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Amid questions over the government’s commitment to the planned second consumption tax hike, the positive impact of the first hike on revenue is already being felt: Japan’s budget deficit has fallen to its lowest level since 2009. What’s more, the deficit …
20th October 2014
Japan is emerging from its second-quarter slump but weak household consumption and business investment, combined with further fiscal austerity, are likely to keep domestic demand sluggish. What’s more, the sharp depreciation of the yen has not translated …
17th October 2014
While bank lending continues to expand robustly, credit in aggregate is growing less rapidly. In fact, household debt reached a fresh low relative to output in Q2. … Monetary Indicators Monitor …
15th October 2014
The impact of the recent weakening of the yen on consumer prices will be dampened by lower crude oil prices. The upshot is that CPI inflation is still likely to moderate towards year-end rather than pick up as expected by the BoJ . … Inflation still …
13th October 2014
The weaker yen hasn’t resulted in the hoped-for improvement in export competitiveness. It has boosted corporate profits, but the pass-through to business investment has been weaker than usual. Meanwhile, yen weakness has contributed to price rises that …
10th October 2014
The continued decline in consumer confidence in September adds to the impression from last month’s business sentiment surveys that the recovery remains sluggish. … Consumer Confidence …
Even though machinery orders continued to recover in August, their current level still points to falling business investment in Q3, as does the ongoing decline in capital goods shipments. But the recovery in capital expenditure should resume soon. … …
9th October 2014
The ongoing slide in industrial production and the weakness of the Tankan have raised concerns that Japan’s economy is in recession. It will be a close-run thing, but more important is what happens next. We think that firms have mostly now adjusted to the …
8th October 2014
The renewed deterioration in the outlook component of today’s Economy Watchers Survey suggests that a rapid recovery of Japan’s economy is not on the cards. … Economy Watchers Survey …
The current account surplus rebounded in August, and may rise a touch further in coming months as a result of the fall of the yen against the dollar. … Current Account …
With policy settings again left unchanged, the key development at today’s Bank of Japan meeting was policymakers’ acknowledgement of the recent sluggishness of the economy. However, we still think that a more aggressive pace of asset purchases will only …
7th October 2014
The latest Tankan survey suggests that the economy shrank again in the third quarter, as does the prolonged fall in industrial production. However, we think the recent decline in output reflects the fact that firms have been slow to respond to the …
3rd October 2014
The latest data still show a sluggish recovery, but recent BoJ communication remains upbeat. The upcoming meeting is therefore unlikely to result in any changes to policy or tone. Instead, we think policymakers will wait until the late-October meeting to …
2nd October 2014
The sharp deterioration in business conditions in the non-manufacturing sector in today's Tankan suggests that output may have shrunk yet again in the third quarter. … Tankan …
1st October 2014
The stagnation in small business confidence in September provides yet another indication that Japan's economic recovery remains sluggish. … Small Business Confidence …
30th September 2014
Wage growth slowed in August, and will likely remain around 1% y/y in coming months as the summer bonus season has come to an end. … Labour Cash Earnings …
Today's data are unlikely to dispel concerns about the pace of recovery from last quarter's slump. … Retail Sales, Industrial Production & Unemployment …
The analyst consensus is close to unanimous that the forthcoming Tankan will show a second successive decline. That’s not implausible given the continued weakness of the activity data. Nonetheless, based on other survey evidence, we believe there is a …
26th September 2014
Inflation dropped slightly in August, and we believe that it will moderate further towards year-end. This should increase pressure on the BoJ to provide more stimulus. … Consumer Prices (national: Aug.; Tokyo: …
Despite the fall in today's flash manufacturing PMI, the decline in manufacturing activity appears to be nearing its end. … Flash Manufacturing PMI …
24th September 2014
Industrial production has been falling for several months, and unemployment has started to rise again. If past experience is any guide, the unemployment rate will continue rising towards 4% by the end of the year even if output starts to recover soon. In …
19th September 2014
The trade deficit narrowed in August, and should shrink further in coming months as external demand has improved and oil prices have fallen. … External trade …
18th September 2014
Ministries’ spending requests for the coming fiscal year have reached a record high, which might raise some questions about the government’s commitment to fiscal consolidation. However, these requests typically get trimmed down in the final budget, and …
12th September 2014
Loan growth has remained stable in recent months though banks were predicting a sharp slowdown in lending following the sales tax hike. Nonetheless, we still think that borrowing will slow in the not too distant future. … Monetary Indicators Monitor …
11th September 2014
In contrast to the lacklustre monthly survey data for August, today’s Business Outlook Survey suggests that the economy returned to growth this quarter. … Business Outlook Survey …
While machinery orders rose in July, they still have a long way to go to recover from the plunge in the second quarter. But the bigger picture is still that spare capacity has shrunk, so firms should continue to invest in machinery and equipment. … …
10th September 2014
The first decline in consumer confidence since April adds to the uninspiring survey evidence released for August. … Consumer Confidence …
9th September 2014
The fall in the current conditions component of today's Economy Watchers Survey suggests that the recovery is already levelling off before it has really started. … Economy Watchers Survey …
8th September 2014
The second estimate of Q2 GDP was little changed from the first and still shows a sharp decline in output last quarter. Meanwhile, the current account surplus may widen further in coming months as domestic demand will probably remain sluggish. … GDP (Q2 …
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
