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If the euro-zone suffers from some form of break-up, as we expect, Japan could feel the effects through three channels: its trade links with the region, the exposure of its banking system and the impact the break-up has on global risk appetite, which …
17th July 2012
The government unveiled its draft of a revitalisation plan for Japan last Wednesday. The strategy sets out a broad range of policies to lift economic growth, end deflation and create over four million jobs by 2020. However, at this stage it is little more …
16th July 2012
The recent slowdown in broad money growth appears to have levelled off as bank lending has started to rise. Lending appears to be being driven by households as corporate borrowing has declined despite improvements in loan availability and falling interest …
12th July 2012
The latest tweaks to the Asset Purchase Program maintain the bias towards “powerful easing” at the Bank of Japan, although for now the Policy Board has kept additional JGB buying in reserve. … Bank of Japan saves its …
June’s consumer confidence survey, released today, shows a slight dip compared to May but we suspect that underlying sentiment is weaker than the headline index suggests. The poll was taken nearly a month ago and more recent sentiment indices shown …
10th July 2012
Japan’s recovery appears to be fading. According to figures released today, core machinery orders plunged in May while the Economy Watchers’ Survey shows that sentiment continued to decline in June. Signs of underlying weakness in the economy are …
9th July 2012
Land prices continue to drop in Japan despite having already been falling for over twenty years. During that period, house prices have risen on occasion, most recently in 2010. But in each case the rebound has soon fizzled out. Falling prices have not …
The marginal improvement in the Tankan survey of business conditions in the quarter just ended points to only a fragile recovery at best. Large manufacturers may be less negative, but large nonmanufacturers and smaller firms in general all expect …
2nd July 2012
The most recent data on Japan have painted a dismal picture of economic conditions in May. Industrial production has fallen sharply as auto makers cut output in anticipation of the end of the auto-subsidy, while the manufacturing PMI has pointed to …
29th June 2012
The Bank of Japan’s Tankan Survey for June (to be released on Monday) will probably show no improvement in business conditions in the second quarter, and predictions for Q3 are likely to remain weak. The Tankan is also likely to be a less reliable guide …
28th June 2012
Better-than-expected retail sales figures disguise signs of weakness in underlying consumer demand. Sales are being propped up by the eco-car subsidy and are likely to fall sharply after the subsidy expires later this year. … Strong retail spending …
On Tuesday, the long-awaited increase in Japan’s consumption tax came a step closer as a bill to raise the tax passed Japan’s lower house of parliament. Although a step in the right direction to stabilise Japan’s public finances, it will still be several …
26th June 2012
Not for the first time, international investors have increased their exposure to Japan’s government and their share of outstanding government securities has grown. However, they have mainly bought Treasury discount bills rather than longer-dated JGBs as …
25th June 2012
The Japanese economy appears to be weakening in the second quarter, as business conditions deteriorate and exports flatten off. Hiring has slowed and inflation is set to fall, though in part the latter reflects lower global energy prices. Despite a …
21st June 2012
Japan’s merchandise trade deficit rose by more than markets expected in May and we suspect that it will increase further still. Energy imports should continue to grow as the country remains reliant on imported fossil fuels and energy demand increases over …
20th June 2012
As the IMF noted in its recent Article IV consultation, Japanese banks have been expanding abroad, particularly in emerging Asia. They have not been alone in doing so, but unlike banks from other developed economies, they have continued to increase …
18th June 2012
Today we are launching a new monthly publication on the Japan service, the Monetary Indicators Monitor. The recent levelling out in the monetary base has been cited by many commentators as evidence that the Bank of Japan needs to do a lot more. However, …
14th June 2012
We are sceptical that signs of an increase in business capital spending signal a rebound in private non-residential investment. Underlying business investment is weak, albeit on a gradual upward trend, and is unlikely to become a prop for economic growth …
13th June 2012
Japan’s post-earthquake policy stimulus may be having a positive impact on the demand for commodities, but any boost will be short-lived and should be far smaller than the potential adverse effects of developments in China and the euro-zone. … Can …
The Bank of Japan’s Policy Board will conclude its two-day June meeting this Friday (15th). We expect this to be uneventful for three reasons. First, the weekend’s bailout of Spain’s banks has reduced the chances of an imminent collapse in the euro. …
12th June 2012
The government’s Business Outlook Survey indicates conditions deteriorated slightly in Q2, confounding Q1’s forecasts of a strong recovery. Despite the tougher-than-expected environment, firms remain optimistic that the recovery has been delayed rather …
11th June 2012
The strong rebound in Japanese GDP in Q1 is likely to mark the high point for growth this year. The recovery is heavily reliant on government support and it looks increasingly unlikely that the private sector can fill the gap as the boost from spending …
With the crisis in the euro-zone escalating further, in this Weekly we use Bank for International Settlement figures to assess how exposed Japanese banks are to the euro-zone periphery economies. … How exposed are Japanese banks to the …
4th June 2012
Japan’s rapid recovery in Q1 already appears to be losing momentum. The unemployment rate has risen again and retail spending fell for a second consecutive month in April. However, government reconstruction spending is likely to continue to support the …
29th May 2012
Japan’s policymakers have said that the euro-zone crisis is not a fire on the other side of the river – the implication being that Japan will not be able to escape indefinitely the debt problems that have engulfed the euro-zone. However, for now at least …
28th May 2012
There is no real substance to suggestions that the lack of any explicit reference to “powerful” easing in the Bank of Japan’s policy statement today signals a shift towards a more neutral stance. However, the Bank is unlikely to be able to prevent a …
23rd May 2012
The Japanese economy managed to rebound in the first quarter, as governmentsupported spending ensured a return to GDP growth. The eco-car subsidy helped drive consumer spending, and public investment increased as earthquake-related reconstruction works …
22nd May 2012
The government’s power saving plan for the summer confirms Japan will face acute power shortages. The hardest hit regions will experience shortages in excess of 15% compared to 2010 levels, and several have been warned to prepare for rolling blackouts. In …
21st May 2012
The Bank of Japan’s Policy Board meeting next week is likely to be uneventful in so far as we are don’t expect to see any change in the asset purchase program. Nonetheless, it may still be important as the Bank needs to reassess its policy options …
17th May 2012
The rebound in Japan’s Q1 GDP was a welcome bolt of good news. Unfortunately it is also likely to mark the high point of the year as we expect growth will slow in the coming quarters. The recovery is heavily reliant on government support, and it is …
April’s consumer confidence survey, released today, shows that sentiment edged lower last month suggesting the recovery in sentiment may have now stalled. With signs of the recovery slowing in Q2 and the Nikkei dropping back below 9,000 in May, sentiment …
15th May 2012
In the last week, the yen has again broken through 80 against the dollar, taking the currency to its strongest level since February. The yen has strengthened despite the recent increase in the ceiling for the Bank of Japan’s JGB purchases under the Asset …
14th May 2012
On the basis of figures released today, Japan’s recovery appears to be on track. But recent data have not been uniformly positive and the next few months are likely to be bumpy. … Economic outlook improving but challenges …
10th May 2012
We have little doubt that the Japanese economy returned to growth in Q1 but it is looking increasingly likely that growth will slow sharply again in Q2 and we wouldn’t completely rule out a renewed contraction. Although the economy will grow over the year …
7th May 2012
The increase in labour cash earnings in March could be an early sign of improvement in the Japanese economy. Although base effects played an important part, other labour market indicators suggest conditions are improving, and this could eventually show …
2nd May 2012
Aggressive monetary easing alone will not be enough to boost prices and activity in the real economy: structural changes to the supply side of the economy are also necessary. Reducing regulation, increasing participation in the labour force and easing the …
30th April 2012
Today’s data releases were inevitably overshadowed by the outcome of the Bank of Japan’s Policy Board meeting, but they were disappointing too. Indeed, they suggest that Japan’s economic recovery may already be stalling again after the likely return to …
27th April 2012
The Bank of Japan’s Policy Board failed to impress with the additional monetary “stimulus” announced today. Any market impact from the ¥10 trillion increase in outright purchases of JGBs was offset by an extension of the period over which the buying will …
Expectations that the Bank of Japan will announce a further increase in asset purchases alongside the publication of updated economic forecasts on Friday are now so high that the Policy Board will have to loosen policy again or risk reversing the …
24th April 2012
Many commentators appear to believe that Japan’s economy could recover from deflation and grow more strongly if only the Bank of Japan were willing to step up its asset purchases. Some also argue that the additional policy measures announced in February …
23rd April 2012
In this Weekly we present our updated GDP forecasts. The Japanese economy looks set to return to growth in Q1 after contracting in four of the last five quarters. We expect the economy will continue to expand over the rest of the year as …
According to the Bank of Japan’s latest Senior Loan Officer Survey (SLOS), loan demand from firms and households jumped in Q1. The pick-up in household demand is particularly encouraging. The survey therefore adds to the evidence that the economic …
20th April 2012
Strong annual export growth in March was flattered by the disruption caused by the Great East Japan Earthquake last year and is still heavily dependent on the recovery in the US. Nonetheless, net trade will have provided a positive contribution to GDP …
19th April 2012
Signs of a recovery in the Japanese economy are becoming more evident as early indicators for March show activity has picked up after a slow start to the year. Confidence is increasing and the eco-car subsidy is providing a strong prop to retail spending. …
18th April 2012
March’s consumer confidence survey, released today, shows sentiment continuing to recover, although it remains below last year’s pre-disaster level. Consumer inflation expectations are also rising again. … Consumer Confidence …
17th April 2012
As if the Bank of Japan were not facing enough political pressure to ease policy further, some commentators have cited the recent contraction in the monetary base as additional evidence that a lot more needs to be done. Our sympathies lie with the central …
16th April 2012
The unexpected jump in core machinery orders in February is clearly welcome but, contrary to many of the headlines this morning, it does not signal a strong recovery in Japan’s capital spending. … Machinery Orders …
11th April 2012
The focus has quickly shifted to the second April meeting of the Bank of Japan’s Policy Board after the widely anticipated decision not to announce any further easing measures today. The publication of updated economic forecasts on the 27th might provide …
10th April 2012
The employment component of the Tankan provided some welcome good news in an otherwise lacklustre survey. The employment index fell to its lowest level in four years, indicating that Japanese firms have now eliminated much of the over-employment that has …
9th April 2012
