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Recent data cast doubt on the strength of the economic recovery while inflation continues to slow. With a disappointing Shunto dashing hopes that the tight labour market would result in robust wage growth, the Bank’s inflation forecasts increasingly look …
7th April 2015
The unusually late timing of Chinese New Year may have distorted Japan’s recent activity data by causing a surge in output and exports in January followed by a slump in February. However, firms predict a renewed drop in industrial output in March, by when …
3rd April 2015
The small rise in today’s Tankan index for all industries suggests that economic activity remained sluggish last quarter. … Tankan …
2nd April 2015
Japan’s economic recovery was dealt a severe blow by last year’s sales tax hike, and we think that the immediate outlook for growth is more gloomy than most believe. With inflation well below the 2% target, the Bank of Japan will likely announce …
31st March 2015
The plunge in industrial production in February all but reversed the surge in January. The upshot is that Japan’s economy seems to have slowed in the first quarter of this year. … Industrial Production …
Despite exceptionally strong corporate profits and falling investment, corporate debt increased by the most since 2008 last quarter. With interest costs at record lows, firms seem to be borrowing to lend to other companies. While this is not a concern for …
27th March 2015
While the labour market remains tight, inflation is moving further away from the Bank of Japan’s 2% target. We continue to expect the Bank to step up the pace of easing at the end of next month. … Retail Sales, Unemployment, Household Spending & …
The surge in small business confidence in March is likely to prove short lived, as firms predict a renewed weakening in April. … Small Business Confidence …
24th March 2015
The second straight drop in the manufacturing PMI suggests that the recent strength in industrial activity is unlikely to last. … Flash Manufacturing PMI …
The early results from this year’s spring wage negotiations confirm that the tight labour market has boosted wage pressure. However, this year’s overall increase in labour income will likely still fall well short of the level required to reach the Bank of …
20th March 2015
While corporate debt increased at the fastest pace in years last quarter, the increase has been more than offset by higher corporate assets. With corporate profits at record-highs, firms are well placed to service higher debt. … Monetary Indicators …
18th March 2015
The trade gap widened last month as a plunge in export volumes offset another decline in the cost of oil imports. Net trade should therefore become a drag on GDP growth soon. … External trade …
Despite the recent run of stronger data, the Bank of Japan was no more upbeat on the economic outlook at today’s meeting than before. Consumer price inflation is likely to turn negative soon, threatening the Bank’s efforts to lift inflation expectations. …
17th March 2015
The economy seems to have picked up speed since the start of the year, and the ongoing spring wage negotiations will likely end with a sizeable increase in base pay. However, inflation has continued to moderate and may turn negative in the second quarter, …
16th March 2015
Judging by the unemployment rate alone, the labour market is tight, vindicating the Bank of Japan’s view that price pressure has strengthened since the launch of QQE. But other measures, such as the number of overtime hours worked, suggest that there is …
13th March 2015
While the strong rebound in consumer sentiment in February is welcome, there are increasing signs that household inflation expectations are declining. … Consumer Confidence …
12th March 2015
The reported deterioration in business conditions in today’s Business Outlook Survey partly reflects seasonal factors. Nonetheless, the survey suggests that economic activity will remain sluggish in coming quarters. … Business Outlook Survey …
Despite a drop in January, machinery orders remain well above their Q4 14 average, and we still think that business investment will start to recover soon. … Machinery Orders …
11th March 2015
The jump in February’s Economy Watchers Survey (EWS) suggests that economic conditions are improving strongly. However, the survey still points to a slowdown in manufacturing activity in coming months. … Economy Watchers Survey …
9th March 2015
While the second estimate of Q4 GDP was not as weak as the headlines would suggest, we still think that the Bank of Japan will announce more stimulus next month. … GDP (Q4 Revised) & Current Account …
There are some reasons to believe that the recent strength in export volumes is the result of improvements in competitiveness linked to currency weakness. However, the trade data tend to be volatile from month to month, and indicators of external demand …
6th March 2015
The travails of Japan’s electronics giants are not indicative of a general demise of the sector. In aggregate, the electronics industry is in fact doing quite well. … Is Japan’s electronics sector …
5th March 2015
While the economy didn’t expand as much as many had hoped last quarter, more recent data have been promising. The labour market remains tight and corporate profits have never been higher, so the ongoing spring wage negotiations should result in a strong …
4th March 2015
Wage growth remained strong in January even though the winter bonus season came to an end, and may pick up further after the spring wage negotiations. … Labour Cash Earnings …
3rd March 2015
The Ministry of Finance’s survey on corporate finances confirms that business investment stagnated last quarter. … Capital Expenditure …
2nd March 2015
The recent plunge in the price of energy has reduced the cost advantage of nuclear relative to thermal electricity generation, and rendered a rapid restart of Japan’s nuclear reactors increasingly unlikely. In any case, electricity prices are unlikely to …
27th February 2015
Industrial output surged last month and the job market remains tight despite a jump in the unemployment rate. However, consumer spending is sluggish and the ongoing slowdown in inflation increases the pressure on the BoJ to announce more stimulus. … …
We are not too worried about evidence suggesting that Japanese households now have a negative saving rate. Thanks to a shrinking fiscal deficit and high corporate saving, Japan remains a net lender to the world. … Should we be worried about the …
25th February 2015
Despite a modest rebound in February, small business confidence remains weak. … Small Business Confidence (Feb.) …
24th February 2015
The slowdown in Japanese FDI into China is not reflective of a general pullback in overseas investment by Japanese firms but is instead linked, we think, to political tensions between the two countries. The broader strength of outward investment is …
Once seasonal factors are accounted for, last month's trade deficit was the smallest in nearly three years. The plunge in energy prices still hasn’t been fully reflected in the cost of imported fuels so a further narrowing of the deficit probably lies …
19th February 2015
The Bank of Japan continues to express confidence in its ability to meet its 2% inflation target. But even that would probably not be enough to reduce the public debt burden. In a best-case scenario in which the fiscal deficit was eliminated and interest …
18th February 2015
Governor Kuroda today expressed the usual confidence about Japan’s economic prospects and the likelihood of price pressures picking up. But with the recent economic data disappointing and inflation set to turn negative soon, we still think that …
The Bank of Japan’s 2% inflation target still looks out of reach, but recent data do at least include some promising signs that price pressures are picking up. … Price pressures building …
17th February 2015
While Japan’s economy has finally left the tax-related weakness behind, the increase in Q4 GDP fell short of expectations and supports our view that the Bank of Japan will announce more stimulus in April. … GDP (Q4 …
16th February 2015
We doubt that concerns about rising import costs caused by a renewed weakening of the yen will prevent the Bank of Japan from announcing more stimulus in April. Instead, we maintain our view that policymakers will opt for another round of pre-emptive …
13th February 2015
This report is only available as a PDF. Click to download. … Baby boomer boost unlikely to last …
While machinery orders soared in December, they were broadly flat over the last quarter, so business investment should have been little changed. Nonetheless, business surveys suggest that the recovery in capital spending should resume soon. … Machinery …
12th February 2015
The plunge in energy prices should provide a welcome fillip to economic activity, and thus strengthen price pressure in the medium term. But the more pressing concern is that lower inflation threatens to undermine the Bank’s progress in lifting …
11th February 2015
Loan growth moderated in January, and a range of leading indicators suggest that borrowing will slow further in coming months. … Monetary Indicators Monitor …
10th February 2015
The jump in the outlook component of today’s Economy Watchers Survey (EWS) suggests that economic activity is picking up speed at the start of the new year. … Economy Watchers Survey …
9th February 2015
The rise in consumer confidence for the second straight month should be followed by a further improvement as households benefit from lower energy prices. … Consumer Confidence …
The current account surplus rose to a fresh high in December, and should continue to improve in coming months as the trade balance may return to surplus. … Current Account …
Efforts to bring more women into Japan’s labour market have enjoyed success in recent years.However, it remains the case that relatively few educated women are in paid work. We estimatethat lifting the labour force participation rate of women with …
6th February 2015
The economy appears to have grown rapidly last quarter, and the labour market has not been as tight since the late 1990s. However, wage growth remains sluggish despite a temporary boost from winter bonuses, and price pressure continues to moderate. With …
5th February 2015
The Bank of Japan has turned more optimistic on the economic outlook recently, in part on the belief that the plunge in the cost of energy should boost demand. A more pressing concern though is that falling inflation is undermining expectations of future …
4th February 2015
The surge in labour cash earnings in December reflects higher winter bonuses and is unlikely to last. A strong rise in base pay in the upcoming spring wage negotiations will be needed to improve the outlook for consumer spending. … Labour Cash Earnings …
A strong rise in base pay in the spring wage negotiations (Shunto) would help convince the Bank of Japan that the current weakness in inflation will prove temporary. A tight labour market and strong corporate profits suggest that a rise in base pay of …
30th January 2015
The labour market continues to tighten, as the economic recovery is picking up speed. However, the continued slowdown in inflation suggests that the Bank of Japan still has more work to do. … Consumer Prices, Unemployment, Industrial Production & …
The drop in retail sales in December mostly reflects weaker gas prices and consumer spending likely accelerated last quarter. However, the outlook for private consumption remains mixed. … Retail Sales …
29th January 2015
