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The decline in listed firms’ profit margins over the last couple of years despite the tailwind from a weaker yen suggests that improved corporate governance isn’t changing corporate behaviour. While timely data point to a rebound in profitability, the …
4th March 2024
Third contraction in GDP now likely We doubt that the slump in industrial output in January will prevent the Bank of Japan from ending negative rates over the coming months, but the recent string of disappointing data reinforces our view that this will …
1st March 2024
This page has been updated with additional analysis since first publication. Huge fall in industrial production suggests continued weakness in activity The plunge in industrial production January suggests that GDP will fall yet again this quarter, which …
28th February 2024
This page has been updated with additional analysis since first publication. Inflation will jump above 2% in February Inflation at the national level held up better in January than the Tokyo CPI would have suggested, which brings a March rate hike back …
26th February 2024
We estimate that in the near-term, the drag on Japan’s exports resulting from of a universal 10% US import tariff could be nearly offset by Japan gaining market share at the expense of China in response to a much higher US tariff on Chinese imports. …
Import volumes weakest since 2020 We’ve been arguing that Japan is not in recession even though GDP has fallen for two consecutive quarters. However, February’s soft flash PMI and the large fall in imports in January hardly instil confidence in the …
23rd February 2024
The Bank of Japan has succeeded in creating tight labour market conditions through ultra-loose monetary policy and is now reaping the benefits in the form of stronger wage growth. The upshot is that we expect the Bank to end negative interest rates at its …
22nd February 2024
This page has been updated with additional analysis since first publication. The recovery in activity this quarter will be modest February’s PMI readings saw a drop almost across the board with the composite PMI, manufacturing PMI, services PMI and new …
This page has been updated with additional analysis since first publication. Export growth will still drive GDP growth this year The trade balance turned positive in January, mainly a result of a large fall in imports. Net exports contributed roughly half …
20th February 2024
GDP has fallen for two consecutive quarters but we don’t think the economy is in recession and should return to growth this year. While the gap between nominal wages and inflation is closing fast, the wage-price virtuous cycle will receive a boost when …
Japan’s industrial production data don’t fully take into account the influence of falling prices and have systematically underestimated the strength of manufacturing output. The upshot is that rather than losing importance, Japan’s industrial sector is …
19th February 2024
Japan’s economy is not in recession The preliminary estimate of Q4 GDP showed the second consecutive contraction in output, but we doubt it will scupper the BoJ’s plans to end negative interest rates. For a start, the quality of Japan’s preliminary GDP …
16th February 2024
The rise in US bond yields has put renewed pressure on the yen, but we think further downside is limited. We still expect Treasury yields to resume their downward trend and for the yen to benefit most among G10 currencies vis-à-vis the dollar from this …
15th February 2024
This page has been updated with additional analysis since first publication. Continued contraction in GDP won’t prevent ending of negative interest rates While the second consecutive contraction in GDP in Q4 would suggest that Japan’s economy is now in …
14th February 2024
External demand strong, domestic demand weak The Q4 GDP data due next week are likely to show that the economy staged a partial rebound after the sharp contraction in Q3. But the details will probably confirm that domestic demand remained weak. Indeed, we …
8th February 2024
This page has been updated with additional analysis since first publication. Further regular wage increases incoming While winter bonus payments increments disappointed in December, regular wage growth accelerated substantially. Looking ahead, we think …
5th February 2024
Kishida pushing for wage increases PM Kishida pledged on Tuesday that the government will “take all possible steps” to raise real incomes this year. While he mentioned no new measures, his government recently rolled out tax breaks for firms that offer …
2nd February 2024
This page has been updated with additional analysis since first publication. GDP growth will be positive in Q4 Though retail sales was very weak in December, strong industrial production data to close out the quarter reinforces our view that Q4 GDP growth …
30th January 2024
Tokyo inflation won’t remain below 2% for long At its meeting on Tuesday, the Bank of Japan sounded increasingly confident that it will be able to meet its 2% inflation target on a sustained basis. And the minutes of the Bank’s December meeting released …
26th January 2024
Plunge in inflation casts doubt on ending of ultra-loose monetary policy The plunge in inflation to well below 2% in Tokyo last month was broad-based, casting doubt on the Bank of Japan’s willingness to end negative interest rates. Headline inflation …
25th January 2024
This is a special Global Economics Chart Pack that provides clients with key analysis to make sense of the macro and market impact of the disruptions to maritime shipping. The charts in this document come from our brand-new shipping dashboard , which …
This page has been updated with additional analysis since first publication. Positive signs for this quarter The composite PMI rose for the second consecutive month in January, driven by rises in both manufacturing and services components. And with the …
24th January 2024
This page has been updated with additional analysis since first publication. Export growth will be sluggish this year The trade deficit widened in December as import values rose more strongly than export values. But the weakness in net goods trade will be …
23rd January 2024
The Bank of Japan sounds increasingly confident that it will be able to achieve its inflation target on a sustained basis. With Mr Ueda at the post-BOJ-meeting press conference again emphasising the importance of the spring wage negotiations, we think the …
Policy normalisation is in sight Although the Bank of Japan stood pat at its meeting today, we’re sticking with our view that policymakers will soon call time on negative rates. The Bank’s decision to leave its policy rate unchanged at -0.1% was correctly …
Note: Join us on our upcoming Asia Drop-in on 25th January. We’re discussing China’s missing stimulus, the Asian monetary policy outlook and much more. Register here for the 20-minute online briefing. Inflationary pressures moderating Inflation fell to an …
19th January 2024
This page has been updated with additional analysis since first publication. Inflation will rebound early this year Inflation fell again in December, driven by declines in both fresh food and energy inflation. However, the bigger picture is that inflation …
18th January 2024
We expect GDP growth to slow to a crawl this year, weighed down by weak consumption growth and sluggish export growth. While the virtuous cycle between prices and wages has shown signs of a slowdown in recent months, it will soon receive a boost when …
17th January 2024
While overall inflation has moderated, services inflation has accelerated Bank will wait for upcoming spring wage negotiations before adjusting policy We expect a rate hike to 0.1% in March, with Yield Curve Control ending by mid-year The Bank of …
16th January 2024
While most of the recent pick-up in services inflation has been driven by just a handful of components, there’s been an upward shift in the distribution of price changes across the CPI basket. However, even if wage growth settles at higher levels than …
15th January 2024
Inflationary pressures moderating The economic data released this week all suggest that the case for tighter monetary policy is diminishing. For a start, the Tokyo CPI showed that inflation excluding fresh food fell to just 2.1% in December, within …
12th January 2024
This page has been updated with additional analysis since first publication. Virtuous cycle will get renewed boost this year Wage growth slowed sharply in November, driven by a plunge in bonus payments. While we expect the labour market to soften in the …
9th January 2024
This page has been updated with additional analysis since first publication. Inflation will jump again before long Inflation excluding fresh food came close to the Bank of Japan’s 2% target in December, but it will jump to nearly 3% from February and …
8th January 2024
The recent sharp fall in Japan’s ratio of public debt to GDP reflects one-off factors that won’t be sustained. While the influence of rising bond yields on the trajectory of the public finances will largely be offset by higher inflation and nominal GDP …
Manufacturers keep losing market share overseas Just as we predicted a few months ago, the outperformance of Japan’s stock market relative to US stocks has unwound as the yen has strengthened in recent weeks. (See Chart 1.) Chart 1: Yen/Dollar vs. …
5th January 2024
Industrial output has usually fallen rather sharply whenever firms were as pessimistic about the production outlook as they are now. That’s consistent with our view that GDP growth next year will be weaker than most anticipate. One thing that stood out …
28th December 2023
This page has been updated with additional analysis since first publication. GDP will rebound this quarter While the November activity data were a mixed bag, they strongly suggest that the economy dodged a recession. Taking industrial production first, …
27th December 2023
This page has been updated with additional analysis since first publication Labour market should tread water from next year The unemployment rate stayed unchanged in November, following consecutive falls in the previous two months. We think it should …
25th December 2023
Policy rate hike in January now looking unlikely It came as a surprise to no one that the Bank of Japan left policy settings unchanged at this week’s meeting . Even so, yields on 10-year JGBs plunged by nearly 10bp since then, whereas 10-year Treasury …
22nd December 2023
This page has been updated with additional analysis since first publication. Inflation will only return to 2% by end-2024 The plunge in inflation in November was broad-based, but with the large drag from energy prices turning into a boost as energy …
21st December 2023
This page has been updated with additional analysis since first publication. Net trade will make a positive contribution to Q4 growth Even though the trade deficit narrowed in November, goods trade will probably be a drag on GDP growth this quarter. …
19th December 2023
The Bank of Japan left policy settings unchanged today as widely anticipated. And while Governor Ueda is sounding more confident that 2% inflation will be sustained, we now expect the Bank of Japan to end negative interest rates in March rather than in …
Bank of Japan will end negative rates next month The Bank of Japan left policy settings unchanged today as widely anticipated but we still expect policymakers to end negative rates in January and to phase out Yield Curve Control later in 2024. The Bank’s …
Services sector running red-hot The strong Q4 Tankan released this week adds to the case for the Bank of Japan to abandon ultra-loose monetary policy. Of particular importance is that the Tankan shows mounting signs of overheating in the services …
15th December 2023
This page has been updated with additional analysis since first publication. Recession unlikely The composite PMI rebounded in December, which means we think there will unlikely be an incoming recession. The manufacturing PMI edged down further but the …
GDP growth should rebound modestly in the fourth quarter but we expect it will remain soft in 2024. Meanwhile, weak job openings data suggests the labour market should loosen slightly in the short term. However, there are mounting signs that a virtuous …
14th December 2023
This page has been updated with additional analysis since first publication. Domestic demand to remain weak The rise in “core” machinery orders in October is a sign that business investment may rebound in Q4 after falls in q/q terms in both Q2 and Q3. In …
13th December 2023
This page has been updated with additional analysis since first publication. Strong Tankan suggests Japan won’t slip into recession The continued improvement in the Tankan suggests that the drop in Q3 GDP was just a blip, but we still expect GDP growth …
12th December 2023
Inflation is slowing and domestic demand is weakening However, price pressures are increasingly broad-based and wage growth is accelerating Bank’s leadership signalling that end of negative rates isn’t far off The Bank of Japan is increasingly keen to …
