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A recent acceleration in producer prices of services combined with more upbeat survey evidence suggest that the prices that consumers pay for services will soon start picking up again. However, there is still a long way to go to reach the Bank of Japan’s …
30th March 2017
The rebound in small business confidence in March largely reflects seasonal patterns and the bigger picture is that the survey points to only modest gains in industrial activity. What’s more, the survey suggests that price pressures are no longer …
29th March 2017
The renewed rise in retail values in February is a positive sign, especially as other data also point to a rebound in private consumption this quarter. … Retail Sales …
Residential property prices in Japan have risen unusually fast since the launch of Quantitative and Qualitative Easing, led by an investment-driven surge in condominium prices. But there are signs that the rally in prices has run out of steam as household …
24th March 2017
The drop in the manufacturing PMI in March is hardly a disaster as the index had climbed to a three-year high in February. More problematic is that the survey points to a renewed moderation in price pressures. … Flash Manufacturing PMI …
A large jump in exports in February resulted in the highest trade surplus since 2010. The upshot is that net trade should have continued to support growth this quarter. … External trade …
22nd March 2017
The impending exit of two hawks from the Bank of Japan’s Policy Board suggests that calls for the Bank to scale back policy support will diminish. The Bank is likely to reduce the volume of its asset purchases whoever takes their place, but the shift in …
21st March 2017
Aggregate private sector debt rose the most on record in Q4 on the back of plunging funding costs. While household and corporate debt are rising again relative to output, the level of indebtedness remains low by past standards. … Monetary Indicators …
20th March 2017
We wouldn’t read much into the smaller pay hikes for employees of large manufacturing firms that have been agreed in this year’s Shunto wage negotiations. Wage growth for most workers looks set to remain strong by recent standards this year. But even …
17th March 2017
The Bank of Japan left policy settings unchanged today as widely anticipated and Governor Kuroda remained cautious about the prospect of hitting the inflation target. While the consensus is increasingly shifting towards policy tightening in coming months, …
16th March 2017
Japan’s unemployment rate is the lowest it has been since the mid-1990s and the job-to-applicant ratio is approaching its bubble year peak. Regular wages are rising at the fastest pace in years, and wages of part time workers, which are more responsive to …
14th March 2017
The Bank of Japan may upgrade its near-term outlook for inflation at its meeting this week. With inflation picking up again, a rising number of analysts now expect the Bank to tighten policy in coming months. But with inflation expectations still subdued, …
13th March 2017
Machinery orders weakened in January but their link with business investment has been poor lately. While capital goods shipments suggest that investment may have risen further this quarter, a marked recovery in capital spending remains unlikely. … …
Prime Minister Abe is set to become Japan’s longest serving Prime Minister and could plausibly now serve until 2021. While his government had some early successes in removing roadblocks to stronger growth, Abenomics seems to have run out of steam more …
10th March 2017
The steady growth in overall labour cash earnings in January masks the strongest increase in base pay in almost two decades. Nonetheless, wages would still have to rise considerably faster to meet the Bank of Japan’s 2% inflation target. … Labour Cash …
9th March 2017
Today’s Economy Watchers Survey suggests that the recovery in industrial production has ground to a halt. It also suggests that the number of employed persons will expand at a slower pace in coming months. … Economy Watchers Survey …
8th March 2017
Revised data show that GDP grew slightly more last quarter than initially reported. We expect the economy to expand by a steady 1% this year but to slow next year as rising prices undermine households’ purchasing power. … GDP (Q4 Revised) & Current …
Public construction activity for the 2020 Olympic Games should pick up next year, providing a boost to growth. However, the impact on aggregate economic activity will be modest. … Tokyo Olympics unlikely to provide major boost to …
7th March 2017
Japan’s economy has performed well recently and inflation is set to rise sharply soon. But the spike in inflation won’t last and, with inflation expectations no higher now than when the Bank of Japan launched Quantitative and Qualitative Easing, any talk …
The national accounts data show that wage growth has slowed in recent quarters even as the labour market has continued to tighten. With the lifetime employment model preventing employees from switching jobs in search of higher pay, we think that wage …
3rd March 2017
The small decline in consumer confidence in February is not particularly worrying as sentiment had reached a multi-year high in January. Meanwhile, household inflation expectations have been stable lately. … Consumer Confidence …
Household spending rebounded sharply in January as the labour market continued to tighten. However, price pressures remain subdued as the boost from higher energy prices is dampened by weak service inflation. … Household Spending, Unemployment & Consumer …
Today’s capital spending figures suggest that non-residential investment was stronger last quarter than initially reported. Overall GDP growth may therefore be revised up from +0.2% q/q to +0.3% q/q in the second estimate. … Capital Expenditure …
1st March 2017
While small business confidence weakened slightly in February, the survey has not been a good to activity lately. We would highlight that firms continue to report pronounced staff shortages while rising input costs are boosting price pressures. … Small …
28th February 2017
January’s first fall in industrial output in six months combined with downbeat forecasts for the following months suggest that the economy had a weak start to the New Year. Nor are we particularly impressed by the rebound in retail sales. … Industrial …
With the writing on the wall for the TPP, Japan’s government believes that its next best bet would be a bilateral deal with the US. In principle, this could generate sizeable benefits by opening Japan’s closed economy to competition and reducing …
24th February 2017
The surge in nominal GDP since the launch of Abenomics reflects a number of one-off factors whose impact has started to fade. While a smaller budget deficit should keep the ratio of public debt to GDP broadly stable for now, more needs to be done to …
22nd February 2017
The manufacturing PMI in February was the highest it has been since 2014’s sales tax hike and suggests that activity in the sector continued to expand at a strong pace this quarter. What’s more, the continued pick-up in input prices will be welcome news …
21st February 2017
The tailwind from rising export prices was offset by a drop in export volumes in January. By contrast, import volumes recorded the strongest increase since mid-2014. … External trade …
20th February 2017
Immigration to Japan is starting to make a meaningful difference in its labour market: the number of foreign workers rose by nearly 20% last year. With Japanese people more accepting of immigration than generally thought and the government taking steps to …
17th February 2017
Despite record-low bank lending rates and extraordinarily loose credit conditions, growth in bank lending has not picked up since the launch of Quantitative and Qualitative Easing. One consequence is that the volume of bank deposits now exceeds the volume …
15th February 2017
Japan’s GDP expanded by 1.0% in 2016, which is a touch faster than the economy’s sustainable rate. We forecast a similar increase in 2017 so spare capacity should continue to decline. Helped by the tailwind from a weaker yen, we expect inflation to …
14th February 2017
Growth was not fast enough last quarter to reduce spare capacity any further, but the current level of the output gap remains consistent with stronger price pressures. The upshot is that monetary policy will remain on hold for a long time. … GDP (Q4 …
13th February 2017
The Bank of Japan’s preferred measure of underlying inflation fell to a fresh low in December. While the weaker exchange rate and the recovery in commodity prices should result in a rebound in coming months, the chances of hitting the Bank’s 2% inflation …
10th February 2017
While machinery orders rebounded in December, their link to spending on machinery and equipment has been weak lately. Nonetheless, the pronounced recovery in capital goods shipments supports our view that business investment rebounded last quarter. … …
9th February 2017
Headline wage growth slowed in December as firms cut winter bonuses. While it should pick up again in coming months, a strong rebound is not on the cards. … Labour Cash Earnings …
6th February 2017
There is growing evidence that the tightness of Japan’s labour market is finally feeding into faster growth in incomes. This should support stronger private consumption at least until inflation becomes a headwind next year. … Tight labour market finally …
3rd February 2017
The slight rise in consumer confidence in January leaves it at its highest level in over three years. Meanwhile, household inflation expectations were broadly unchanged last month. … Consumer Confidence …
2nd February 2017
The BoJ left policy settings unchanged today and lifted its GDP forecasts for the next two years. Even though we expect inflation to approach the 2% inflation target next year, we doubt that the Bank will be able to tighten policy anytime soon as the …
31st January 2017
While today’s release on household spending suggests private consumption may have weakened in the fourth quarter, better-than-expected industrial production in December is consistent with a continued recovery in the wider economy. … Industrial Production, …
December’s retail sales figures were weaker than expected and suggest our forecast of a 0.2% q/q rise in consumer spending last quarter appears too optimistic. At this stage a fall of around 0.5% q/q seems possible, but we’ll know more when household …
30th January 2017
President Trump has threatened to impose a tariff on Mexican and Chinese imports, which wouldn’t create insurmountable challenges for Japanese firms producing cars and other products in these countries. However, his apparent determination to narrow the US …
27th January 2017
Both headline and underlying inflation weakened in December as the lingering effects of last year’s strengthening of the yen lowered goods prices. But with the yen having weakened markedly in recent months, inflation should start to rebound soon. … …
The Bank of Japan appears to have reduced the number of short-term JGB auctions it conducts this month, paving the way for a reduction in the volume of purchases this year. However, an increase in the target for 10-year JGB yields is not on the cards. … …
26th January 2017
The Bank of Japan will probably extend the deadlines for some of its lending programmes by one year at the upcoming meeting. But having upgraded its assessment of the economy at the December meeting, there is little chance of new stimulus being announced. …
The first rise in export values in more than a year reflects a combination of soaring export volumes and the recent depreciation of the yen. However, a weaker exchange rate tends to lift import prices by more than it boosts the yen-value of shipments, so …
25th January 2017
January’s manufacturing PMI suggests that Japan’s economic recovery picked up pace at the start of the year. What’s more, the weaker yen is fuelling price pressures. … Flash Manufacturing PMI …
24th January 2017
With the recent improvement in the inflation outlook, the Bank of Japan is unlikely to ease further in 2017 but any speculation about policy tightening will prove premature. In fact, the Bank’s pledge to keep long-term government bond yields low has …
23rd January 2017
Official data show a sharp decline in the budget deficit but it remains sizeable and we don’t expect the narrowing to continue. In any case, the key determinant of the sustainability of the public finances is not the size of the deficit but whether the …
20th January 2017
Corporate debt affordability remains extraordinarily high, as corporate profit margins have rebounded and borrowing costs have continued to decline. Firms have responded with higher corporate bond issuance rather than with increased borrowing from banks. …
18th January 2017
