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Underlying inflation climbed to a 20-month high in February but the recent strengthening of the exchange rate suggests that it won’t rise much further. … Consumer Prices …
23rd March 2018
While the manufacturing PMI weakened in March, it remains consistent with solid gains in industrial production. However, the hard data suggest that output will fall this quarter. … Flash Manufacturing PMI …
22nd March 2018
Japanese households and firms now both receive more in interest income than they pay out on their debt. That is making life difficult for banks. The main factor keeping them afloat is their sizeable activity overseas. … Monetary Indicators Monitor …
20th March 2018
Seasonal swings related to Chinese New Year pushed the trade balance into the red in February. However, we suspect that these moves will reverse in March. … External Trade …
19th March 2018
We wouldn’t read too much into the early results of this year’s spring wage negotiations, which showed that the large carmakers and electronic firms lifted base pay by less than in 2014 and 2015. But the bigger picture is that wage growth will remain well …
16th March 2018
Revised GDP figures confirmed that the economic recovery continued apace in Q4. However, the more recent monthly activity data suggest that the longest period of uninterrupted expansion since the late 1980s may finally have come to an end this quarter. …
14th March 2018
The rebound in machinery orders in January lifted them above their Q4 average. With firms facing severe capacity and staff shortages, business investment will remain a growth driver this year. … Machinery Orders …
Prime Minister Abe is once again embroiled in a political scandal that raises the possibility that he could be replaced as head of the LDP, and hence as prime minister. This still seems unlikely but, if it did happen, Mr Abe’s departure would not have …
12th March 2018
Sluggish wage growth, subdued inflation expectations and the renewed strengthening of the exchange rate suggest that inflation will remain below the Bank’s 2% target for the foreseeable future. The upshot is that the Bank’s new leadership will have to …
9th March 2018
The yen would have to strengthen much further before it turns into a major drag on export competitiveness and corporate profits. However, the recent appreciation should bring the pick-up in goods inflation to a halt over the coming months. … Yen strength …
The slowdown in base pay in January underlines that the Bank of Japan won’t be able to tighten monetary policy anytime soon. Meanwhile, the jump in household spending in January is good news but we still expect private consumption to stagnate this …
The Economy Watchers Survey weakened further in February as poor weather persisted. The survey suggests that private consumption has slowed quite sharply. … Economy Watchers Survey …
8th March 2018
Revised GDP data show that growth was stronger in Q4 than initially reported. But with the economy running into capacity constraints, we still think that the expansion will lose vigour this year. … GDP (Q4 …
Japanese officials have good reasons to take the imposition of US tariffs on steel and aluminium in their stride. The US would have to target a more important industry to provoke Japan to retaliate. The car industry is arguably the red line. The European …
7th March 2018
Japan’s economic expansion has become more shaky recently. And, while inflation has surged in recent months, it looks likely to moderate over the course of the year with the recent strengthening of the yen helping to keep price pressures in check. Against …
5th March 2018
Dismal industrial production and weak consumer spending figures for January suggest that Japan’s longest period of uninterrupted expansion since the late 1980s will come to an end this quarter. We reiterate our forecast that growth will slow this year as …
2nd March 2018
The labour market continues to tighten and price pressures are strengthening further. However, there is still a long way to go to reach the Bank of Japan’s 2% inflation target. … Labour Market (Jan.) & Tokyo CPI …
An advisor to PM Abe has suggested that the Bank of Japan should buy foreign bonds. However, economic conditions are far too buoyant at the moment for policymakers to take such a radical step. … Bank of Japan unlikely to buy foreign …
1st March 2018
Household sentiment weakened in February as the recent equity market turmoil reduced confidence in households’ personal finances. … Consumer Confidence …
The jump in capital spending excluding software last quarter suggests that non-residential investment was stronger than initially reported. However, this alone won’t be enough to lift overall GDP growth. … Capital Spending …
Industrial production plunged and retail sales fell rather sharply in January. It looks increasingly likely that the longest period of uninterrupted expansion will come to an end this quarter. … Industrial Production & Retail Sales …
28th February 2018
On past form, capacity shortages alone will never be enough to generate 2% inflation in Japan. The prerequisite for faster price gains is that inflation expectations among households and firms also rise substantially. Unfortunately, the Bank of Japan’s …
23rd February 2018
Underlying inflation has picked up again but we think this mostly reflects the lagged pass-through from previous exchange rate weakness. With producer prices of consumer goods now moderating, underlying inflation is set to remain well below the Bank of …
While the manufacturing PMI weakened in February it remains near the highest it has been since 2014’s sales tax hike and consistent with strong gains in industrial output. Meanwhile, the survey suggests that price pressures aren’t strengthening any …
21st February 2018
Japan’s economy recorded an eighth consecutive quarter of growth in Q4, the longest uninterrupted run of expansion since the late 1980s. Unemployment is very low, inflation has started to pick up, condominium prices have soared and credit growth is the …
20th February 2018
Trade values were distorted in January by seasonal swings ahead of the Lunar New Year. The bigger picture is that external demand remains robust. … External Trade …
19th February 2018
While machinery orders fell sharply in December, they were broadly unchanged in the fourth quarter as a whole. However, we already know from yesterday’s release of the GDP data that business investment continued to expand in Q4 and the figures released …
15th February 2018
If the Bank of Japan were to reverse course on monetary loosening in the near future, it would more likely be a response to worries about financial stability than high inflation. The recent deterioration in banks’ capital ratios therefore should be …
14th February 2018
GDP growth slowed sharply last quarter and we think that the economy won’t expand as strongly this year as it did in 2017. … GDP (Q4 …
Bank lending has continued to slow and Japanese banks are no longer gaining market share in the cross-border lending market. However, one reason is that non-financial firms are increasingly turning to the bond market to raise funds. … Monetary Indicators …
13th February 2018
Governor Kuroda looks likely to be reappointed as Bank of Japan Governor when his current term ends in April. It is still unclear who his two deputies will be, but the main candidates are mostly in favour of continued aggressive monetary easing. As such, …
12th February 2018
The recent sell-off on the stock market would have to continue for much longer before it started to have a major effect on consumer spending in Japan. And with the yen barely changed, the impact on the wider economy of this week’s market moves should be …
9th February 2018
The yen has strengthened in recent months even though investors are now anticipating a more aggressive pace of tightening by the US Fed. While we expect US long-term interest rates to end this year a bit higher than they are now, we no longer expect this …
8th February 2018
The slump in the Economy Watchers Survey in January probably reflects cold winter weather and we wouldn’t read too much into it. … Economy Watchers Survey …
The slowdown in wage growth in December was driven by bonus payments and overtime pay whereas regular pay rebounded. The big picture is that wage growth remains sluggish. … Labour Cash Earnings …
7th February 2018
The Bank of Japan’s offer to buy an unlimited amount of bonds today for the first time since July has dampened expectations that policymakers are about to withdraw stimulus. As a result, the yen has now started to weaken again. We expect it to fall …
2nd February 2018
With our GDP tracker suggesting that activity continued to expand at a rapid clip last quarter, risks to our forecast of a 1.2% rise in GDP this year are skewed to the upside. However, the economy is now running into capacity constraints and we still …
Household sentiment remained strong at the start of 2018 and suggests that the expansion in consumer spending has further to run. … Consumer Confidence …
31st January 2018
Industrial production recorded another marked rise last quarter which suggests that GDP growth remained strong. However, the outlook for the coming months is less rosy. … Industrial Production …
While the jobless rate edged up in December, the continued rise in job vacancies suggest it will fall to fresh lows before long. Meanwhile, consumer spending should have rebounded last quarter even though the December data on retail sales and household …
30th January 2018
One widely-overlooked factor driving Japan’s growth in recent years has been a surge in the number of foreign workers. This appears to be continuing, as employers face labour shortages and recent legal changes have made it easier for foreigners to work in …
29th January 2018
Some commentators have been arguing that the Bank of Japan should be raising interest rates now to support household incomes. However, it isn’t clear whether this would boost household spending, while higher interest rates certainly would present a …
26th January 2018
Inflation excluding fresh food remained close to 1% in December. But with wage growth still sluggish and the tailwind from higher energy prices set to fade, inflation won’t rise any further. … Consumer Prices …
The manufacturing PMI climbed to a four-year high in January and suggests that the economic expansion remained vigorous at the start of this year. … Flash Manufacturing PMI …
24th January 2018
While import volumes outpaced export volumes in December, we still think that net exports supported GDP growth last quarter. … External Trade …
For the first time since July 2014, the Bank of Japan didn’t lower its inflation forecasts any further. However, we believe that the Bank is too optimistic about the inflation outlook and we remain convinced that policy won’t be tightened anytime soon. … …
23rd January 2018
We expect the price of Brent crude oil to moderate from $70 per barrel to $55 by the end of 2018. But even if global oil prices remain close to current levels, inflation in Japan would only average 1% this year instead of our existing forecast of 0.7%. …
19th January 2018
Speculation that the Bank of Japan is about to increase its yield target has pushed the yen higher. However, we think that policy tightening remains a distant prospect and that the yen will weaken as this become clear. … Bank of Japan to keep policy loose …
18th January 2018
Inflation climbed to a fresh high in November and mounting capacity shortages suggest that price pressures will strengthen further. However, most of the recent increase has been driven by higher energy inflation. We expect crude oil prices to fall this …
17th January 2018
Machinery orders were the highest in almost a decade in November which suggests that the expansion in business investment continued last quarter. … Machinery Orders …
