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Revised data show that GDP growth was weaker last quarter than initially reported. However, the early indications for the current quarter are positive and we reiterate our 2017 GDP forecast of +1.5%. … GDP (Q1 Revised) & Current Account …
8th June 2017
We expect the expansion in the labour force to slow in coming years which suggests that wage growth should soon start picking up again. However, the shift to flexible employment forms, globalisation and technological progress all have undermined the …
6th June 2017
Following an unusually weak reading in March, the rebound in wage growth in April came as no surprise. But the bigger picture is that labour cash earnings are not growing fast enough to create noticeable cost pressures. … Labour Cash Earnings …
Growth in labour income slowed sharply in Q1 but a rebound seems likely. Even if income growth remains sluggish, households have plenty of scope to reduce savings following a prolonged period of restraint after 2014’s sales tax hike. And with inflation …
2nd June 2017
Consumer sentiment rebounded in May and remains near the highest it has been since the sales tax hike. Meanwhile, household inflation expectations have started to recover again. … Consumer Confidence …
Today’s capital spending figures suggest that business investment was fractionally stronger last quarter than initially reported. However, we expect next week’s revised GDP figures to confirm the preliminary estimate of a 0.5% q/q increase in Q1. … …
1st June 2017
Small business confidence was little changed in May and points to continued gains in industrial output. But despite rising labour shortages, price pressures remain subdued. … Small Business Confidence …
31st May 2017
We expect energy inflation to peak next quarter and then drop back, providing another challenge to the Bank of Japan’s efforts to reach a 2% inflation target. … When will energy inflation …
Even though firms are projecting a renewed fall in May and June, the jump in industrial production in April bodes well for GDP growth in the second quarter. … Industrial Production …
Strong gains in retail sales and “core” household spending in April suggest that private consumption is on track for another solid increase in the second quarter. Meanwhile, employment growth remains very strong and the labour market is the tightest it …
30th May 2017
Strong growth in Japan’s main export markets has provided a fillip to export volumes in recent quarters. However, foreign demand growth is likely to fade in coming months and the unusual recent weakness in import volumes should also have run its course. …
26th May 2017
The main inflation gauges all edged up in April and should climb further in coming months. But with the boost from higher energy prices set to fizzle out in the second half of the year, inflation will settle at levels well below the BoJ’s 2% target. … …
Japan is on the longest streak of growth in more than a decade. But the lesson of the last growth spurt is that capacity shortages would have to intensify much further to generate major price pressures. … Much greater capacity shortages needed to lift …
23rd May 2017
The rather sharp fall in the manufacturing PMI in May suggests that the economic recovery may now be slowing again. Meanwhile, price pressures remain subdued. … Flash Manufacturing PMI …
The trade surplus fell to a fresh low in April which suggests that net trade should have provided less support to economic activity in the second quarter. But the bigger picture is that external demand is growing strongly so we expect net exports to …
22nd May 2017
A surge in the share of women in or looking for paid employment has boosted potential growth and kept price pressures subdued in recent years. But with the female labour force participation rate no longer low compared to other large advanced countries, …
19th May 2017
Japan’s economy is on its longest streak of expansion in more than a decade. However, growth in labour income has weakened sharply and we expect a slowdown in GDP growth in the second half of the year. Price pressures are therefore unlikely to strengthen …
18th May 2017
Combined with the drop in capital goods shipments, the decline in machinery orders in Q1 suggests that investment spending weakened last quarter. Nonetheless, we still expect tomorrow’s preliminary estimate to show strong GDP growth in Q1. … Machinery …
17th May 2017
Credit growth is the strongest it has been in years but continues to fall short of growth in bank deposits. Meanwhile, the volume of external lending dipped slightly in Q4 but remains close to a record high. … Monetary Indicators Monitor …
16th May 2017
Japan’s economy has been performing well recently and we expect growth to exceed most estimates of its sustainable rate this year. But inflation remains low and, with wages still barely rising, there is little chance of it stabilising at a level that …
15th May 2017
Japan’s economy probably recorded the fifth straight quarter of growth in Q1, the longest streak since 2005. The unemployment rate is at multi-year lows and corporate profit margins at record highs. However, there is still little sign that capacity …
The government has raised minimum wages, mainly to the benefit of part-time workers, and improved tax incentives to encourage firms to lift salaries. But much more is needed to boost wage growth to rates that could generate inflation. In particular, the …
12th May 2017
Despite an improvement in April, today’s Economy Watchers Survey remains consistent with falling manufacturing activity. It also points to a slowdown in job growth, though the survey has not been a good guide to labour market developments lately. … …
11th May 2017
The first fall in labour cash earnings since last May underlines the challenges the Bank of Japan is facing in lifting inflation to 2%. With wages growing no faster than labour productivity, much stronger gains would be needed to generate major cost …
9th May 2017
We are not too worried about the drop in consumer confidence in April as the index remains near multi-year highs. What’s more, the survey remains consistent with a rebound in durable goods consumption. … Consumer Confidence …
8th May 2017
There is less evidence of spare capacity in Japan’s economy than in the euro-zone which might suggest that the Bank of Japan is likely to hike rates before the ECB. However, the Bank has pledged to let inflation overshoot its 2% target which is unlikely …
Underlying price pressures in Japan are not quite as weak as the recent negative reading for core inflation might suggest: it was caused by a slump in mobile phone prices that won’t continue. But while we expect a rebound in inflation over coming months, …
5th May 2017
Japan’s budget deficit has fallen sharply in recent years but improvements are now likely to slow, with the result that the government will struggle to achieve its target of a primary budget surplus in 2020. A small deficit would suffice though to …
2nd May 2017
Private sector debt is growing at the fastest pace in at least two decades, but this boom in credit is not doing much to support demand in the economy. The upshot is that economic activity should hold up even if bank lending does slow again. … Strong …
28th April 2017
Despite sharp falls in “core” household spending and industrial production in March, we expect GDP growth to accelerate from 0.3% q/q in Q4 to 0.7% in Q1. However, there is still no evidence that the economic recovery is boosting price pressures. … …
The BoJ upgraded its assessment of the economy at today’s meeting but lowered its inflation forecast for the current fiscal year. We think that the Bank remains too optimistic about inflation and therefore do not share the consensus view that the Bank …
27th April 2017
While the decline in small business confidence in April can largely be attributed to seasonal patterns, the survey remains consistent with a stagnation in industrial output. What’s more, there are no clear-cut signs that price pressures are strengthening. …
26th April 2017
Japan’s economy probably expanded for the fifth straight quarter as consumer spending is finally recovering in earnest. The activity surveys suggest that growth held up in the second quarter and we’ve revised up our 2017 growth forecast from 1.0% to 1.5%. …
21st April 2017
The manufacturing PMI remained at a high level in April and suggests that the sector had a strong start to the second quarter. What’s more, there are mounting signs that price pressures are strengthening again. … Flash Manufacturing PMI …
With economic growth strengthening recently, a slim majority of analysts now expects the Bank of Japan to start tightening policy by the end of next year. But stronger growth has failed to generate price pressures – in fact, the Bank looks set to revise …
20th April 2017
Export values slumped in March as distortions related to the Lunar New Year unwound. Nonetheless, we still expect net exports to provide another boost to Q1 GDP growth. … External trade …
High-level discussions with the US today have revived talk in Japan of a bilateral trade deal that could in principle generate sizeable productivity gains for Japan and make up for the US abandoning the TPP. Unfortunately, the chances of the US …
18th April 2017
Bank lending is rising at the fastest pace since 2009, led by non-manufacturing firms. A combination of record-low bank lending rates and extremely loose bank lending attitudes has fuelled the credit boom. … Monetary Indicators Monitor …
17th April 2017
While there are good reasons to believe that inflation will continue to recover in coming months, the Bank of Japan’s most recent forecasts from January are far too optimistic. Downward revisions to the Bank’s projections at the meeting later this month …
13th April 2017
The labour market continues to tighten and firms are reporting the most severe capacity shortages in years. Underlying inflation is therefore set to recover after approaching zero at the start of this year. However, long-term inflation expectations remain …
12th April 2017
The rebound in machinery orders in February wasn’t strong enough to reverse the decline in January. But with capacity usage picking up, we expect business investment to expand at a robust pace this year. … Machinery Orders …
A sharp rise in interest rates could result in large losses for the Bank of Japan if it were ever to sell its huge stock of government bonds. But the Bank is keeping a lid on bond yields and will continue buying rather than selling bonds. And even if QQE …
11th April 2017
Today’s Economy Watchers Survey jars with the upbeat message from other sentiment surveys. The survey also points to a further slowdown in job growth in coming months. … Economy Watchers Survey …
10th April 2017
Deflation has not done as much damage to Japan’s economy as is often thought and, correspondingly, a return to inflation is unlikely to deliver major benefits for now. However, we remain convinced that higher inflation is the only solution to Japan’s debt …
While the economy should continue to grow at a robust pace, price pressures will strengthen only slowly. And with the sales tax hike scheduled for end-2019 clouding the outlook, the Bank of Japan is unlikely to tighten policy anytime soon. Growth has been …
7th April 2017
February’s data on labour cash earnings were a mixed bag. While growth in regular earnings slowed, wages of part-time worker grew at the fastest pace in years. The key point though is that much faster gains would be needed to reach the Bank of Japan’s 2% …
The rise in consumer confidence in March left sentiment at the highest level it has been since autumn 2013 and suggests that consumption should continue to recover. However, households still expect sluggish income growth and their inflation expectations …
6th April 2017
While today’s Tankan survey showed that business conditions for large manufacturers did not improve as much as most had anticipated, the survey suggests that growth will remain strong for now. What’s more, the continued increase in capacity usage is …
3rd April 2017
A range of policy decisions that encouraged consumers to bring forward purchases of durable goods contributed to keeping consumer spending weak in recent years. But with the replacement cycle now picking up pace, we think that the conditions for a rebound …
31st March 2017
Today’s activity data suggest that Japan’s economy continued to recover in Q1 while the labour market tightened further. However, very weak underlying price pressures highlight that the Bank of Japan is unlikely to tighten policy anytime soon. … Ind. …
