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Weak survey evidence notwithstanding, the economy likely continued to recover in the second quarter, while the labour market has rarely been tighter. However, wage growth remains anaemic and the past strengthening of the exchange rate will likely dampen …
8th August 2016
The improvement in both current conditions and the outlook in today’s Economy Watchers Survey was the strongest since spring 2014. That said, the survey’s link with actual economic activity is often tenuous. … Economy Watchers Survey …
Only a fraction of the ¥28 trillion fiscal stimulus passed by the Cabinet on Tuesday constitutes fresh public spending. What’s more, budgeted spending has been a poor guide to actual changes in public demand. Projections by the IMF have done a much better …
5th August 2016
Wage growth rebounded in June, and the headline continues to mask solid gains in hourly earnings. Nonetheless, wages are not growing fast enough to create noticeable price pressures. … Labour Cash Earnings …
The fiscal stimulus package approved by the Cabinet today will boost growth by much less than the headline figure suggests. As such, the Bank of Japan still has more work to do reach its 2% inflation target. … Stimulus package doesn’t let the BoJ off …
2nd August 2016
Japanese households seem unconvinced that the resounding victory of the ruling coalition in the Upper House elections will improve their living conditions in coming months. At least their inflation expectations did not fall any further, though. … …
One widely-held view is that the Bank of Japan has refrained from stepping up its purchases of Japanese Government Bonds in recent months because the pool of available securities is drying up quickly. By contrast, we believe that QQE can continue at least …
29th July 2016
The Bank of Japan’s decision to refrain from meaningful easing once again today has disappointedinvestors and resulted in a renewed strengthening of the yen. While we still expect the Bank to domore, it seems that Governor Kuroda has now adopted the …
Today’s activity data suggest that Japan’s economy continued to recover last quarter, while the labour market continues to tighten. However, the stronger yen is set to dampen price pressures further, and we still consider it more likely than not that the …
Prime Minister Abe’s announcement of a huge fiscal stimulus package today provided fresh impetus to Japan’s stock market and resulted in another decline of the yen against the dollar, but the news should be treated with caution. … Don’t believe the fiscal …
27th July 2016
While small business confidence rose for the second straight month in July, it still suggests that Japan’s economic recovery remains sluggish. … Small Business Confidence …
An imminent shift from fiscal tightening to loosening has reduced the pressure on the Bank of Japan to provide more stimulus. However, the sharp appreciation of the exchange rate since the start of the year is threatening to derail the Bank’s efforts to …
26th July 2016
The sharp strengthening of the exchange rate since the start of the year continued to depress trade values in June. However, falling trade values mask a stabilisation in trade volumes . … External Trade …
25th July 2016
Baron Munchausen managed to escape a swamp by pulling on his own hair. In a similar vein, some commentators have recently argued that Japan could pull itself out of its debt morass by using carefully designed tax increases to lift both fiscal revenue and …
22nd July 2016
The second straight rise in the manufacturing PMI in July suggests that firms have shrugged off any uncertainty caused by the UK’s vote to leave the EU. However, the appreciation of the exchange rate continues to depress external demand and price …
Some investors in Japan have responded to the introduction of negative interest ratesby acquiring more overseas securities. Meanwhile, bank lending rates have fallen butthe availability of cheaper loans has not led households and firms to borrow more. … …
20th July 2016
Speculation that the Bank of Japan has already embarked on “helicopter money” are wide off the mark. While we believe the measure would provide a solution to the country’s debt woes, the helicopter will remain grounded until other options have been …
18th July 2016
Following a landslide victory in the Upper House elections, Prime Minister Abe has confirmed that the government will prepare a large supplementary budget later this year. All else equal, this should lift growth and lessen the need for additional monetary …
15th July 2016
The landslide victory for Japan’s ruling coalition in the Upper House election is not necessarily good news for the economy, as lawmakers’ time and energy may now be focused on revising the pacifist constitution rather than economic reforms. Hopes for any …
11th July 2016
The renewed decline in “core” machinery orders in May suggests that capital spending fell yet again last quarter. … Machinery Orders …
Looser fiscal policy is likely to support an acceleration in economic growth next year but it will fizzle out again in 2018 leaving ample amounts of spare capacity and little in the way of inflationary pressure. By that point though, the Bank of Japan …
8th July 2016
The plunge in the outlook of today’s Economy Watchers Survey indicates that the stronger yen and Brexit have dealt a serious blow to confidence in Japan. … Economy Watchers Survey …
Wage growth turned negative in May, and even allowing for falling working hours, the tight labour market has yet to produce noticeable cost pressures . … Labour Cash Earnings …
The yen has strengthened sharply since the start of the year and is now back at the level seen at the launch of Quantitative and Qualitative Easing. The resulting plunge in import prices has contributed to the moderation in underlying inflation. What’s …
5th July 2016
While the yen has weakened slightly over the past week as concerns about the impact of Brexit have faded, it is still around 20% stronger than it was at the start of the year. A stronger currency creates a headwind for the Bank of Japan’s efforts to boost …
1st July 2016
The delay of the sales tax hike provided a boost to household sentiment in June. However, the collapse in household inflation expectations is clearly worrying. … Consumer Confidence …
While the Tankan’s headline index held steady last quarter, the survey doesn’t capture the impact of Brexit in full. What’s more, conditions for non-manufacturers worsened. … Tankan …
While the labour market remains tight, consumer spending probably slowed last quarter. With underlying inflation now clearly weakening, we retain our view that the Bank of Japan will announce more stimulus later this month. … Household Spending, …
The sharp fall in industrial production in May suggests that the economy slowed in the second quarter following a solid rise in GDP in Q1. We retain our forecast that the Bank of Japan will announce more easing at next month’s meeting. … Industrial …
30th June 2016
If worries about a deepening crisis in the EU drive another surge of safe haven flows into Japan, even direct foreign exchange intervention would probably not prevent the yen from strengthening. Intervention could make a difference though if market …
29th June 2016
Small business confidence picked up in June and the further improvement predicted for July suggests that manufacturing activity will continue to recover in coming months. … Small Business Confidence …
Even though retail sales stagnated once again in May, private consumption should continue to recover in the second quarter. … Retail Sales …
Structural reforms since the launch of Abenomics have been insufficient to improve the medium-term outlook for Japan’s economy. Meanwhile, monetary policy is running into diminishing returns. As a result, we suspect that the government may soon reverse …
27th June 2016
The UK’s vote to leave the EU has pushed the yen to levels last seen when Quantitative and Qualitative Easing was first launched, while the Nikkei has slumped by 8%. These moves increase the chances of direct intervention by Japanese policymakers to …
24th June 2016
The manufacturing PMI remained weak in June and still points to sharp falls in industrial output. However, we would put more weight on firms’ production forecasts which point to a solid rebound in activity this quarter. … Flash Manufacturing PMI …
23rd June 2016
Doing away with a specific timeframe for reaching 2% inflation would sow doubts about policymakers’ commitment to the 2%-target and would be a major step backwards. Instead, more stimulus is needed to make more credible policymakers’ efforts to achieving …
22nd June 2016
Bank lending rates have fallen sharply since policymakers introduced negative interest rates in January. One consequence is that bank profits have started to moderate from high levels. … Monetary Indicators Monitor …
21st June 2016
The trade surplus narrowed in May as the stronger yen lowered export revenues and rising energy prices lifted import values. We expect crude oil prices to recover further next year, so the trade balance may return to deficit before long. … External …
20th June 2016
Commercial bank profits have started to moderate following the launch of negative interest rates as banks have cut lending rates. However, we are not convinced that further cuts in lending rates will inevitably reduce banks’ willingness to provide credit, …
17th June 2016
The Bank of Japan still sees downside risks to its inflation forecasts, and we believe that policymakers will respond by stepping up the pace of easing next month. … Bank of Japan to provide more easing next …
16th June 2016
The government’s decision to postpone the sales tax hike to 2019 has improved the economic outlook. However, we still believe that the Bank will respond to the recent moderation in underlying inflation by stepping up the pace of monetary easing, probably …
13th June 2016
The upcoming Upper House elections should solidify the government’s position even if the LDP/New Komeito coalition fails to achieve the hoped for two-thirds majority. However, hopes that a strong electoral showing will revive the stalled reform agenda …
10th June 2016
The sharp fall in machinery orders in April bodes ill for capital spending in the second quarter, though we wouldn’t read too much into the data for a single month. … Machinery Orders …
9th June 2016
The decline in current conditions in May’s Economy Watchers Survey reflects seasonal patterns rather than a genuine deterioration. What’s more, the outlook for coming months has started to brighten again. … Economy Watchers Survey …
8th June 2016
The second estimate of Q1 GDP revealed that growth was marginally stronger last quarter than initially reported. However, we expect spare capacity to shrink only slowly, so the Bank of Japan will remain under pressure to introduce more stimulus. … GDP …
Japan’s economy is holding up reasonably well despite the recent strengthening of the yen. Meanwhile, the decision to delay the sales tax hike that had been scheduled for next April has brightened the outlook for domestic demand. Nonetheless, with import …
6th June 2016
While the number of people in paid employment in Japan is now the highest since 2008, hours worked have fallen to fresh lows as full-time workers have been replaced by part-time workers. With little prospect of productivity growth accelerating …
3rd June 2016
The slowdown in wage growth in April was broad-based, and we believe that the labour market will have to tighten much further to create major cost pressures. … Labour Cash Earnings …
Households’ expectations for the next few months were little changed in May but the delay of the sales tax hike should lift spirits in coming months. … Consumer Confidence …
2nd June 2016
The delay that has just been confirmed in the sales tax hike will result in economic activity being stronger than would have been the case next year. The decision diminishes pressure on the Bank of Japan to provide more monetary stimulus to offset fiscal …
1st June 2016
