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Today’s Economy Watchers Survey (EWS) suggests that activity in the manufacturing sector slowed sharply in the second quarter. … Economy Watchers Survey …
8th June 2015
While revised data showed that Q1 GDP expanded even more strongly than initially estimated, a slowdown in Q2 looks likely. … GDP (Q1 Revised) & Current Account …
We remain convinced that a weaker yen is needed to boost demand, lift inflation and put the public finances on a sustainable path. As long as the exchange rate continues to weaken gradually rather than abruptly, we think that wage gains should be strong …
5th June 2015
Several commentators have expressed unease about yen weakness, with some even arguing that the government may intervene if the ongoing slide persists. But a weaker yen is a key transmission channel in the Bank of Japan’s efforts to lift inflation. The …
4th June 2015
The diverging prospects for monetary policy in Japan and the US have resulted in a renewed weakening of the yen in recent weeks. With price pressures set to remain subdued, we think that the Bank of Japan will have to step up the pace of easing before too …
3rd June 2015
We wouldn’t read too much into the rebound in wage growth in April. In fact, we think that labour costs will continue to grow far too slowly to create broad-based price pressure. … Labour Cash Earnings …
2nd June 2015
The Ministry of Finance’s survey on corporate finances suggests that business investment was stronger last quarter than initially estimated. … Capital Expenditure …
1st June 2015
Households have benefitted less from the plunge in energy prices and the surge in overseas investment income than other sectors. With wage growth set to remain subdued, we think that consumer spending will be sluggish this year before picking up next year …
29th May 2015
With economic activity sluggish and price pressures subdued despite a tighter labour market, we remain convinced that the Bank of Japan will have to step up the pace of easing before too long. … Industrial Production, Household Spending, Unemployment & …
The rebound in retail sales in April did not reverse the plunge in March, and we think that consumer spending will remain sluggish in coming months. … Retail Sales …
28th May 2015
Japan’s butter shortage is the result of agricultural policy failures. It should strengthen the argument that agreement to scale back protectionist measures in the ongoing talks on the Trans-Pacific Partnership Agreement would leave Japan better off. … …
27th May 2015
Despite a rebound in May, small business confidence still suggests that the economic recovery lacks vigour. … Small Business Confidence …
The trade balance returned to deficit in April and will likely remain in the red in coming months. … External trade (Apr.) …
25th May 2015
There are increasing signs that the weak yen is finally curbing demand for imported goods, but the trade deficit should nonetheless widen again next year as consumers bring forward spending ahead of the sales tax hike in 2017. Net exports should therefore …
22nd May 2015
The Bank of Japan’s more upbeat economic assessment today suggests that the introduction of more stimulus as early as July is off the table. However, we remain convinced that the prospect of prolonged below-target inflation will convince policymakers to …
While the rebound in the manufacturing PMI in May suggests that the sector is not doing as badly as we had feared, there is a long way to go to recoup the 4% fall in activity since January. … Flash Manufacturing PMI …
21st May 2015
The acceleration in GDP growth last quarter was mostly due to a jump in inventories, and a range of indicators point to a slowdown in the second quarter. … GDP (Q1 …
20th May 2015
The Bank’s decision not to announce more stimulus at the end-April meeting will only make it more difficult to reach its 2%-inflation target, as any support from a weaker yen and rising import prices will be less pronounced. With economic activity …
18th May 2015
Machinery orders rose by more than 6% q/q last quarter, so business investment should have finally started to recover again. … Machinery Orders …
Because of its outsized weight in the consumer price basket, housing rent has a significant impact on inflation in Japan. Unfortunately for the Bank of Japan, it seems likely that rent will continue to decline, undermining policymakers’ efforts to reach …
15th May 2015
Following four straight increases, the small drop in consumer confidence in April is no disaster. What’s more, the Bank of Japan will have been pleased by the fact that inflation expectations are holding up. … Consumer Confidence …
Banks report slowing loan demand but aggregate credit growth nonetheless remains strong as lower yields have encouraged firms to turn to the bond market for funding. … Monetary Indicators Monitor …
14th May 2015
The increase in the headline index of today’s Economy Watchers Survey (EWS) masks a deterioration in some of the subindices, and we still think that economic activity will remain sluggish in the second quarter. … Economy Watchers Survey …
13th May 2015
The current account surplus jumped to a multi-year high in March, and we think that it will be the highest this year since 2010. … Current Account …
We are not convinced that the BoJ’s decision to use the monetary base as its operational target limits the effectiveness of QQE, as some are suggesting. More problematic is that the reduction in real interest rates that policymakers hope the programme …
12th May 2015
The Bank of Japan’s decision not to step up the pace of easing at the end of April has prompted us to pare back our expectations for yen depreciation in the near term. But we still think that policymakers will have to act before too long and that this …
8th May 2015
Recent data suggest that economic activity held up fairly well at the start of the year and that the labour market continues to tighten. However, there are no signs that price or wage pressures are strengthening, and we still think that the Bank of Japan …
7th May 2015
Negative rates on central bank reserves could be one way to reduce bank lending rates further in Japan. This idea has received some attention in the media recently, but it does not appear to be under consideration by the Bank of Japan. As such, the …
1st May 2015
While the labour market continues to tighten, inflation remains near zero and wages are barely rising. The BoJ will have to step up the pace of easing before long. … Unemployment, Household Spending, Consumer Prices & Labour Cash Earnings …
The Bank of Japan today decided to leave policy settings unchanged, thus ignoring signs that its efforts to lift inflation towards the 2% target are stalling. However, we think that the threat of persistent deflation will force policymakers to step up the …
30th April 2015
The decline in industrial production in March was much less pronounced than expected and suggests that GDP growth remained solid last quarter. As such, it would provide an excuse for the Bank of Japan to leave policy settings unchanged at its meeting …
Small business confidence weakened in April and remains consistent with sluggish activity in the manufacturing sector. … Small Business Confidence …
28th April 2015
The renewed plunge in retail sales values in March suggests that consumer spending may have fallen last quarter. … Retail Sales …
With economic activity sluggish and inflation slowing, we think it is a question of when rather than if the Bank will step up the pace of its asset purchases. Mr Kuroda has given no hint recently – including at the Bank’s meeting earlier this month – that …
27th April 2015
In contrast to the Bank of Japan, we are far from convinced that QQE has lifted inflation expectations. In fact, wage and price setting behaviour have changed little since the programme was launched. The upshot is that, without additional policy easing, …
24th April 2015
The third straight fall in the manufacturing PMI confirms that the plunge in energy prices has failed to reinvigorate Japan's economy. … Flash Manufacturing PMI …
23rd April 2015
The plunge in import volumes in March likely reflects seasonal distortions rather than a sudden collapse in domestic demand. The upshot is that imports should rebound in April and the trade balance should return into the red. … What explains the plunge …
22nd April 2015
Even though the trade balance returned into the black for the first time since 2011 last month, net trade likely turned into a drag on GDP growth last quarter. … External trade …
The BoJ’s Senior Loan Officer Survey points to a further slowdown in loan demand last quarter. But the survey has not been a reliable guide to the pace of credit growth recently. While we can’t rule out a slowdown in borrowing in coming months, we are …
21st April 2015
Around 20% of all Japanese Government Bonds (JGBs) are currently used as collateral with the Bank of Japan or in private repurchase agreements. However, there are various ways to ensure that a shortage of available JGBs will not hamper the Bank’s asset …
17th April 2015
While consumer confidence continued to recover in March, households have so far preferred to save rather than to spend the windfall from lower energy prices. … Consumer Confidence …
The Bank of Japan’s 2% inflation target remains out of sight despite the benefits of a much weaker exchange rate. With the potential to expand QQE in its current form limited, new approaches are therefore likely to be needed to permanently lift price …
16th April 2015
The Bank of Japan now owns more Japanese government bonds than private pension funds and insurance companies combined. However, with the government pension fund continuing to shed bonds, and usage of JGBs as collateral declining, the outstanding amount of …
14th April 2015
Despite small declines in January and February, machinery orders remain well above their Q4 14 average, so business investment should finally have started to rebound last quarter. … Machinery Orders …
13th April 2015
Despite press reports that suggest the opposite, there is no evidence that Japanese firms have returned manufacturing production to their homeland on a large scale. Even if they did, this would be no reason to cheer. Venturing abroad boosts rather than …
10th April 2015
The Bank of Japan left policy settings unchanged today and Governor Kuroda indicated that the Board doesn’t see the need for additional stimulus at the moment. However, Mr Kuroda has a record of springing surprises and we still expect policymakers to step …
8th April 2015
In contrast to the rather disappointing Tankan survey, the fourth straight rise in the Economy Watchers Survey suggests that economic conditions continue to improve. … Economy Watchers Survey …
The current account surplus dropped in February, but should remain broadly stable going forward as a higher oil import bill should be offset by rising investment income. … Current Account …
While the economic recovery seemed to have picked up pace at the start of the year, recent data have dashed hopes of rapid growth. Consumers are not spending the windfall from lower energy prices, and firms are raising wages by less than anticipated. With …
Revised data show that the base pay hikes agreed upon in last year’s spring wage negotiations were not reflected in aggregate base pay, providing another headwind to higher inflation. … Revised data show that wage growth remains …
7th April 2015
