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While the money supply grew at the fastest pace since the late 1990s in October, bank lending has decelerated slightly. But record low interest rates and easy lending standards should provide further support to loan volumes. … Monetary Indicators Monitor …
18th November 2013
The government has pledged to halve its primary deficit by 2015. However, the ongoing surge in public spending casts severe doubt on policymakers' commitment to fiscal austerity despite the planned increase in the consumption tax hike. Unless the …
The slowdown in Q3 GDP follows unsustainably strong growth in the first half of the year and is therefore no cause for concern. The economy is likely to regain momentum in the near-term as spending is brought forward ahead of April's consumption tax hike. …
14th November 2013
Despite a modest fall in September, the uptrend in machinery orders remains intact and points to a further rebound in business investment. However, the recovery may not be strong enough to offset the likely fall in housing investment after April's …
13th November 2013
The slump in consumer confidence in October shows that households feel uncomfortable with the combination of rising prices and falling incomes. Meanwhile, the money supply grew at its fastest pace since the late 1990s in October. … Money Supply & …
12th November 2013
The rise in the outlook component of the Economy Watchers Survey to a six month high suggests that economic conditions remained robust at the start of the fourth quarter. Meanwhile, the record current account deficit in September was partly a statistical …
11th November 2013
The impact of the Great East Japan Earthquake on energy imports is often overestimated. By contrast, the impact on exports is generally overlooked. The disaster has significantly reduced how much energy is available to domestic producers and has tainted …
If Japan’s past is a guide, some spending will be brought forward ahead of April’s consumption tax hike and it will slump thereafter. The experience from the 1997 increase in the same tax suggests that investment will pick up sooner and rise more than …
8th November 2013
There are tentative signs in recent data of an increase in spending that we suspect is linked to April's consumption tax hike. In particular, construction orders have soared as homebuilders seek to avoid the higher sales tax. Meanwhile, business surveys …
7th November 2013
The public debt problem in Japan has of course been brewing for many years without boiling over into a full-blown crisis. However, adverse demographics could soon cause the government’s finances to spiral out of control. Japan’s low potential growth rate, …
4th November 2013
Japan’s trade deficit has reached a record high in recent months. This is often attributed to a surge in energy imports after the shutdown of the country’s nuclear reactors. However, energy import volumes are no higher than they were before the Great East …
1st November 2013
The BoJ today only marginally tweaked its economic forecasts, and took a sanguine view of the upcoming consumption tax hike. It was therefore no surprise that policy settings were left unchanged. However, with underlying inflaton likely to fall short of …
31st October 2013
The manufacturing PMI reached a three-year high in October and points to a further rebound in industrial production in coming months. Meanwhile, labour cash earnings edged up in September, but the sharp fall in real wages casts doubt on the recent …
Today's data show that economic momentum remains strong. Small business confidence and retail sales both reached new multi-year highs, helped by strong employment gains. … Unemployment Rate, Retail Sales (Sep.) & Small Business Confidence …
29th October 2013
Japanese firms have accumulated record amounts of cash and the conventional wisdom is that it is only a matter of time before this triggers a surge in investment. Our view, in contrast, is that capital spending is being held back by still-ample spare …
28th October 2013
Headline inflation rose further in September, but the acceleration was largely due to a spike in fresh food prices. While a gradual closing of the output gap and stubbornly high import price inflation point to a further rise in consumer price inflation, …
25th October 2013
The main agenda item at next Thursday’s meeting of the Bank of Japan’s Policy Board will be the new GDP and inflation forecasts to be published in the Bank’s “Outlook for Economic Activity and Prices”. This report is likely to be upbeat, which may dampen …
24th October 2013
The BoJ’s Senior Loan Officer Survey shows that household loan demand remains very strong. Corporate loan demand is weaker but record low lending rates and an ongoing easing in lending standards should support lending to firms in the months ahead. … …
22nd October 2013
The widening of the trade deficit to a record high in September highlights that the sharp fall of the yen over the past year has had little impact on export competitiveness. While lower import prices should provide some support in the coming months, the …
21st October 2013
Japan’s stock of inward FDI is by some way the lowest in the OECD, reflecting a strict regulatory regime and administrative barriers at the local level. With foreign firms significantly more productive than local companies, this has major economic …
Easy financial conditions and record-low bank lending rates continue to propel a strong expansion of the monetary aggregates and bank lending. … Monetary Indicators Monitor …
16th October 2013
The autumn Diet session is the first in which Prime Minister Abe’s coalition has a majority in both houses of the legislature and it will provide an important test of his ability to push through reform. The government should spell out details of planned …
15th October 2013
Japanese equities are among the most vulnerable to the fall-out from a potential US government default. What’s more, profit margins are already close to record highs, and the pass-through of earlier yen weakness is largely over. Nonetheless, there are a …
14th October 2013
Japan’s export-oriented manufacturing sector is benefiting from the recovery in the global economy and the weakness in the yen, but the signals on domestic demand are mixed. Business spending does finally appear to be recovering. However, household …
10th October 2013
A surge in core machinery orders suggests that business investment should continue to recover. Meanwhile, a strong rebound in consumer confidence highlights that households remain willing to spend even though income growth is still weak. … Machinery …
Japanese equities have dropped further than their peers so far this month and are among the most vulnerable to the fall-out from a potential US government default. Nonetheless, once the debt-ceiling crisis is resolved, we would expect the Nikkei to …
9th October 2013
The first increase in the Economy Watchers’ Survey in six months brought the index to even more elevated levels. However, as households are suffering from rising inflation and falling wages, further declines in the coming months seem likely. … Economy …
8th October 2013
The decision to go ahead with the first consumption tax hike next year is an important step towards improving Japan’s public finances. But the government will have to go further to have a chance of meeting its target of halving the country’s primary …
7th October 2013
The BoJ’s decision today to keep its policy settings unchanged was no surprise, particularly in the wake of the government’s announcement that it would introduce a large fiscal stimulus to offset the impact of next year’s consumption tax hike. …
4th October 2013
Following a strong Q3 Tankan survey, the Japanese government today confirmed that it will go ahead with the first consumption tax hike next April. However, the decision to offset some of the fiscal benefits with additional stimulus measures means that …
1st October 2013
The surge in the unemployment rate in August reflects a jump in the labour force participation rate and is at odds with other labour market indicators. Unemployment is likely to resume its downtrend in the coming months. However, despite the tight labour …
The drop in industrial production in August is unlikely to last long. Companies predict a very strong rebound in the following months, and the manufacturing PMI climbed to a new high in September. However, retail sales momentum has slowed as households …
30th September 2013
The key event this week will be the government’s decision whether or not to raise the consumption tax as planned next April, which should be announced after the release of the Q3 Tankan survey on Tuesday. We expect the Tankan to show that the economic …
The ongoing rise in inflation is still mostly a reflection of the slump in the exchangeover the past year. While goods inflation has risen sharply, service inflation remainssubdued and the timelier Tokyo CPI suggests that the effects of the weaker yen …
27th September 2013
The Bank of Japan’s two-day Policy Boardmeeting, which concludes next Friday, will beovershadowed by the release of the Tankan surveyand the confirmation of the government’s decisionon the consumption tax, both due on Tuesday. Wedo not expect these …
26th September 2013
The ongoing improvement in small business confidence suggests that firms are shrugging off the looming consumption tax hike. With spare capacity gradually diminishing, their pricing power seems to be improving as well. … Small Business Confidence …
25th September 2013
Abenomics is widely heralded as a boon to Japanese society, but the benefits are not being felt evenly. Companies are reporting healthy profits and business confidence remains strong, while the equity market has soared. However, wage growth remains …
23rd September 2013
There are tentative signs that the weak yen is having the hoped-for effect on external trade. In August, export volumes were growing faster than import volumes for the first time since last May. But a surge in export volumes still remains unlikely. … …
19th September 2013
Japan has regained its position as the world's largest international lender. This partly reflects the relative stability of the country's banking sector in recent years. But it is also the result of a lack of lending opportunities at home. As the recent …
18th September 2013
Over the past few months, broad money has grown at the fastest pace in several years in y/y terms. However, the Bank of Japan can only take part of the credit: the initial acceleration happened well before the Bank adopted its aggressive new easing …
17th September 2013
The return of inflation has been welcomed by many – although not by Japanese consumers – as an early success for “Abenomics”. In reality there is little behind the increases in the CPI other than the pass through of yen weakness. Based on our forecasts …
16th September 2013
The Japanese government looks set to press ahead with the hike in the consumption tax as planned next year, albeit with some offsetting increases in public spending and cuts in corporate taxes. This approach should minimise the threat to the economic …
13th September 2013
Even though machinery orders failed to reverse the previous month's dip in July, they still point to a further rebound in business investment in the third quarter. As capacity utilisation rises gradually, companies should continue to add to existing plant …
12th September 2013
Tokyo’s hosting of the 2020 Olympic Games is unlikely to provide any material contribution to economic growth in Japan. Overall spending on the Games will be small and focused on sporting facilities rather than transport infrastructure, thus providing …
10th September 2013
The ongoing falls in consumer confidence and the Economy Watchers’ Survey (EWS) indicate that confidence in "Abenomics" has faded. While other surveys remain at strong levels, the EWS has a better track record in capturing major cyclical turning points. …
9th September 2013
The upward revision to Q2 GDP growth strengthens the case for the government to press ahead with the consumption tax hike. However, the ongoing large reliance on consumer and government spending suggests that fiscal stimulus measures may be needed to …
Despite improving economic conditions, which include the unemployment rate dropping to fresh cyclical lows, nominal wages excluding bonuses and overtime payments have continued to fall. One reason is that productivity growth is subdued. In addition, a …
Governor Kuroda today underlined the Bank of Japan’s view – already reflected in its economic forecasts – that the planned consumption tax hikes will neither derail the recovery nor prevent inflation from rising to 2% on a sustainable basis. But he also …
5th September 2013
The preliminary estimate of Q2 GDP only added to the uncertainty about the planned consumption tax hikes. The latest monthly data have mostly been favourable, notably the buoyancy of business confidence and signs that investment may already have started …
4th September 2013
Wage growth slowed in July and is likely to ease further in coming months as bonus season ends. Unless regular earnings pick up markedly, households’ purchasing power will therefore become further undermined by rising inflation. … Labour Cash Earnings …
3rd September 2013
