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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 …
8th August 2014
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 …
The revised “Growth Strategy” published this week contained some positive surprises. In particular, it proposes a revision of the tax and social security system that could result in a sizeable boost to the number of women in paid employment. However, the …
The rebound in retail sales and the renewed decline in the unemployment rate in May confirm that the slump following the consumption tax hike was short-lived. … Consumer Prices (national: May; Tokyo: Jun.), Unemployment & Retail Sales …
27th June 2014
While the revised “Growth Strategy” appears to contain some promising elements, it is unlikely to lift Japan’s potential growth rate significantly. In particular, the document does not adequately address the contraction of the workforce, which is the main …
24th June 2014
June's flash manufacturing PMI confirms that the economy has stabilised after the slump caused by the consumption tax hike. … Flash Manufacturing PMI …
23rd June 2014
April’s consumption tax hike has made it more difficult to assess the strength of consumer price pressures. But different approaches that make allowance for the one-off impact of the tax increase lead to the same conclusion: underlying inflationary …
The trade deficit remained broadly unchanged in May, and should narrow slightly further in coming months. … External trade (May) …
18th June 2014
Pension provision is a significant drain on Japan's fiscal resources in part because the returns generated by the Government Pension Investment Fund (GPIF) have fallen short of those earned by counterparts overseas in recent years. Matching the returns …
16th June 2014
Even though the BoJ left policy unchanged today and provided no indication that additional stimulus will be forthcoming any time soon, we think that it is premature to write off further easing. … Rumours of QQE's end have been greatly …
13th June 2014
The inevitable plunge in machinery orders in April following March's surge does not alter our view that investment spending will continue to recover. … Machinery Orders …
12th June 2014
Today's Business Outlook Survey points to a sharp drop in output this quarter, but firms still expect demand to recover in the second half of the year. … Business Outlook Survey …
11th June 2014
The share of government bonds held by the BoJ has risen sharply since the start of QQE. Contrary to some suggestions, there are no compelling reasons why the central bank’s holdings can’t increase much further. … Monetary Indicators Monitor (May …
10th June 2014
The Bank of Japan will likely leave policy settings unchanged at the meeting that concludes on Friday (13 th June). We continue to expect more easing in October as it becomes clear that inflation excluding the effects of the consumption tax hike will fall …
The improvements in consumer confidence and the Economy Watchers Survey last month add to the evidence that the slump after the consumption tax hike is unlikely to last long. … Economy Watchers Survey & Consumer Confidence …
9th June 2014
The second estimate of Q1 GDP confirmed that the recovery in business investment continued last quarter. Meanwhile, the current account returned to surplus after the sales tax hike as imports plunged. … GDP (Q1 Revised) & Current Account …
The two preliminary estimates of GDP are among the most widely followed indicators of Japan’s economy. The good news is that neither of these early estimates displays major biases relative to the final outcome, and the magnitude of revisions to the …
Unsurprisingly, consumer spending plunged in April after the consumption tax hike, and industrial production weakened as well. But machinery orders have climbed to a fresh high, which suggests that companies expect demand to recover in coming months. …
4th June 2014
The ongoing fall in basic pay shows that the increases agreed upon in the spring wage negotiations have so far not filtered through to employees not covered by these talks. … Labour Cash Earnings …
3rd June 2014
The Ministry of Finance's survey on corporate finances confirmed that the recovery in business investment continued last quarter. … Capital Expenditure …
2nd June 2014
Japan is widely known to have the highest gross government debt level relative to the size of its economy in the developed world but some commentators have argued that the net debt picture is much less of a concern. Accounting for the government’s large …
Neither the surge in inflation nor the slowdown in industrial production in April came as a surprise, and firms expect output to stabilise in coming months while inflation should moderate. … Consumer Prices (national: Apr.; Tokyo: May), Unemployment & …
30th May 2014
Unsurprisingly, retail sales fell sharply in April following the consumption tax hike, but we remain confident that the recovery in household consumption will resume in the second half of the year. … Retail Sales …
29th May 2014
