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Labour cash earnings expanded at the fastest pace since 1997 in July. Given recent, much slower, gains in productivity and the low likelihood of significant further tightening in the labour market, we expect wage growth to slow again as the summer bonus …
5th September 2014
The BOJ left policy settings unchanged at today’s meeting, and provided no indications of imminent easing despite the recent weakness in the economy. However, inflation is likely to fall short of the Bank’s forecasts by year-end, so a more aggressive pace …
4th September 2014
Japan’s shrinking working-age population is a constant drag on economic growth. Unfortunately, policy measures that might help to stabilise the population would have substantial fiscal costs, which Japan would struggle to afford. And most people in Japan …
3rd September 2014
The latest data have done little to assuage doubts about the strength of the recovery. The economy contracted sharply in Q2 and industrial production and retail sales remained sluggish at the start of the third quarter. The labour market has softened …
Wage growth surged in July, but is set to slow in coming months as the summer bonus season ends. … Labour Cash Earnings (July) …
2nd September 2014
Despite the recent run of weak data, the Bank of Japan may strike a more positive tone about the economy at its meeting this week, while leaving policy settings unchanged. This would dampen hopes of any imminent increase in the pace of its asset …
1st September 2014
The Ministry of Finance's survey on corporate finances suggests that there won't be major adjustments to non-residential investment in the second estimate of Q2 GDP. In the meantime, April's consumption tax hike has had little impact on corporate …
Japan’s government is debating whether to implement a second increase in the consumption tax to 10% in October next year. The fiscal case for a higher tax rate is overwhelming, in particular since the government has already said that it intends to lower …
29th August 2014
Today's data on industrial production and retail sales show that the economy continued to stagnate at the start of the third quarter. What's more, inflation moderated in July and is set to decline further, which should increase the pressure on …
Growth in the share of part-time workers in Japan’s workforce is one factor being blamed for the recent sluggishness of wage growth. In reality, this shift has not had much of an impact on aggregate compensation in the last few years and probably won’t in …
27th August 2014
While small business confidence weakened in August, firms expect conditions to improve strongly next month. … Small Business Confidence …
26th August 2014
The continued sluggishness of exports in the face of significant yen depreciation reflects the fact that firms have been reluctant to lower prices, as well as weakness in global demand. But there are now signs that demand is picking up and we think …
25th August 2014
The conventional wisdom is that Japan’s firms have increasingly shifted production facilities abroad in recent years, resulting in a “hollowing out” of the country’s domestic manufacturing sector. But the recent acceleration in outward FDI mostly reflects …
22nd August 2014
The improvement in the flash manufacturing PMI in August suggests that the sector has come back to life. … Flash Manufacturing PMI …
21st August 2014
July's trade deficit was larger than expected, and indicates that net trade is unlikely to provide much support to GDP growth in the third quarter. However, the recent improvement in external demand suggests that the shortfall will narrow further towards …
20th August 2014
While large inventory build-ups usually spell trouble for future output, last quarter’s surge was largely the result of the one-off hit to demand from the sales tax hike. Overall, we still expect the recovery to resume in the second half of the year. … …
19th August 2014
Last quarter's GDP figures were weaker than we had expected, and we've adjusted our growth forecast for 2014 from 1.5% to 0.9%. What's more, growth in the current fiscal year may be close to zero rather than the 1% expected by the BoJ, bolstering the case …
18th August 2014
While machinery orders bounced back in June, their overall weakness last quarter suggests that business investment may have fallen more than initially reported. … Machinery Orders …
14th August 2014
The collapse in economic activity last quarter was largely a result of the higher sales tax, and we still believe that the recovery will resume in the second half of the year. … GDP (Q2 …
13th August 2014
Bank lending continues to expand at a robust pace, but weaker loan demand should eventually lead to a slowdown. … Monetary Indicators Monitor …
12th August 2014
The BoJ left policy settings unchanged today, and may merely confirm that QQE will be maintained in its current form at the October meeting. However, we expect inflation to fall short of the Bank's forecasts before too long, which may still require a more …
8th August 2014
A string of weak data in recent weeks has cast doubt over the strength of the recovery from the slump triggered by the consumption tax hike. However, it had always been unlikely that the weakness would disappear over night, and we still think that the …
Today's Economy Watchers Survey showed that conditions continued to improve in July. Unfortunately, it also suggests that the recovery is unlikely to accelerate much further in coming months. … Economy Watchers Survey …
While the current account balance worsened in June, we think it will remain in surplus in coming months. … Current Account (Jun.) …
While the economy initially seemed to bounce back quickly from the shock caused by the consumption tax hike, recent data have already cast doubt on the strength of the recovery. Machinery orders have plummeted, industrial production has weakened, and the …
6th August 2014
The upcoming BoJ meeting is unlikely to result in any changes in policy. However, policymakers will have to outline their strategy for 2015 before too long – most likely at the late-October meeting, we think. Inflation has been stronger than previously …
4th August 2014
Housing starts and sales have plunged as a result of the sales tax hike, and residential investment will likely contract in both Q2 and Q3. While the experience from the last consumption tax hike is anything but reassuring, market fundamentals are …
1st August 2014
While headline wage growth disappointed last month, the rise in base pay is reassuring. … Labour Cash Earnings (June) …
31st July 2014
Industrial production fell sharply in June, and business surveys suggest that any recovery in coming months is unlikely to be vigorous. … Industrial Production …
30th July 2014
While the renewed improvement in small business confidence in July lifted the index well above its long-term average, the survey still points to sluggish industrial output. … Small Business Confidence …
29th July 2014
Today's data showed the second consecutive rise in retail sales following April's plunge and a tightening labour market suggests that the recovery in consumer spending should continue in coming months. … Unemployment, Retail Sales & Household Spending …
Japan’s share of Chinese imports has fallen below that of the EU and South Korea recently. One reason is that large numbers of Japanese firms have shifted production facilities to China. This shouldn’t in itself be too great a concern. But the recent …
25th July 2014
The dip in nationwide inflation in June and the second consecutive fall in the capital region in July suggest that the impact of the sales tax hike has started to fade. We expect core inflation excl. tax to fall below 1% in coming months. … Consumer …
The decline in the manufacturing PMI in July suggests that the economy is recovering only slowly from the weakness caused by the consumption tax hike. … Flash Manufacturing PMI …
24th July 2014
While the trade deficit widened last month, it remains much smaller than before the sales tax hike. This suggests that net trade finally ceased to be a drag on GDP growth last quarter. … External trade …
Japan’s current account surplus has fallen sharply in recent years, as the trade balance has moved deeply into the red. The current account balance is more likely to rebound into surplus than slip into sustained deficit in the years ahead, so private …
22nd July 2014
The sharp drop in machinery orders in April and May casts doubts on the prospects for capital spending. However, we are not too worried. Business investment was exceptionally strong in Q1, so a fall in the second quarter had always been likely. Spare …
21st July 2014
The BoJ’s Senior Loan Officer Survey signals that loan demand slowed last quarter and is set to remain weak. Loan growth should therefore decelerate. … Senior Loan Officer Survey …
17th July 2014
It came as no surprise that the BoJ left policy settings unchanged today and presented upbeat inflation forecasts, but we still think more easing will be announced in October. … BoJ still likely to extend QQE despite upbeat inflation …
15th July 2014
Even though bank lending has reaccelerated lately amid supportive financial conditions, a range of surveys suggest that credit growth will slow in coming months. … Monetary Indicators Monitor …
14th July 2014
Japanese GDP surely contracted in the second quarter in the wake of April’s consumption tax hike, but the latest survey evidence suggests that a recovery is already underway. In the meantime the Bank of Japan appears confident that inflation is on track …
Machinery orders were far weaker than expected in May. But some pullback was always on the cards in Q2 and the latest figures shouldn't derail hopes that shrinking spare capacity will underpin renewed growth in investment later in the year. Meanwhile, …
10th July 2014
Until recently, the majority of analysts had expected the Bank of Japan to announce more easing at the meeting that concludes next Tuesday (15th July). But recent upbeat communication by central bank officials suggests that this is unlikely. Instead, we …
8th July 2014
The Economy Watchers Survey for June shows that optimism about the outlook has stabilised close to pre-tax hike levels and suggests that the economic recovery will continue in the second half of the year. Meanwhile, the current account has moved further …
A reshuffle at the nuclear energy watchdog has paved the way for the restart of atomic reactors in Japan. But the economic benefits of this change should not be overplayed. Only around a third of the country's nuclear capacity is likely to resume …
7th July 2014
The latest data suggest that the tax hike has not had a lasting impact on Japan’s economy. Business surveys have mostly rebounded, spending has too, and manufacturing output has stabilised. What’s more, the labour market is as tight as it has been in many …
3rd July 2014
The first rise in base pay in almost two years suggests that PM Abe's "Wage Surprise" is starting to work. … Labour Cash Earnings …
1st July 2014
While today's Tankan points to a contraction in GDP of around 0.5% q/q last quarter, the survey suggests that the recovery will resume in the second half of the year. … Tankan …
According to June's small business confidence, the economy has recovered quickly from the shock to demand caused by the consumption tax hike. … Small Business Confidence (Jun.) & Housing Starts …
30th June 2014
The rise in industrial production in May suggests that the sector is recovering from the weakness caused by the consumption tax hike. … Industrial Production …
