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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 …
23rd September 2016
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
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
