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The smaller-than-expected increase in industrial production in January is a reminder of the fragility of the recovery in Japan, and perhaps in global activity too. The output projections made by firms for the following two months and the further pick-up …
28th February 2013
The two-day meeting of the Bank of Japan’s Policy Board which concludes next Thursday (7th March) will of course be overshadowed by the imminent departure of Governor Shirakawa and his two Deputies. The Board will probably be happy to sit on the sidelines …
27th February 2013
The recent sideways trading in the yen and the Nikkei may simply be a pause in the trends, which would not be unusual following such rapid moves. Nonetheless, we do have three more fundamental concerns. The first is that any further decline in the yen …
25th February 2013
While the headlines have focussed on the size of Japan’s merchandise trade deficit last month, the more important development in the latest trade data was the strength of exports. We suspect that a revival of global demand rather than the slide in the yen …
20th February 2013
The government is due to announce its nominee for Bank of Japan Governor in the next few days, with expectations running high that the successful candidate will set policy-making on a new course. The emergence of a new front-runner for the post suggests …
18th February 2013
The small contraction in Q4 and revisions to back data mean that Japanese GDP fell in each of the last three quarters of 2012. However, more timely monthly indicators and surveys already show that the economy is picking up at the start of 2013. The weak …
14th February 2013
The jump in consumer confidence in January underlines just how big a task the Abe government has to meet the high expectations now spreading well beyond the financial markets. However, the improvement in sentiment should help to kick-start the economic …
12th February 2013
We expect the two-day meeting of the Bank of Japan’s Policy Board to conclude this Thursday (14th) without any major policy initiatives. A weak Q4 GDP figure might still prompt the Board to add another ¥10 trillion to the asset purchases scheduled for …
11th February 2013
Hopes that a new leadership team at the Bank of Japan will deliver real change probably have a little further to run, even though the transition could still become quite messy. However, the latest Economy Watchers Survey has underlined just how big a task …
The continued recovery in machinery orders in December suggests that business investment is on the mend. On balance, we still think that GDP contracted for a second successive quarter in Q4 2012, which would do nothing to discourage talk of more …
7th February 2013
Bank of Japan Governor Shirakawa’s announcement that he intends to leave office in March, a few weeks early, might ease the transition to a new leadership team. However, his move may not advance the process that much, depending on how accommodating the …
5th February 2013
The consensus is that Japan avoided two successive quarters of contracting GDP at the end of 2012, albeit only just. In contrast, we still expect a small decline. Looking ahead, we are tweaking our forecasts for 2013 and 2014. Most commentators are …
4th February 2013
Japan’s economy appears to have suffered a second successive quarterly contraction at the end of 2012. The weakness was broad-based. Measures of industrial output, investment, consumer spending and exports all declined in Q4. But this is arguably old …
31st January 2013
Hopes that yet more fiscal stimulus will transform the prospects for Japan’s economy, or at least make a meaningful difference to GDP in the next year or so, are overdone. The government’s credibility on this issue is already being undermined by mixed …
30th January 2013
Despite the headlines, the policy overhaul and additional asset purchases announced by the Bank of Japan last week were timid rather than “bold”. That was the initial reaction in the financial markets too. However, the focus has swiftly moved on to the …
28th January 2013
Japan’s record trade deficit in 2012 mainly reflected the fragility of the global economic recovery and a persistently high bill for energy imports, with currency strength playing a secondary role. Nonetheless, this is unlikely to prevent some officials …
24th January 2013
A lack of demand, rather than the level of interest rates or problems with credit supply, remains the key factor holding back broad monetary growth in Japan. … Monetary Indicators Monitor (Dec. …
23rd January 2013
The Bank of Japan’s adoption of an explicit 2% inflation target after this was called for by the new government has added to fears that central banks worldwide will be forced to monetise public debt and engage in competitive currency devaluations. …
Despite the much-hyped announcement of “open-ended easing” to meet a new 2% inflation target, today’s policy overhaul by the Bank of Japan disappoints in many respects. In particular, the ceiling on asset purchases in 2013 is unchanged, the additional …
22nd January 2013
Markets have, somewhat implausibly, welcomed the returned of Prime Minister Abe as signalling something of a fresh start for Japan. But there is a risk that today’s investor optimism will turn to disillusion if the change of tack loudly heralded by Mr. …
21st January 2013
We expect the two-day meeting of the Bank of Japan’s Policy Board to conclude next Tuesday (22nd) with a joint statement on policy cooperation between the Bank and the government, the unveiling of a “new” inflation target of 2%, and another increase of at …
16th January 2013
The announcement of the government’s ¥10.3 trillion supplementary budget on Friday has been widely welcomed. However, it is unlikely to provide the boost to the economy the Cabinet Office expects. In practice, the budget just rolls over the extra spending …
14th January 2013
In announcing yet another fiscal stimulus package, heavy on public works spending and subsidies for popular projects, Japan’s new government is simply repeating what the others have done before. If anything, the measures cast further doubt on the …
11th January 2013
Expectations that a higher inflation target and a “new accord” with the government will prompt much more aggressive monetary easing have continued to weaken the yen. However, a closer look at the proposed reforms at the Bank of Japan does not reveal any …
9th January 2013
Vehicles sales increased for a third month running in December suggesting that demand is rebounding following the expiry of the eco-car subsidy. However, demand for other consumer durables remains weak and, with labour market conditions remaining …
7th January 2013
With the return to power of the Liberal Democratic Party the yen has weakened sharply and the Nikkei has strengthened on the belief that the incoming government will push the Bank of Japan into greater monetary easing and further loosen the fiscal purse …
In this final Weekly of the year we take a look ahead to some of main events and themes that will shape Japan’s economy in 2013. Key among these are the incoming LDP government’s first budget and the replacement of Mr Shirakawa as Bank of Japan Governor. …
24th December 2012
At its Policy Board meeting today, the Bank of Japan extended its asset purchase program and announced a review of its inflation target. Since Sunday’s election, the incoming LDP government has stepped up the pressure on the Bank to engage in more …
20th December 2012
The incoming LDP government is likely to put increasing pressure on the Bank of Japan to enact more aggressive monetary easing. But the latest data show that monetary conditions are already extremely loose, and the constraint is a lack of demand rather …
19th December 2012
The yen has weakened markedly over the last month on anticipation of more aggressive monetary easing as the incoming LDP administration turns the screws on the Bank of Japan. However, the Bank is already committed to significant further easing in order to …
18th December 2012
As had been widely expected, Sunday’s election has returned the Liberal Democratic Party of Japan to power after a three-year absence. We can expect a two-pronged assault on deflation with significant fiscal stimulus and a push for more aggressive …
17th December 2012
At the time of writing, the outcome of the 16th December Lower House election is not yet clear. However, the dire Q4 Tankan survey, released on Friday, underlined the scale of the challenges facing the new government. In this Weekly we look at the key …
The Bank of Japan’s Tankan survey showed business conditions deteriorated sharply in Q4, adding to evidence that the economy is likely to have contracted for a third consecutive quarter. The winner of Sunday’s Lower House election is likely to seize on …
14th December 2012
The decision at the Bank of Japan’s Policy Board meeting next week is likely to be finely balanced. There are several goods reasons to believe the Board will further extend monetary easing, and several strong reasons to think it won’t. On balance, we …
11th December 2012
The latest figures on Japan’s economy suggest that it has already fallen into recession and is unlikely to emerge before next year. However, whilst the economic backdrop is bad, it is at least not getting any worse. Firms expect a recovery in the first …
10th December 2012
The fatal accident in the Sasago Tunnel on Sunday 2nd December has turned the spotlight on to Japan’s ageing infrastructure ahead of the Lower House elections at the end of this week. In this Weekly , we take a closer look at infrastructure spending in …
The Ministry of Finance’s quarterly investment survey was weaker than most had expected, but shouldnonetheless mean a slightly upward revision to Q3 GDP. Unlike the forthcoming Tankan and BusinessOutlook surveys, the investment survey is only backward …
3rd December 2012
On Friday, Japan’s government announced another stimulus package, the second in just over a month. For Japan’s economy the package is more a prick of the finger than a shot in the arm and appears to be a poor last ditch attempt for votes by the ruling DPJ …
The publication of the main economic figures for October is likely to heavily influence the debate ahead of December’s elections. Dismal figures are expected, and will probably leave the main parties clamouring for additional fiscal stimulus to reignite …
29th November 2012
We think that the markets would be wrong to expect major changes in the Bank of Japan’s monetary stance after the Lower House elections in December. For a start, it is not certain that the LDP will win. Even if opposition leader Shinzo Abe does become …
26th November 2012
The LDP’s manifesto for the elections in December, published today, includes a commitment to persuade the Bank of Japan to raise its inflation target from 1% to 2%. This has added to the downward pressure on the yen in anticipation of more aggressive …
21st November 2012
A quick look at what’s behind the recent slide in Japan’s exports confirms that the main drag is the renewed downturn in the global economy. Exports to China have not deteriorated more than those to other countries while the yen has actually weakened …
The election of an LDP-led government would be unlikely to result in the dramatic shift in policy at the Bank of Japan than many now seem to expect. Proposals that threaten the independence of the central bank will probably be dropped. And for all the …
20th November 2012
The Bank of Japan’s asset purchase program continues to drive growth in the monetary base. There are few signs of this feeding through to stronger credit demand. … Monetary Indicators Monitor …
Japan’s economy saw a large contraction in the third quarter and looks set for a second contraction in Q4. Output indicators have fallen and improvements in the labour market earlier in the year are likely to begin to unwind, further undermining private …
19th November 2012
Prime Minister Yoshihiko Noda dissolved parliament on Friday, paving the way for a general election on 16th December. The decision is likely to mean the fall of the ruling DPJ party from office and the return of the Liberal Democratic Party (LDP) to power …
The Bank of Japan’s Policy Board meeting next week is likely to be uneventful. The Board has eased monetary policy twice in three meetings over the last two months, and we see little justification for further easing next Tuesday. Most of the additional …
13th November 2012
Japan’s economy may already be in recession. The sharp fall in Q3 GDP was the first contraction this year but increasingly looks like it will not be the last. We are now expecting a contraction in Q4 GDP. … Japanese economy plunging into …
12th November 2012
Improvements in labour market conditions earlier this year came to a halt in Q3 as the economy experienced a sharp decline. With most indicators pointing to a further contraction in Q4, we think labour market conditions will soon begin to deteriorate. …
Consensus expectations for Japan’s Q3 growth have been slashed over the last month. However, based on today’s dire numbers the contraction in Q3 could be even worse. What’s more, a further fall in output appears to be on the cards in Q4. … A sharp …
8th November 2012
