-GFC peak before long Today’s trade figures suggest that export volumes kept rising and we think that Japan’s focus on cars and machinery means that they will hold up better than in other Asian economies . The 26.2% y/y …
Business investment to continue rapid recovery The rise in machinery orders in July and optimistic projections for August and September support our view that business investment will rise strongly again across Q3. And private investment should continue to …
15th September 2021
Delta wave breaking The Bank of Japan’s consumption activity index edged up by 0.5% m/m in July, driven by a 3.3% m/m rise in services consumption. However, services spending was still 5% below the peak in November, let alone the much higher levels that …
10th September 2021
Kono Taro is emerging as the favourite to succeed Mr Suga as PM. While Kishida and Takaichi are viewed as safer hands by LDP party elders, the outspoken Kono’s popularity with the public gives him the edge on the eve of a general election where the ruling …
8th September 2021
