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While machinery orders fell in November, their current level remains consistent with a rebound in investment spending last quarter. The rebound in capital goods shipments also suggests that business investment is on the mend. … Machinery Orders …
16th January 2017
Recent revisions to the GDP data suggest that the output gap has all but closed. However, the main factor holding back inflation over the last two decades were entrenched deflation expectations rather than a lack of demand. Unfortunately, the Bank of …
13th January 2017
Inflation fell to fresh lows at the end of 2016, with the Bank of Japan’s favourite measure of underlying inflation turning negative in the Tokyo region on our estimates. What’s more, there are few signs that the tight labour market is boosting wage …
12th January 2017
Today’s Economy Watchers Survey showed that the outlook has deteriorated somewhat relative to current conditions. Nonetheless, the survey remains consistent with a recovery in industrial production. … Economy Watchers Survey …
The rebound in consumer confidence to a three-year high in December supports our view that consumer spending will be one of the driving forces of the economic recovery this year. … Consumer Confidence …
10th January 2017
The budget for the coming fiscal year foresees broadly neutral rather than expansionary fiscal policy. With supplementary spending for the current fiscal year barely larger than last year’s, the strong increase in public spending promised last July will …
9th January 2017
The recent slump in the yen has lifted the yen-value of foreign assets and associated income streams. We estimate that the government’s net debt has fallen by 11% of GDP since the US election as the value of its overseas assets has increased. Meanwhile, …
6th January 2017
Headline wage growth remained close to zero in November and part-time wages would have to rise at a much stronger pace to generate faster gains in consumer prices. … Labour Cash Earnings …
We expect Japan’s economy to grow by 1% next year. Given how low potential growth is, this should be enough to drive a further decline in spare capacity and to add to price pressures. The Bank of Japan is therefore unlikely to introduce further easing. …
23rd December 2016
The Bank of Japan left policy settings unchanged today. As expected, it upgraded its assessment of the health of the economy, which points to policy remaining on hold for the foreseeable future. … Bank of Japan on hold for foreseeable …
20th December 2016
The Bank of Japan’s yield target has kept JGB prices anchored over recent weeks against the backdrop of a sell-off in bond markets overseas. The volume of the Bank’s bond purchases has also remained stable. With the yield target likely to be unchanged …
19th December 2016
The sharp weakening of the yen has contributed to a rebound in the annual growth rate of trade values. However, since imports are invoiced in foreign currency more often than exports, the trade surplus should start to narrow in coming months. … External …
The recent sharp fall in import volumes is largely a legacy of the slump in the exchange rate in the early stages of Abenomics. We expect imports to rebound next year, so the boost from net trade to GDP growth should fade. This would hardly be a disaster …
16th December 2016
At its last meeting, the Bank of Japan sounded the alarm over a decline in price pressures. However, the economy has continued to grow faster than potential and the recent sharp weakening of the yen should have soothed nerves. We expect the Bank to leave …
15th December 2016
The manufacturing PMI was the highest in December in almost a year and supports our view that the economy continued to expand at a robust pace this quarter. … Flash Manufacturing PMI …
While firms’ capital spending plans remain much weaker than in previous years, the rebound in the headline index of today’s Tankan should encourage the Bank of Japan to refrain from further easing. … Tankan …
14th December 2016
The Bank of Japan’s favourite gauge of underlying price pressures remains just a touch above zero. However, spare capacity is narrowing and growth in part-time pay has started to pick up. What’s more, the exchange rate has weakened sharply since the US …
12th December 2016
Combined with the recovery in capital goods shipments, October’s rebound in “core” machinery orders suggests that business investment will start to recover this quarter. … Machinery Orders …
We expect the upcoming spring wage negotiations to result in base pay hikes of only 0.5% or so, which would be broadly in line with the increase agreed upon this year. Even with output per employee stagnant for several years, this would be insufficient to …
9th December 2016
Today’s Economy Watchers Survey showed that current conditions are the most buoyant since 2014’s sales tax hike. However, the survey still points to a slowdown in job growth in coming months. … Economy Watchers Survey …
8th December 2016
GDP growth wasn’t quite as strong last quarter as initially reported, but this was more than offset by upward revisions to previous quarters. Spare capacity is narrowing and we still expect the Bank of Japan to remain on hold for the foreseeable future. … …
Wage growth picked up marginally in October but remained very weak. While wages are rising more strongly allowing for falling working hours, the tight labour market has yet to create noticeable cost pressures. … Labour Cash Earnings …
6th December 2016
While consumer sentiment worsened in November, household inflation expectations seem to have turned the corner. … Consumer Confidence …
5th December 2016
The recent weakening of the yen will lift headline inflation by around 0.5 percentage points in coming months and further gains are likely if, as we have been forecasting for a while, the yen weakens towards 120 against the dollar by the end of next year. …
2nd December 2016
Today’s capital spending figures suggest that non-residential investment was a touch stronger last quarter than initially estimated. However, the second preliminary estimate of Q3 GDP should confirm that the economy expanded by 0.5% q/q. … Capital …
1st December 2016
Small business confidence was flat in November and suggests that the economy is treading water. Meanwhile, there are signs that the recent weakening of the exchange rate is boosting price pressures. … Small Business Confidence …
30th November 2016
While industrial production was little changed in October, firms’ forecasts point to a strong rise in the current quarter. … Industrial Production …
A proposed reform to better link pension payments with movements in wages should improve the viability of Japan’s public finances. For current workers though, the reform may force them to delay retirement even longer. Japan has an older population than …
29th November 2016
While the jobless rate held steady in October, the job-to-applicant ratio is approaching the record-highs from the early-1990s. However, the tighter labour market has yet to translate into a visible rebound in consumer spending. … Unemployment, Retail …
A further rise in global government bond yields may put the Bank of Japan’s yield target under pressure but we nonetheless believe the Bank will be able to reduce its asset purchases next year while keeping the yield target unchanged. … BoJ set to taper …
25th November 2016
While underlying inflation edged up in October, past falls in import prices may still push underlying inflation towards zero by year-end. But with the yen now weakening again and spare capacity shrinking, price pressures should strengthen again soon. … …
Following five straight monthly gains, the small decline in the manufacturing PMI in November is hardly a disaster. In fact, the survey suggests that price pressures have started to strengthen again. … Flash Manufacturing PMI …
24th November 2016
Even though the drag from the stronger yen has started to fade, the annual growth rate of both export and import values fell deeper into the red last month. Nonetheless, net exports may still provide another small boost to GDP growth in the current …
21st November 2016
With the yen weakening dramatically since the US election and incoming data showing GDP growth strong last quarter, there is now little pressure on the Bank of Japan to ease further. Less positively from the Bank’s perspective, underlying inflation looks …
18th November 2016
With its first fixed-rate operation today in support of the new target for 10-year Japanese Government Bond yields, the Bank of Japan has moved closer to full-fledged helicopter money. There are already some indications that the government is responding …
17th November 2016
Amid falling profitability and sluggish loan demand at home, banks continue to expand overseas lending. … Monetary Indicators Monitor …
16th November 2016
The potential benefits for Japan from the proposed RCEP trade deal in Asia are similar in scale to those that might have been achieved under the TPP. But they are not substitutes for each other: gains under RCEP would come from reductions in tariffs, …
15th November 2016
The 0.5% q/q rise in GDP last quarter implies that the output gap was the smallest since 2014’s sales tax hike. Combined with the recent weakening of the yen, today’s figures therefore reduce the pressure on the Bank of Japan to introduce more easing. … …
14th November 2016
Falling rents have been a persistent drag on inflation in Japan. While condominium prices have surged since the launch of QQE, there is virtually no link between house prices and rents. Instead, rents are mainly driven by developments in household …
11th November 2016
Despite having a sizeable output gap, Japan’s economy has expanded at a pace no stronger than potential this year so slack in the economy has not been reduced. One reason is that consumer spending has been flat since 2014’s sales tax hike. Even though the …
10th November 2016
Despite a renewed fall in September, machinery orders suggest that non-residential investment rebounded last quarter. However, we think this will prove short-lived. … Machinery Orders …
The yen may strengthen a little further as increased uncertainty adds to safe haven demand, and Japanese exporters may face a less welcoming environment for trade. But, for Japan, the key immediate economic implication of Donald Trump’s election win is …
9th November 2016
Allowing for seasonal factors, the Economy Watchers Survey climbed to a ten-month high in October. However, the index remains consistent with sluggish activity in the manufacturing sector. … Economy Watchers Survey …
Wage growth remained weak in September as regular earnings are barely rising. The upshot is that the tight labour market has yet to generate noticeable cost pressures. … Labour Cash Earnings …
7th November 2016
Consumer spending has been broadly flat since 2014’s sales tax hike as households have used the windfall from falling energy and import prices to replenish savings. However, we believe that this is about to change. We expect consumer spending to expand by …
4th November 2016
While consumer confidence weakened slightly last month, the survey still points to a rebound in consumer spending. Meanwhile, inflation expectations show further signs of stabilising. … Consumer Confidence …
2nd November 2016
The Bank of Japan today pushed back the timing for hitting its inflation target and sounded alarmed about the recent moderation in price pressures, but nonetheless refrained from providing more stimulus. While we still think that further cuts in the …
1st November 2016
While today’s retail sales data suggest that private consumption may at best be flat in Q3, the industrial production figures point to continued recovery. We therefore stick to our forecast of a 0.1% q/q rise in GDP in Q3. Nonetheless, today’s data will …
31st October 2016
The Bank of Japan recently abandoned its target for expansion of the monetary base but said that it would continue to buy assets at around the same rate as before. This pace of asset purchases will increasingly become inconsistent with the Bank’s new …
28th October 2016
At its upcoming meeting, the Bank of Japan is set to slash its inflation forecasts for the coming fiscal year and may push also back the timeframe for hitting the 2% inflation target yet again. While the failure to hit the target can be blamed in part on …
