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The expansion in the broad money aggregates has ground to a halt in the last two months. Bank lending is slowing now, too, even though financial conditions remain very accommodative. … Monetary Indicators Monitor (Mar …
22nd April 2014
The widening of the trade deficit in March should be followed by smaller shortfalls in coming months as consumers rein in spending in the wake of the consumption tax hike. … External trade …
21st April 2014
With the working-age population projected to shrink by almost a third by 2050, it has been suggested that robots could be part of the solution to Japan’s demographic challenges and help boost corporate profits too. However, robots are already widely used …
The collapse in consumer confidence shows that Japanese households lost their enthusiasm for “Abenomics” well before investor appetite for Japanese equities began to wane. … Poor consumer sentiment adds to PM Abe’s …
17th April 2014
If Japan is to succeed in escaping deflation, growth will have to pick up sufficiently to eliminate the margin of spare capacity - the so-called output gap - that has kept price pressures subdued. There is ample evidence - both from business surveys as …
14th April 2014
Machinery orders fell back sharply in February, and current levels point to broadly stagnant non-residential investment. However, declining spare capacity suggests that capital expenditure should continue to rise. … Machinery Orders …
10th April 2014
The markets may be disappointed in coming months as we think the Bank of Japan (BoJ) will announce further monetary easing later than many expect. We continue to favour October, rather than July. … Expectations of mid-year easing likely to be …
8th April 2014
Today's Economy Watchers Survey confirms that the outlook for the second quarter remains dire. … Economy Watchers Survey (Mar.) …
The decline in the current account deficit in February was hardly surprising. Looking ahead, we expect the balance to return to surplus. … Current Account …
The Bank of Japan has become much more aggressive since Mr. Kuroda took over a year ago. The central bank’s “shock and awe” approach is a welcome departure from the gradualist ways of previous experiments with balance sheet expansion. Communication has …
7th April 2014
The Bank of Japan will almost certainly maintain its current policy settings at the conclusion of the first of this month’s two Board meetings on Tuesday (8th), despite the hit to GDP from the consumption tax hike. It makes sense to wait and see how the …
4th April 2014
The enthusiasm with which Abenomics was first greeted seems to have given way to a more sober assessment in recent months. While the US stock market has scaled new heights, the Nikkei is down around 10% since the start of the year. But investors’ verdict …
3rd April 2014
Japan's consumers continue to face severe headwinds as strong employment gains remain insufficient to compensate for falling real wages. … Labour Cash Earnings …
1st April 2014
The improvement in business conditions last quarter fell short of expectations, and the Bank of Japan's Tankan survey suggests that growth will slow sharply in the second quarter of this year. … Tankan …
Today's data show that Japan's manufacturing sector lost some speed ahead of tomorrow's increase in the consumption tax. … Industrial Production (Feb.) & Manufacturing PMI …
31st March 2014
Japan invests a larger share of its income in machinery and equipment than most other advanced countries, while generating rather tepid returns. Some are suggesting that Japan would be better served by investing less. However, we think Japan should aim …
Consumer spending was sluggish in February, but the real surge ahead of next month's consumption tax hike will only show up in the March figures. Meanwhile, there are further signs that underlying inflation is about to peak. … Retail Sales, Unemployment …
28th March 2014
Despite reaching a multi-decade high in March, small business confidence is set to weaken sharply in coming months. … Small Business Confidence …
25th March 2014
The “record” ¥95.9 trillion in budgeted expenditure for the coming fiscal year does not mean that the government has given up on fiscal consolidation. But its medium-term targets are still likely to be missed. … Fiscal consolidation continues despite …
24th March 2014
Energy prices in Japan are now touching all-time highs, in part because a weaker currency has pushed up the local price of imports. But the threat to Japanese industry is easily overdone. In fact, energy prices have risen much less in Japan since the turn …
The sharp fall in the trade deficit in February is welcome, and the shortfall may narrow slightly further in coming months. … External trade …
19th March 2014
Bank lending is a widely watched indicator of the health of Japan's economy. However, for a number of reasons, it may be less useful than many think. … Is bank lending a reliable gauge of Japan's …
18th March 2014
The rise in base wages agreed upon in this year’s spring wage negotiations is far less impressive than some of the headlines suggest and is still consistent with real incomes falling. There is a good chance that workers will see bigger increases once …
17th March 2014
The rebound in machinery orders in January points to a further recovery in business investment. … Machinery Orders (Jan) …
13th March 2014
The drop in consumer confidence in February shows that consumers are increasingly doubtful about the benefits of Abenomics. … Consumer Confidence …
12th March 2014
The expansion in the broad money supply ground to a halt in February, and the annual growth rates may well have peaked for now. However, the fundamentals for a further acceleration in bank lending remain in place. … Monetary Indicators Monitor …
Today's Business Outlook Survey suggests that demand should start to recover in Q3 after taking a hit from the consumption tax hike next quarter. … Business Outlook Survey …
The Bank of Japan’s decision to maintain its current policy settings at today’s Board meeting was no surprise. While we remain convinced that further easing will eventually be required (over and above that already in the pipeline), there are no signs that …
11th March 2014
The plunge in the outlook component of the Economy Watchers Survey in February points to a sharp deterioration in demand in coming months. … Economy Watchers Survey …
10th March 2014
The Bank of Japan will almost certainly maintain its current policy settings at the conclusion of the two-day March Board meeting tomorrow (Tuesday 11 th ). It will be interesting to see whether geopolitics is added to the list of risks to Japan in the …
Despite a small downward revision in the second estimate, last quarter's GDP figures were still not as bad as the headlines imply. … GDP (Q4 Revised) & Current Account …
Events in Ukraine and elsewhere in the emerging world have brought into focus Japan’s exposure to geopolitical risks due to its reliance on imported energy and the yen’s safe-haven role. Barring some unforeseen conflagration, though, the impact of further …
Recent economic data have mostly been positive, with industrial production and retail sales climbing to multi-year highs, and corporate profitability exceptionally strong. However, investors are eagerly waiting to see how sharply demand will slow …
5th March 2014
Sluggish wage growth in Japan remains a major stumbling block to higher inflation and the overall success of Abenomics. … Labour Cash Earnings …
4th March 2014
The Ministry of Finance's survey on corporate finances casts renewed doubts on the recovery in business investment. Nonetheless, very strong corporate profitability suggests that firms should be able to invest in plant and machinery. … Capital …
3rd March 2014
Despite the sharp fall in the yen since 2012, Japanese exporters lost global market share last year. Rising costs and a sluggish world economy have played a part and both factors should fade in importance in the future. But the main reason was that …
Almost one year after the launch of Quantitative and Qualitative Easing (QQE) by the Bank of Japan, the policy is working as well as could reasonably be expected. However, despite initial signs of success, we still think that underlying inflation will …
28th February 2014
Today's data confirm that the economy is picking up speed ahead of the consumption tax hike. However, the first fall in inflation since the start of QQE shows that the BoJ still has more work to do reach its inflation target. … Retail Sales, Industrial …
Slow progress in the talks aimed at setting up the Trans-Pacific Partnership has set back hopes that the trade deal could be a catalyst for structural reform in Japan. Japan’s high tariffs on many agricultural products remain a major obstacle to an …
25th February 2014
The modest fall in small business confidence in February will likely be followed by a further deterioration in coming months as conditions are set to weaken after April's sales tax hike. … Small Business Confidence …
With the yen broadly stable since last May, import price inflation has already started to moderate and will probably fall sharply in the next few months. As wage growth is still muted and spare capacity is unlikely to diminish much further in the …
24th February 2014
January’s trade data indicate that the drag on Japan’s economy from net exports persisted at the start of the new year. With domestic demand surging ahead of the consumption tax hike, the monthly numbers may get worse before they get better. … External …
20th February 2014
Adverse weather in recent days is unlikely to have a major effect on output, as most of it occurred at the weekend and plant closures are unlikely to last long. Historical experience also indicates that heavy snowfall has only limited effects on …
18th February 2014
The Bank of Japan’s decision to extend and expand the special loan facilities that were due to expire next month is a largely symbolic move that will not have a significant impact on financial conditions. Nor should it have surprised the markets as much …
Although the preliminary estimate of GDP growth in the final quarter of last year fell short of expectations, it is not the major blow to the credibility of “Abenomics” that some have suggested. … Q4 GDP not as bad as headlines …
17th February 2014
Weak Q4 GDP figures show that the surge in spending ahead of the consumption tax hike has yet to come. … GDP (Q4 Preliminary) …
Wide divergences have emerged in the results of the sentiment surveys in recent months. These typically reflect the design of each survey, as more backward-looking measures have climbed to record highs while relatively forward-looking measures have …
The Bank of Japan will almost certainly maintain its current policy settings at the conclusion of the two-day Board meeting next Tuesday (18 th ). This means no change to the asset purchase programme, although some special loan facilities that are …
14th February 2014
The annual growth rate of the money supply seems to be levelling off, and is likely to remain broadly stable in coming months. By contrast, bank lending may still accelerate further as loan demand continues to improve. … Monetary Indicators Monitor (Jan …
13th February 2014
January’s sell-off in the equity market and the strengthening yen are unlikely to have much impact on the Japanese economy. Equities have regained some ground over the past week and the Nikkei is still much higher than before Abenomics began. In any case, …
12th February 2014
