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The fall in small business confidence in April reflects seasonal patterns. Still, the survey suggests that economic activity remains sluggish. … Small Business Confidence …
27th April 2016
We believe that public spending financed permanently by central bank transfers would be a viable option to boost demand and lift price pressures. However, until the existing policy measures are exhausted, which will take a few more years, we consider the …
26th April 2016
Headwinds to the Bank of Japan’s efforts to lift inflation have intensified in recent weeks. We expect the Bank to ease more at the upcoming meeting, most probably by increasing asset purchases and cutting interest rates. … Bank to announce more easing …
25th April 2016
The recent strengthening of the yen will lower prices of imported goods and provide some support to flagging private consumption. However, lower import prices provide a further headwind to the Bank of Japan’s efforts to lift inflation. What’s more, the …
22nd April 2016
The fourth straight drop in the manufacturing PMI in April suggests that the continued strengthening of the yen and the disruptions caused by the Kyushu earthquakes are taking their toll on activity in the sector. … Flash Manufacturing PMI …
The slump in export values is weighing on firms’ revenues and may undermine their willingness to invest and lift wages. … External trade …
20th April 2016
While the earthquake that hit Kyushu Island during the weekend is a human tragedy, we doubt that it will have a severe impact on Japan’s economy. The scale of damage does not appear huge and production shutdowns by major manufacturers should be reversed …
18th April 2016
If the government presses ahead with the sales tax hike next year, the chances of hitting 2% inflation on a sustainable basis anytime soon are very slim. Even if the tax hike is postponed, our best guess is that it will take at least three years before …
15th April 2016
If the end-game for Japan’s public debt problem is direct financing of the budget deficit by the Bank of Japan, this could be a step towards a solution rather than the disaster that many assume. Inflation would be likely to rise, which is exactly what is …
14th April 2016
While corporate debt has been broadly stable relative to output in recent years, firms have never been in a better position to service their debt as interest rates have collapsed and profits have surged. … Monetary Indicators Monitor …
We do not share the view that monetary policy has become impotent. However, scope to step up monetary stimulus much beyond current levels is small. The Bank of Japan’s efforts to boost growth and lift price pressures are therefore likely to require …
13th April 2016
Three years after the launch of Quantitative and Qualitative Easing, the Bank of Japan’s efforts to stoke price pressures are failing. Business confidence has fallen to a three-year low while the appreciation of the yen has magnified the slump in import …
12th April 2016
The surge in iron and steel orders which pushed up machinery orders in January reversed in February but orders remain consistent with a renewed rise in business investment last quarter. … Machinery Orders …
11th April 2016
The government has tried to talk down the yen down over last week as the currency has climbed to fresh highs against the dollar. While we still consider intervention in the currency markets unlikely, the moves put further pressure on the Bank of Japan to …
8th April 2016
The rebound in the Economy Watchers Survey last month is far less positive than it looks. Allowing for seasonal variations, “current conditions” were the weakest since 2014’s sales tax hike. … Economy Watchers Survey …
The rebound in consumer confidence in March may prove short-lived as stock markets sold off again at the start of April. … Consumer Confidence …
The current account surplus rebounded in February, but we expect the energy import bill to rise which should result in a narrower surplus in coming months. … Current Account …
We expect Tokyo’s economy to outperform the rest of Japan in coming years, largely because demographic prospects in the capital are brighter. One consequence is that house prices in Tokyo should continue to rise faster than elsewhere. … Is the grass …
7th April 2016
The proposed distribution of shopping vouchers to households would only boost spending temporarily. In order to lower precautionary savings and provide a longer-lasting impetus to private consumption, policymakers should instead postpone the sales tax …
6th April 2016
While wage growth rebounded in February, the ongoing spring wage negotiations will likely result in smaller base pay hikes than last year. The upshot is that the outlook for labour income remains bleak. … Labour Cash Earnings …
5th April 2016
Low inflation and the continued expansion in part-time employment are one reason why wage growth is not picking up. However, there are also some structural factors at play. Japan’s lifetime employment model and the diminished clout of trade unions lower …
1st April 2016
The pronounced drop in the headline index of today’s Tankan survey underlines that the recent strengthening of the yen has damaged business confidence and suggests that the Bank of Japan will announce more easing later this month. … Tankan …
The slump in industrial output in February suggests that manufacturing activity will contract this quarter and implies downside risks to our forecast of a 0.2% q/q rebound in GDP in Q1. … Industrial Production …
30th March 2016
The rebound in small business confidence in March is due to seasonal patterns. In fact, the survey points to falling industrial output. … Small Business Confidence …
29th March 2016
While the labour market remains tight, consumer spending may only have rebounded marginally this quarter. … Unemployment, Household Spending & Retail Sales …
The Bank of Japan’s new favourite inflation gauge remained below its December peak in February. Sizeable spare capacity and falling import prices suggest that price pressures will moderate further. … Underlying inflation to moderate …
28th March 2016
The conventional wisdom is that the collapse in bond yields since the launch of QQE is undermining bank profits. In reality, though they reached a fresh high last year. Unfortunately this is bad news for the Bank of Japan, as the resilience of bank …
24th March 2016
The renewed fall in the manufacturing PMI to a three year-low in March underlines that the recent strengthening of the exchange rate is dampening activity in the sector. … Flash Manufacturing PMI …
22nd March 2016
The early results of the Shunto spring wage negotiations have been disappointing to policymakers hoping to see faster wage gains. The major carmakers and electronics firms have agreed smaller base pay hikes than they did a year ago. If other firms follow …
18th March 2016
The trade surplus climbed to a fresh high in February, but should worsen again before long as the yen weakens and crude oil prices continue to rise. … External trade …
17th March 2016
PM Abe has invited outspoken opponents of tighter fiscal policy to a panel debating whether or not to raise the sales tax next year, which suggests that the chances of a renewed postponement are mounting. This should support economic activity and help the …
16th March 2016
The Bank of Japan did not announce additional monetary easing at today’s meeting, but dropped some strong hints that it believes more stimulus will eventually be needed. We now expect policymakers to step up the pace of asset purchases and lower the …
15th March 2016
Today’s data on machinery orders suggest that capital spending will continue to expand this quarter. While a near-term slowdown is likely, we expect the recovery in capital expenditure to resume towards the end of this year. … Machinery Orders …
14th March 2016
At first glance, a write-off of the Bank of Japan’s huge JGB holdings offers a simple solution to the country’s debt problem. But it is not clear that such a drastic step would actually help significantly. We still think that higher inflation rather than …
11th March 2016
Corporate bond yields have collapsed since the Bank of Japan adopted negative interest rates. However, with bonds only accounting for a quarter of corporate debt, bank lending rates would also have to fall to ensure a noticeable decline in corporate …
10th March 2016
Japan’s economy is struggling to regain momentum and the recent strengthening of the yen is providing a further headwind to efforts to raise inflation. The Bank of Japan will therefore have to step up the pace of easing soon – we suspect as early as next …
9th March 2016
The sharp fall in consumer confidence last month shows that the recent market turmoil has taken its toll on sentiment and suggests that households may cut spending further this quarter. What’s more, the continued slowdown in household inflation …
8th March 2016
The second estimate of Q4 GDP confirmed that Japan’s economy contracted last quarter. With the early indications for Q1 not looking promising, we retain our view that the Bank of Japan will announce more easing next week. … GDP (Q4 …
The economic recovery remains sluggish and the recent financial market turmoil seems to have dampened the mood. With the stronger yen lowering corporate profits and reducing import costs, we think the Bank of Japan will be forced to step up the pace of …
7th March 2016
We expect GDP growth among Japan’s major trading partners to remain weak this year by past standards, so Japan’s export volumes will remain under pressure. However, if our currency forecasts prove correct, firms should see a boost to profit margins from a …
4th March 2016
While wage growth rebounded in January, it remains low by past standards. With the upcoming spring wage negotiations set to result in smaller pay hikes than last year, the labour market will not create strong price pressures anytime soon. … Labour Cash …
Today’s capital spending figures suggest that investment spending was a touch weaker last quarter than initially estimated, but revised GDP data due on Monday should confirm that output shrank by 0.4% q/q. … Capital Expenditure …
1st March 2016
While the labour market continues to tighten, consumer spending remained sluggish at the start of the new year. … Unemployment & Household Spending …
The surge in nominal GDP last year reflects temporary factors and should not be taken as a sign of success for Abenomics. In fact, nominal GDP growth is set to slow this year. … Nominal GDP growth set to slow …
29th February 2016
The rebound in industrial production in January is unlikely to assuage concerns about the health of Japan’s economy as firms are predicting a renewed slump in February. … Industrial Production & Retail Sales …
Weak productivity developments pose some upside risks to inflation, particularly in services. However, this will be more than offset by the impact of lower consumer import prices on goods inflation. The upshot is that the Bank of Japan’s new favourite …
26th February 2016
We estimate that the Bank of Japan’s new favourite inflation measure moderated in January. In light of falling import prices and sluggish economic activity, we think that the slowdown in underlying inflation has further to run. … Consumer Prices …
There has been some recent talk of froth returning to Japan’s housing market but prices, other than for condominiums, are not rising at a rapid rate. With debt levels also stable, there are no signs of a bubble. Indeed, policymakers would probably welcome …
25th February 2016
While small business confidence picked up in February, firms project a deterioration in March allowing for seasonal factors. … Small Business Confidence …
24th February 2016
JGB yields would have to fall by another 40bp to wipe out the Bank of Japan’s profits, and they would have to remain that negative for many years to erode its capital base. However, that would be a price worth paying to overcome deflation and return the …
23rd February 2016
