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Bank lending has continued to slow. However, this doesn’t seem to reflect a tightening in bank lending attitudes, which remain very accommodative. What’s more, overall borrowing by the private sector is growing at the fastest pace since the early 1990s as …
15th January 2018
A reduction in the size of the BoJ’s JGB auction moved markets this week. This wasn’t policy tapering in an effort to reduce stimulus: the Bank now only buys what is needed to maintain the yield target and that amount has been falling for a while. Indeed, …
12th January 2018
The Economy Watchers Survey remained strong in December despite a small decline. The survey suggests that consumer spending and employment will continue growing at rates comparable to those seen over the past few months, while the manufacturing sector …
This week’s reduction in the Bank of Japan’s scheduled government bond purchases doesn’t signal that it is about to lift the yield target. The Bank purchases whatever is needed to maintain the target and the credibility of its commitment to the target has …
10th January 2018
Households remained in high spirits in December which suggests that Q3’s drop in consumer spending wasn’t repeated last quarter. … Consumer Confidence …
9th January 2018
Regular earnings probably rose at the fastest pace in two decades last year. Yet the pace of improvement remains woefully slow so the Bank of Japan’s 2% inflation target remains out of reach. … Labour Cash Earnings …
Perhaps the most remarkable achievement of Abenomics has been the continued increase in employment despite the contraction in the working age population. It is possible that Japan will be able to continue dodging its apparent demographic destiny but this …
8th January 2018
While the budget for the coming fiscal year foresees record spending, expenditure will only rise marginally and revenues may climb even faster. The upshot is that the government is set to proceed with fiscal tightening. While there is no pressing need to …
5th January 2018
Japan’s November activity data suggest that the economy recorded an eighth consecutive quarter ofgrowth in Q4. And with the labour market the tightest in at least two decades, underlying inflationcontinues to accelerate. … Price pressures strengthening …
2nd January 2018
Unless private sector surpluses fall, the planned increase in the sales tax in 2019 will result in weaker domestic demand. Incentives to increase investment spending or lift dividend payments would lower the corporate surplus. But Japanese firms already …
21st December 2017
A rising number of analysts believe that the BoJ will start tightening policy by the end of next year. But with inflation set to remain below its 2% target, we think that the Bank will keep policy loose for longer. … Weak price pressures will prevent BoJ …
The Bank of Japan has been warning that low policy rates could eventually prove contractionary if they depress banks’ profits and capital and reduce their willingness to lend. In reality though, capital ratios have risen in recent years, banks’ lending …
19th December 2017
Producer prices in Japan are rising at the fastest pace in years but we still expect consumer price inflation to remain broadly flat in coming months. … What to make of the surge in producer …
18th December 2017
Japan’s economy will expand the most this year since 2013. Yet the unemployment rate hasn’t fallen any further since the start of the year. This isn’t due to a surge in productivity that has reduced labour demand. In fact, productivity growth has been …
Export volumes continued to grow faster than import volumes last month which suggests that net trade continued to support growth in the current quarter. … External Trade …
We expect Japan’s GDP growth to slow next year as the economy is now operating above capacity. Price and wage pressures should strengthen somewhat but inflation will remain well below the Bank of Japan’s 2% target and monetary policy settings will …
15th December 2017
Today’s Tankan survey showed that business conditions didn’t improve much further this quarter which suggests that growth is now slowing. Nonetheless, capacity and staff shortages continue to intensify and price pressures are strengthening. … Tankan …
The manufacturing PMI was the highest in nearly four years in December as external demand continues to improve. However, price pressures are only strengthening slowly. … Flash Manufacturing PMI …
14th December 2017
With yields set to rise overseas and concerns that low policy rates may curtail lending likely to linger, speculation about policy tightening in Japan will not subside next year. However, we believe that subdued price pressures will force the Bank to keep …
13th December 2017
The rebound in machinery orders left them no higher than their Q3 average, but we’ve still pencilled in another rise in business investment this quarter. … Machinery Orders …
The jobless rate has been effectively flat since February despite continued strong growth in the economy. The economy is now close to full employment which suggests that wage growth will continue to strengthen. However, wages would have to rise much …
8th December 2017
The surge in the Economy Watchers Survey is yet another sign that the drop in consumer spending last quarter was just a blip. The survey suggests that job growth will pick up further and that industrial production will rise at a strong pace over the …
Regular earnings are now growing a touch faster than productivity which suggests that firms may have to start raising prices before long. Nonetheless, there is still a long way to reach the Bank of Japan’s 2% inflation target. … Labour Cash Earnings …
Revised data show that growth was stronger last quarter than initially estimated. However, the economy is running into capacity constraints and firms face increasingly severe staff shortages. The upshot is that the expansion should slow again before long. …
A long period of sustained economic growth has helped drive unemployment in Japan to its lowest level in nearly a quarter of a century. Nonetheless, inflation and wage growth are both barely positive and look set to remain subdued. The Bank of Japan is …
7th December 2017
Households are the most upbeat since 2013 which suggests that the drop in consumer spending last quarter was just a blip. … Consumer Confidence …
4th December 2017
Governor Kuroda has recently discussed the idea that extremely low interest rates could undermine bank profits and capital and, ultimately, lending. Evidence for this idea is lacking in Japan, where the main pressure on bank profits is coming from …
1st December 2017
Today’s household spending data suggest that private consumption remained sluggish this quarter. Meanwhile, there are still few signs that the tight labour market is boosting price pressures. … Labour Market, Household Spending, Consumer Prices (Oct.) & …
Even though industrial production disappointed in October, optimistic forecasts for the remainder of Q4 suggest that activity accelerated towards the end of the year. … Industrial Production …
30th November 2017
While retail sales stagnated in October, strong gains in household incomes and buoyant consumer confidence suggest that consumer spending should return to growth this quarter. … Retail Sales …
29th November 2017
Recent comments by BoJ Board members have trigged speculation that the Bank is considering a gradual withdrawal of monetary stimulus, in part to help Japan’s banks. But with inflation still rooted well below the 2% target, we still expect the Bank to hold …
27th November 2017
Private consumption fell last quarter for the first time since end-2015. However, solid growth in household incomes, an elevated household saving rate and upbeat consumer confidence suggest that this was just a blip. We reiterate our forecast that private …
24th November 2017
The manufacturing PMI climbed to a fresh high in November and suggests that the expansion accelerated in the final quarter of the year. What’s more, the survey shows that price pressures continue to strengthen. … Flash Manufacturing PMI …
Export volumes continue to rise more rapidly than import volumes so net trade should have continued to support GDP growth in the current quarter. … External Trade …
20th November 2017
Some commentators are arguing that the costs of continued loose monetary policy outweigh the benefits as house and stock prices have soared and banks’ lending margins have slumped. By contrast, we believe that these development should not be major causes …
17th November 2017
The Nikkei is near its highest in 25 years, buoyed by a 200% rise in net profits since PM Abe returned to power five years ago. Looking ahead, we expect the yen to weaken to 120 by the end of next year. With this backdrop, even though Japanese stocks are …
16th November 2017
The longest expansion since 2001 continued in the third quarter. However, the economy is running into capacity constraints and we expect growth to slow next year. … GDP …
15th November 2017
Bank lending has slowed in recent months and the BoJ’s Senior Loan Officer Survey points to a further weakening in coming months. However, brisk corporate bond issuance and record corporate profits imply that firms have sufficient funds to finance capital …
14th November 2017
Even after the withdrawal of the US, the TPP remains an ambitious free trade agreement that will lower tariffs and non-tariff barriers for Japanese firms in a number of important trading partners and should open its economy to productivity-enhancing …
13th November 2017
Wage growth is likely to pick up over coming months as the labour market remains extremely tight. But unusually low job mobility in Japan, which is linked to the widespread use of seniority wages and the lifetime employment model, means that wage gains …
10th November 2017
The Economy Watchers Survey was the strongest it has been since 2014’s sales tax hike last month. Job growth should therefore remain strong and the recent slowdown in consumer spending should come to an end soon. … Economy Watchers Survey …
9th November 2017
The plunge in machinery orders in September followed strong gains in previous months and orders still recorded a solid rise last quarter. The upshot is that we’ve pencilled in another increase in non-residential investment in Q3. … Machinery Orders …
President Trump drew attention this week to the difficulties US firms face trading with Japan. Japan’s tariff barriers are typically lower than those in the US but non-tariff barriers are significantly higher. Since foreign firms are more productive than …
8th November 2017
Wage growth rebounded in September and strong growth in part-time earnings suggest that it will pick up further in coming months. But the bigger picture is that much stronger increases would be needed to lift price pressures. … Labour Cash Earnings …
7th November 2017
Suggestions from Japan’s government that it has vanquished deflation are premature when wages are barely rising, core inflation is close to zero and inflation expectations are lower than a few years ago. As things stand, a drop back into deflation still …
6th November 2017
Outward investment from Japan has soared in recent years but this doesn’t seem to have been to the detriment of domestic manufacturing. This isn’t entirely surprising: firms say their main reason for setting up shop overseas is to be closer to customers …
3rd November 2017
Households remained upbeat ahead of last month’s Lower House elections which suggests that the recent slowdown in household spending is unlikely to last. … Consumer Confidence …
2nd November 2017
The Bank of Japan still expects growth to exceed its sustainable rate both this year and next. However, sluggish price pressures forced the Board to slash its inflation forecasts yet again at today’s meeting. The upshot is that policy tightening remains a …
31st October 2017
Today’s activity data confirm that growth slowed last quarter but a rebound in the current quarter is likely. Meanwhile, strong job growth isn’t reducing unemployment for now as the labour force continues to expand a rapid pace. … Industrial Production, …
Despite a rebound in retail sales in September, private consumption probably fell in Q3 for the first time in almost two years. However, the weakness is unlikely to last as household incomes are growing at a healthy pace and consumers remain unusually …
30th October 2017
