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The rebound in small business confidence in May adds to the evidence that the economy should recover quickly from any weakness after the consumption tax hike. … Small Business Confidence …
27th May 2014
The second version of the government’s “Growth Strategy”, which is due next month, should include a pledge to cut corporate taxes, and perhaps some measures to cut red tape in Special Economic Zones. These measures would be equity-friendly and provide a …
26th May 2014
Japan’s economic recovery should be able to weather last month’s consumption tax hike, helped by improvements in investment and in net exports. But the bigger picture is that years of fiscal tightening and painful structural reforms lie ahead. In the …
23rd May 2014
The inaugural flash manufacturing PMI confirmed that the weakness caused by the consumption tax hike should be short-lived. … Flash Manufacturing PMI …
22nd May 2014
While the share of government bonds held by the BoJ has risen sharply since the start of QQE, there are no compelling reasons why the central bank's holdings can’t increase much further. … For how much longer can the BoJ buy government …
The optimistic tone of recent BoJ communication suggests that the chances of additional stimulus being announced as soon as July, as many had expected, have shrunk substantially. We however continue to believe that more easing will be introduced later in …
21st May 2014
While the plunge in the trade shortfall in April may have been too strong to last, the deficit should remain low as domestic demand has weakened after the sales tax hike. … External trade …
The Bank of Japan will most likely leave policy settings unchanged at the upcoming May meeting, and Board members’ sanguine views on the economy suggest that the chances of additional near-term easing have shrunk substantially. Nonetheless, we continue to …
19th May 2014
The surge in machinery orders in March suggests that the recovery in business investment remains on track. … Machinery Orders (Mar.) …
If Japan’s past experience is any guide, the next few weeks will deliver a run of downbeat data reflecting a plunge in domestic demand after the consumption tax hike. In fact, many indicators have already started slowing. Retail and vehicle sales are …
A key aim of the BoJ’s QQE programme is to lower real interest rates in a bid to encourage firms and households to borrow and spend more and thereby eliminate the spare capacity that underpins deflation. Unfortunately, credit growth has already started to …
16th May 2014
Despite a small rise in purchasing intentions, consumer confidence remained at very weak levels last month. … Consumer Confidence …
15th May 2014
Raising female participation in the labour force to the same rate as that for men could boost Japan’s GDP by as much as 13%. However, no advanced economy has achieved parity on this basis, and a more realistic target would be a 3% gain (spread over many …
Japan's economy expanded rapidly ahead of the sales tax hike. While growth is set to slump in Q2, we remain confident that the recovery will resume in the second half of the year. … GDP (Q1 …
The latest Senior Loan Officer survey showed that banks expect household loan demand to weaken sharply in the second quarter. Borrowing is highly likely to slow now that the consumption tax hike has taken place but that is not the only factor at play. …
14th May 2014
Today's Economy Watchers Survey confirmed that the Japanese economy weakened abruptly in the wake of the sales tax hike, but also suggested that the weakness is unlikely to last. … Economy Watchers Survey …
12th May 2014
The current account showed a record shortfall in March, but we expect a return to surplus in coming months. … Current Account (Mar.) …
The planned shift from corporate to consumption taxes should boost overall economic growth in coming years. However, the benefits from corporate tax cuts alone may be smaller than hoped for, as many other features of Japan’s tax system require reform, …
For now, Japan's economy is following the script of the 1997 consumption tax hike. Consumer spending surged in a last-minute shopping spree before the tax was raised, and inflation soared in the capital region in April. While car sales weakened only …
7th May 2014
Female employment has risen sharply since Prime Minister Abe returned to office. However, most of the newly-created jobs are part-time or temporary, offering lower pay and fewer opportunities for training than permanent, full-time positions. A variety of …
2nd May 2014
While the unemployment rate remained unchanged in March, the ongoing rise in job vacancies points to further declines in the jobless rate in coming months. … Unemployment & Household Spending …
It came as no surprise that the BoJ left policy unchanged today and sounded confident about the prospects of hitting its inflation target. However, not all Board members are convinced that the 2% inflation target will be met as early as planned, and we …
30th April 2014
The plunge in small business confidence in April shows that the mood among Japan's small firms has soured sharply after the consumption tax hike, and points to falling industrial output in coming months. … Small Business Confidence …
Wage growth picked up last month, but base pay continues to decline and incomes are not expanding fast enough to offset high inflation. While incomes may get some support from the spring wage negotiations, the effect is unlikely to be large. … Labour Cash …
Industrial production did not reverse February's drop in March, and the manufacturing PMI suggests that output will fall sharply following the consumption tax hike. … Industrial Production (Mar.) & Manufacturing PMI …
The Bank of Japan will almost certainly maintain its current policy settings at the conclusion of the second of this month’s two Board meetings on Wednesday. However, there should still be plenty of interest in the Board’s updated forecasts for growth and …
28th April 2014
The surge in retail sales ahead of the consumption tax hike needs to be seen together with a likely plunge this month. However, we remain confident that the recovery in consumer spending will resume in the second half of the year. … Retail Sales …
Japan’s exports have been broadly flat in recent years, reflecting a mix of cyclical headwinds (such as weak global demand) and structural pressures (notably the shift in production capacity abroad). The poor demographic outlook suggests that Japanese …
While the consumption tax hike at the beginning of April lifted inflation in the capital region close to 3%, price pressure should abate in coming months as import prices have moderated. … Consumer Prices (national: Mar.; Tokyo: …
25th April 2014
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
