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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
The Bank of Japan is unlikely to make any major policy changes at its two-day September meeting, which concludes on Thursday. Recent economic and market developments have mostly been positive, and Governor Kuroda has shown no enthusiasm for fine-tuning. …
2nd September 2013
On balance, the available evidence suggests that spare capacity remains ample. While the falling unemployment rate points to a tightening labour market, wage growth is weak. The output gap is still large and survey-based measures also show considerable …
Today’s industrial production and labour market data show that the recovery should continue in the third quarter. Meanwhile, the ongoing rise in consumer price inflation is still largely a reflection of the weak exchange rate. … Industrial Production, …
30th August 2013
The sharp drop in retail sales in July casts doubt on the ability of “Abenomics“ to boost private consumption. While hot weather may have prevented consumers from spending, there are a number of reasons that suggest the weakness is genuine. … Retail …
29th August 2013
Higher female participation could eventually provide a small but welcome boost to the potential growth rate of the Japanese economy. However, the government’s pledge to improve the availability of childcare is not enough. Tackling widespread …
28th August 2013
The pick-up in small business confidence in August shows that firms remain confident about the economic recovery. Spare capacity is also expected to shrink further and profitabilityis strong, which should support a rebound in investment spending. … …
27th August 2013
Japan's adverse demographics and huge public debt are strengthening the pressure for labour market reforms that could both lift economic growth and save the government money. However, raising the official retirement age is unlikely to do much to boost the …
26th August 2013
Investors tend to focus on visible trade when analysing the impact of the weak yen on the current account. The impact on investment income tends to be ignored, even though it is more immediate. Since Japan’s income on its large stock of foreign assets is …
The tentative signs of acceleration in the June money supply figures turned out to be a false dawn. In July, most money supply measures expanded at the slowest pace in several months on a m/m basis. At least the expansion in bank lending remains …
22nd August 2013
The first rise in export volumes since early 2012 is unlikely to be sustained amid sluggish external demand. Meanwhile, the weak yen continues to have little impact on the trade deficit, which has widened again. … External trade …
19th August 2013
Business investment has been a clear laggard in Japan’s recovery. Structural factors, including a high level of investment compared to other countries and a large rise in the capital/GDP ratio since the early 2000s, argue against a surge in corporate …
Japan’s government could still decide to delay the consumption tax hike scheduled for April 2014. The damage to credibility may be lessened if the economy is clearly too weak and a sensible alternative plan (with fiscal “forward guidance”) is put in …
14th August 2013
Even without the need to mitigate the impact of the planned doubling of the consumption tax, the arguments for lowering Japan’s relatively high corporate tax rates would be very strong. But with a substantial fiscal squeeze coming otherwise, the arguments …
13th August 2013
Capital spending has lagged well behind the recovery in the rest of Japan’s economy, but it should now start to make a decent contribution to growth from the third quarter onwards. In turn, this may ease concern about the potential impact of the …
Last week India appointed Raghuram Rajan, a former chief economist at the IMF, as the new governor of the Reserve Bank (RBI). The new governor takes over at a tricky time, with India’s economy struggling with a range of problems. This Weekly looks at the …
12th August 2013
The conventional wisdom is that a weak yen should help boost the competitiveness of Japanese exports. However, most exports are invoiced in foreign currency, and exporters have been reluctant to lower export prices. Instead, the weak exchange rate has led …
The Bank of Japan’s decision today to refrain from any additional easing on top of that already planned reflects the Board’s conviction that the measures taken so far are working. But with signs mounting that the recovery is already slowing, further …
8th August 2013
Japan’s economy likely continued to grow at a solid pace in the second quarter of the year, even though the recent wide divergence between various measures of consumer spending raises question marks about the exact speed. However, the recovery may have …
6th August 2013
The Bank of Japan will likely leave policy settings unchanged at its two-day August meeting, which concludes on Thursday. Governor Kuroda has indicated that a condition for further easing is the implementation of the consumption tax hike. The central bank …
5th August 2013
China’s economy is set to slow further over coming years but we believe that the slump in growth many are now predicting will be avoided. … Tampering with the sales tax hike carries …
The first drop in the manufacturing PMI since late last year indicates that the recovery may now be entering a slower phase. Meanwhile wage growth remains insufficient to compensate for rising inflation as regular pay continues to fall. … Manufacturing …
31st July 2013
