Filtered by Subscriptions: Japan Economics Use setting Japan Economics
Domestic demand will pick up speed ahead of next year’s sales tax hike, extending one of Japan’s strongest runs of growth since the 1980s, and price pressures will strengthen. But weaker domestic demand after the tax hike means that GDP growth will slow …
9th October 2018
Japan’s labour market is as strong as most of today’s workers will ever have known, which makes the persistent weakness of consumption all the more puzzling. Spending remains flat according to data from the Bank of Japan today and survey evidence suggests …
5th October 2018
The strongest rise in regular earnings since 1997 should be followed by even stronger gains in coming months as the labour market tightens further. … Labour Cash Earnings & Household Spending …
The deterioration in business conditions in the Q3 Tankan supports our view that GDP growth slowed last quarter. That said, firms remain optimistic about the outlook for capital spending and the survey suggests that price pressures will continue to …
1st October 2018
Japan’s government this week caved to US pressure to start discussions on a bilateral trade deal. But it appears to have won some valuable concessions in return. Meanwhile, we learnt more about what the Bank of Japan was thinking with its recent …
28th September 2018
Today’s activity data showed a rebound in August but that won’t prevent a slowdown in GDP growth in Q3. The labour market remains tight and price pressures in the capital have strengthened further. … Labour Market & Activity (Aug.) & Tokyo CPI …
Recent comments by Prime Minister Abe suggest that he is no longer obsessed with overcoming deflation and would like the Bank of Japan to focus more on the financial stability part of its mandate. However, credit growth remains strong, price pressures …
21st September 2018
The continued increase in the manufacturing PMI in September suggests that industrial activity should soon start to strengthen again. … Flash Manufacturing PMI …
Underlying inflation climbed to a four-month high in August and should pick up further ahead of next year’s sales tax hike. But price pressures will weaken once the tax has been raised and the BoJ’s 2% target remains elusive. … Consumer Prices …
Mr Abe will remain Prime Minister for another three years. That means fiscal policy will probably be tightened further, monetary policy will remain loose and policymakers may take some further steps to address the country’s demographic headwinds. … What …
20th September 2018
The Bank of Japan today reiterated its pledge to keep rates low for a prolonged period. With the sales tax hike looming and inflation set to remain below target for longer, we think that the Bank will keep rates unchanged beyond 2020. … Mounting risks …
19th September 2018
Import volumes seem to have outpaced export volumes yet again in August which supports our view that net trade remained a drag on Q3 GDP growth. … External Trade …
Recent comments by President Trump suggest that he may target Japan next in his efforts to reduce the US trade deficit. Trump may want Japan to increase pressure on China to end unfair trading practices. But that would require more than just rhetoric by …
14th September 2018
Mounting downside risks to economic activity mean that the Bank of Japan will have little reason in the foreseeable future to deviate from its pledge to keep interest rates extremely low for an extended period. Our long-held view that the Bank will keep …
13th September 2018
Even though machinery orders jumped in July, the recent fall in capital goods shipments suggests that a slowdown in business investment in the third quarter will be hard to avoid. … Machinery Orders …
Summer bonuses rose the most since 1991 this year. That is partly a reflection of the surge in corporate profits in recent years. But workers are earning more than their fair share of the pie. Labour income is growing much faster than output and the wage …
11th September 2018
Revised data show that growth in Q2 was stronger than initially reported. But the available data suggest that activity slowed in Q3 and we reiterate our forecast that growth will be just 1% this year. … GDP (Q2 …
10th September 2018
Prime Minister Abe is set to remain in power for another three years following the LDP leadership elections. One of the few substantive reform proposals he has put forward is an increase in the retirement age beyond the current 65. While this would reduce …
7th September 2018
We wouldn’t read too much into the slowdown in wage growth in July as it was driven by volatile bonus payments. Base pay continues to grow at a healthy pace. We expect wage growth to strengthen a bit further but it won’t be fast enough to generate 2% …
Japan’s government has long argued that the sales tax hike scheduled for next year is needed to improve the fiscal position. With the economy performing extremely well at the moment, Mr Abe has no reason to reconsider those plans. But economic conditions …
5th September 2018
The increase in the volume of the Bank of Japan’s bond auctions merely offsets a reduction in their frequency and won’t alter the overall pace of purchases much. The bigger point is that those auctions don’t tell us anything about the outlook for monetary …
Today’s shift in the Bank of Japan’s bond purchases shouldn’t be interpreted as a signal that the 10-year target will be raised anytime soon. Note added post-publication: In this Update, we suggest that the increase in BoJ purchases “looks rather odd”. We …
4th September 2018
Today’s capital spending data suggest that business investment was much stronger last quarter than initially reported. This points to an upward revision to GDP growth in next week’s second estimate. … Capital Spending …
3rd September 2018
This week’s activity data for July were rather weak. The 0.1% m/m rise in retail sales values wasn’t too bad given that sales had jumped by 1.4% m/m in June. But consumer goods prices rose by 0.7% m/m in July so sales volumes fell. If sales volumes remain …
31st August 2018
The third consecutive decline in industrial production in July suggests that growth will slow in Q3. Meanwhile, the tight labour market is starting to boost price pressures. … Labour Market & Ind. Prod. (Jul.) & Tokyo CPI …
While retail sales values edged up in July, sales volumes declined. The upshot is that private consumption started Q3 on a soft note. … Retail Sales …
30th August 2018
Inflation has been held back by plunging mobile phone costs and competition from online retailers. The main factor, however, are deeply engrained deflationary expectations among households and firms. While the Bank of Japan has had little success in …
24th August 2018
Consumer price gains remain driven by volatile fresh food and energy inflation while underlying inflation remains subdued. Price pressures should strengthen ahead of next year’s sales tax hike but inflation is set to remain well below the BoJ’s 2% …
Even though the manufacturing PMI still points to robust gains in industrial production, there are signs that the prospect of a global trade war is weighing on external demand. … Flash Manufacturing PMI …
23rd August 2018
Even if it escalates, the trade dispute between the US and China shouldn’t do significant damage to Japan’s economy. US tariffs on Japanese vehicles would be a greater concern, while a blanket US tariff on all Japanese imports would push the economy into …
21st August 2018
A former BoJ executive suggested that the Bank of Japan may tolerate 10-year yields rising to 0.4% even while keeping its official target at zero. This would lift trading income, increase returns on bond holdings and might also encourage banks to lift …
17th August 2018
Mr Abe will almost certainly win the LDP’s leadership elections next month, allowing him to stay Prime Minister for another three years. While fiscal policy will probably be tightened a little further during his upcoming third term, the impact on economic …
16th August 2018
The deterioration in the trade balance in July reflects a combination of rising import volumes and higher energy prices. We expect crude oil prices to fall over the coming months so the trade balance should become positive again. … External Trade …
Abolishing cash would allow the Bank of Japan to cut interest rates deeper into negative territory. But in a society where cash transactions are still widespread, such a move would prove deeply unpopular. And if policy rates become too negative, consumers …
14th August 2018
The Bank of Japan’s decision to allow JGB yields to deviate by 0.2 percentage points rather than 0.1 percentage points from its 0% target suggests that long-term bond yields will settle at a slightly higher level than before. The market has yet to test …
13th August 2018
Media reports suggest that the Bank of Japan was close to hiking rates twice this year. But the decision to allow ten-year yields to rise a bit further above the 0% target placated the hawks on the Board. And the introduction of forward guidance suggests …
10th August 2018
While GDP started expanding again in the second quarter, growth isn’t as vigorous as last year. With the economy running into capacity constraints, we think that activity will remain sluggish for now. … GDP (Q2 …
Even though machinery orders fell further in June, they still rose last quarter and we’ve pencilled in an increase in non-residential investment in tomorrow’s GDP release. … Machinery Orders …
9th August 2018
The surge in wage growth in June was mostly driven by stronger bonus payments whereas base pay didn’t pick up any further. Meanwhile, the rise in household spending in June adds to the evidence that consumer spending bounced back last quarter. … Labour …
7th August 2018
The outlines of the Bank of Japan’s new policy framework have become clearer during the week: a more flexible approach to intervention, a focus on preventing sharp moves, but also a tolerance of higher yields for the target 10-year JGB than before. In the …
3rd August 2018
The Bank of Japan made some technical adjustments to its policy framework today. But its key message, which it emphasised with the introduction of explicit forward guidance, was that the main policy rates will remain at very low levels for the foreseeable …
31st July 2018
Even though job growth slowed in June, the unemployment rate remained very low. Meanwhile, industrial production rebounded last quarter which suggests that the economy returned to growth. … Labour Market & Industrial Production …
The rebound in retail sales in June suggests that consumer spending picked up again in Q2 which supports our view that the economy returned to growth last quarter. … Retail Sales …
30th July 2018
Bond market participants appear convinced that something substantive will come from next week’s Bank of Japan meeting. But if the Bank did anything that was perceived as backing away from the commitment to keep policy ultra-loose it would be shooting …
27th July 2018
There was a broad-based rise in price pressures in the capital region last month. But while the rise in energy inflation won’t be sustained, the recent pick-up in underlying inflation has further to run. … Tokyo CPI …
Leaks from the Bank of Japan ahead of next week’s Policy Board meeting have prompted speculation that the Board will adjust its policy framework. Any changes would be intended to address the strains on financial institutions caused by ultra-loose policy, …
26th July 2018
The manufacturing PMI fell back in July which suggests that the threat of a global trade war may be weighing on business confidence. At the same time, price pressures have continued to intensify. … Flash Manufacturing PMI …
24th July 2018
The BoJ has been able to drastically slow the pace of its acquisition of Japanese Government Bonds since it adopted a 0% yield target, which should quells doubts about the policy’s long-run viability. And while ultra-loose policy creates some challenges …
23rd July 2018
The trade war between China and the US will cause some collateral damage but the biggest potential threat to Japan’s economy is a US tariff on Japanese cars. For now though, our base case is that the tariff won’t be as high as Trump had threatened and …
20th July 2018
Energy inflation jumped in June. But if we strip out energy and fresh food, consumer prices have fallen in recent months, leaving the BoJ’s 2% inflation target out of reach. … Consumer Prices …
