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The labour market is getting increasingly tight. However, consumer spending remains sluggish and the slowdown in underlying inflation shows that price pressures continue to moderate. … Household Spending, Unemployment & Consumer Prices …
28th October 2016
Despite a rise in October, small business confidence still points to stagnant industrial production at best, and the outlook is not any better. … Small Business Confidence …
26th October 2016
The contraction in export values eased last month as the drag from falling prices is fading, and export volumes recorded the strongest rise since January last year. However, the renewed recent weakening of the yen suggests that the trade surplus will …
24th October 2016
The strong recent increase in the current account surplus is bad news for an economy struggling with persistently weak demand, as it implies that households and firms have saved rather than spent the windfall from cheaper energy. While we expect firms to …
21st October 2016
Investment by Japanese firms has been disappointingly weak recently. Capacity utilisation is high and firms are in a strong financial position to step up spending, but we nonetheless expect the recent deterioration in corporate sentiment to weigh on …
19th October 2016
Japan’s economy has become less reliant on imported energy in recent years as electricity consumption has fallen sharply. With consumers having stepped up savings over the past two years, the country is in a good position to deal with rising oil prices. … …
18th October 2016
Bank lending picked up in September and a broader measure of private sector credit expanded at the fastest pace since the launch of QQE in Q2. Meanwhile, low returns at home have encouraged Japanese investors to buy record amounts of foreign bonds. … …
17th October 2016
Japan’s effective labour force has continued to grow despite a continued fall in the working-age population as more women have entered the workforce and baby-boomers have continued to work into older age. But these tailwinds appear to be fading. The …
14th October 2016
Despite a drop in August, machinery orders point to a rebound in investment spending in Q3. However, falling capital goods shipments and the deterioration in business confidence suggest that capital expenditure will continue to weaken. … Machinery Orders …
12th October 2016
Allowing for seasonal factors, the Economy Watchers Survey continued to improve in September. However, “current conditions” still point to falling industrial output. … Economy Watchers Survey …
11th October 2016
Recent data suggest that the economic recovery may be a touch stronger than we had been expecting. However, there are no signs that the tight labour market is fuelling price pressures. While the Bank of Japan can blame the stronger yen for a sharp fall in …
10th October 2016
While the collapse in energy prices over the past two years explains some of the recent decline in services inflation, we suspect that it mostly reflects the sluggish state of consumer spending. However, the continued tightening of the labour market …
7th October 2016
Wage growth slowed in August as the bonus payments slumped after the end of the summer bonus season. While growth in hourly wages remains strong, we expect it to fall again in coming months. … Labour Cash Earnings …
We wouldn’t be overly concerned about a US tariff on Japanese imports should Donald Trump become president, as Japanese manufacturers mostly serve their US customers from their US subsidiaries. By contrast, shelving the TPP would do lasting damage to …
5th October 2016
The improvement in consumer confidence in September suggests that the recent surge in the household saving rate is unlikely to continue. Another positive sign is that inflation expectations seem to be bottoming. … Consumer Confidence …
4th October 2016
According to today’s Tankan survey, conditions in the manufacturing sector remained the weakest they have been seen the launch of QQE, while conditions in non-manufacturing continued to worsen. The survey therefore underlines that the Bank of Japan has …
3rd October 2016
Japanese manufacturers continue to increase production in their overseas subsidiaries. However, only a fraction of the goods produced overseas are re-imported to Japan. With the overall importance of manufactured goods imports on the rise, inflation has …
30th September 2016
While the consumer spending data send conflicting messages for Q3 GDP growth, the solid rise in industrial production in August strongly suggests that Japan’s economy continued to recover in the third quarter. However, the continued decline in underlying …
Even though retail sales values dropped in August, the data suggest that consumer spending rebounded in the third quarter. … Retail Sales …
29th September 2016
Even though small business confidence remains consistent with falling industrial production despite a rebound in September, firms’ forecasts for October suggest that conditions are on the mend. … Small Business Confidence …
28th September 2016
Data from the Bank of Japan show that bank lending to real estate companies reached a record high last quarter and, on some measures, property prices have been rising rapidly too. However, broader measures of debt suggest that concerns a property bubble …
23rd September 2016
The fourth straight rise in the manufacturing PMI suggests that the sector continued to take the strong appreciation of the exchange rate in its stride. However, the weakness in price pressures should be disconcerting for policymakers at the Bank of …
The key tool for monetary loosening in the Bank of Japan’s new framework will be the short-termpolicy rate, which now stands at -0.1%, rather than the new target for 10-year JGB yields. … How will the BoJ conduct policy in …
22nd September 2016
The Bank of Japan’s decision to replace its target for the monetary base with a target for 10-year government bond yields has prolonged the lifespan of QQE. However, it hasn’t improved the near term prospects for hitting 2% inflation, and we continue to …
21st September 2016
The contraction in both export and import values eased last month despite the ongoing price drag from the stronger yen. Export volumes are holding up well as the bulk is invoiced in currencies other than the yen. … External trade …
Negative interest rates are undermining the profitability of financial institutions asbanks have slashed lending rates. However, lower borrowing costs have yet to resultin stronger credit demand. … Monetary Indicators Monitor …
19th September 2016
The announcement that a comprehensive assessment of monetary policy would be carried out at the upcoming Bank of Japan meeting has triggered even more speculation than usual about possible changes of direction. We expect the negative policy rate to be cut …
16th September 2016
The stronger yen has brought Japan’s tourism boom to a halt. However, the importance ofoverseas visitors for economic activity remains small. The bigger risks from the appreciation ofthe exchange rate lie elsewhere. … End of tourism boom no …
Despite the further rise in “core” machinery orders in July, it still appears that business investment has stagnated. Indeed, other surveys of activity are hardly reassuring. … Machinery Orders …
12th September 2016
Japan’s budget deficit has narrowed in recent years, mostly because of 2014’s sales tax hike. However, tax revenues have started to fall relative to output as corporate profits are weakening and consumer spending is sluggish. As a result, the government’s …
9th September 2016
Negative interest rates have succeeded in lowering bond yields and bank lending rates in Japan without undermining lenders’ willingness to provide credit. However, credit growth has nonetheless continued to slow, and the measure has arguably contributed …
8th September 2016
Japan’s labour market has been tight for a while but the unemployment rate has continued to fall and now stands at a level last seen in the mid-1990s. The latest data show a long-awaited pick-up in wages too. The wage data can be volatile and it is …
7th September 2016
Wage growth held up better than expected in July, helped by faster growth in bonus payments. But with regular earnings still expanding at a sluggish pace, wage growth is set to moderate over the coming months. … Labour Cash Earnings …
5th September 2016
While the recent strengthening of the yen has rendered outward investment cheaper for Japanese firms, we doubt that it will lift investment outflows much as the growth outlook elsewhere remains rather gloomy. Nonetheless, the long-run trend towards …
2nd September 2016
Households have become more upbeat about the outlook for their personal finances, which suggests that the recent jump in the household saving rate should reverse before long. By contrast, the renewed dip in household inflation expectations adds to the …
Today’s data on capital spending showed a fall that broadly matched the drop in non-residential investment in the preliminary estimate of Q2 GDP. The upshot is that the second estimate of GDP, due next Thursday, should confirm that the economy stagnated …
1st September 2016
While the drop in today’s Shoko Chukin survey partly reflects seasonal patterns, the index remains consistent with falling industrial production. … Small Business Confidence …
31st August 2016
While industrial production was unchanged in July, firms’ forecasts for the following months suggest that the economy started expanding again in the third quarter. However, this alone is unlikely to prevent the Bank of Japan from announcing more stimulus …
The tight labour market in Japan is delivering pay increases for younger workers willing to move jobs, but a low level of labour market mobility and a rising share of older workers, for whom pay rises are harder to find, is keeping overall wage growth …
30th August 2016
Today’s labour market data showed that job growth accelerated further in July. As the number of people in paid employment continues to rise rapidly, consumer spending should recover further this quarter. … Unemployment, Retail Sales & Household Spending …
Japan’s economy remains dominated by old, unproductive firms, while those hoping to create new firms face a range of hurdles. Meanwhile, the country remains relatively isolated from the rest of the world, which limits knowledge spillovers. Unless this …
26th August 2016
Today’s inflation figures confirm that the recent moderation in price pressures can no longer be blamed on cheaper energy. While economic activity is on the mend, the slump in import prices suggests that underlying inflation will continue to fall in …
The third straight rise in the manufacturing PMI suggests that the sector is coping quite well with the sharp strengthening of the exchange rate since the start of the year. … Flash Manufacturing PMI …
23rd August 2016
Our base case is that the recent strengthening of the yen will result in a further moderation in inflation excluding fresh food and energy towards zero. However, the magnitude of recent exchange rate movements has been so large that we can’t exclude a …
19th August 2016
The trade surplus declined only slightly in July, but business surveys still point to a sharp fall in export volumes this quarter. … External trade …
18th August 2016
Amid rising concerns that the BoJ’s large-scale purchases of Japanese Government Bonds cannot be sustained for much longer, policymakers are mulling the introduction of an explicit target for long-term bond yields. While we believe that a further …
17th August 2016
Japan’s economy stagnated in the second quarter, so spare capacity didn’t shrink any further. Adding in the deflationary impact of the stronger yen, underlying inflation should moderate further in coming months, increasing the pressure on the BoJ to …
15th August 2016
The conventional wisdom is that the Bank of Japan’s large-scale bond purchases will soon dry up the pool of available assets. By contrast, we believe that QQE can continue for several more years. One reason is that the government is funding the entire …
12th August 2016
The sharp weakening of the yen in the early stages of Abenomics helped to shield Japanese exporters from the slowdown in global demand. However, the renewed strengthening of the exchange rate since the start of the year suggests that net exports will turn …
Despite a rebound in “core” machinery orders in June, their Q2 average points to a renewed decline in business investment. Nonetheless, we have pencilled in a small rebound as “core” capital goods shipments rebounded last quarter. … Machinery Orders …
10th August 2016
