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Broad money growth remained weak in August but it picked up slightly amid a continued rise in bank lending. Household demand for credit remains firm but businesses are cutting back on borrowing from banks and increasing their use of other sources of …
17th September 2012
Leaked details of the government’s new energy plan suggest that nuclear power will be phased-out by the 2030s. In this Weekly we argue that the main reason Japan coped without nuclear power this summer was weakness in the economy, not something it would …
The Bank of Japan’s Policy Board will conclude its September meeting next Wednesday (19th), and is likely to leave policy settings unchanged despite concerns about the economic environment. The fact that policymakers in China, the euro-zone and (almost …
13th September 2012
The second successive monthly rise in Japanese core machinery orders in July, announced today, does not suggest business capital spending will expand in Q3. The level of orders remains low, firms expect a contraction over the quarter as a whole, and the …
12th September 2012
The Japanese government’s Business Outlook Survey suggests conditions improved slightly in Q3, with firms expecting further improvements over the next six months. Whilst clearly good news, the pick-up was much less than anticipated at the time of the last …
11th September 2012
The latest figures on the state of Japan’s economy in August were not uniformly bad, but as signs that the slowdown has bottomed out they were unconvincing. Our long-held view that the economy will contract sharply in Q3 is being increasingly borne out by …
10th September 2012
The government’s eco-car subsidy appears to have run its course. Although it provided a visible boost to car sales, which supported aggregate spending, the subsidy should not be given all the credit for the recent recovery in the sector. What’s more, …
7th September 2012
The acceleration in business capital spending revealed by the Ministry of Finance’s (MoF) investment survey was not enough to impress markets. Indeed, the headline annual figure is flattered by favourable base effects, while a q/q contraction is likely to …
3rd September 2012
The boost to industrial production from reconstruction spending appears to be fading. With no signs of a recovery in domestic private sector demand, and external demand set to remain weak, the outlook for industry is grim. … Industry struggling as …
31st August 2012
Slowing auto sales dragged down retail spending last month. Even sharper falls are likely when the funds for the eco-car subsidy run out, probably any day now. With few signs of support elsewhere in the economy, we think GDP will contract in the third …
30th August 2012
It was perhaps refreshing that last week there was at least one occasion when news from Japan drove markets elsewhere, rather than vice versa. Unfortunately, that news was bad, namely the weakness of Japan’s exports in July. We expect this downbeat tone …
24th August 2012
The weakness in Japan’s export data in July provides yet another reminder of the fragility of the recovery in the global economy. What’s more, these data underline the trend across Asia, with no sign of any recovery in the PMIs either. … Weak Japanese …
22nd August 2012
Japan’s economy slowed sharply in the second quarter after strong growth in the first. The monthly activity data suggest that the recovery came to a halt towards the end of Q2, while forward-looking indicators including consumer and business confidence …
21st August 2012
The government has raised the prospect of introducing a supplementary budget before the end of the year. With the recovery unwinding and an election just around the corner, it is not hard to see why they are looking to further stimulus. However, we are …
17th August 2012
The acceleration in the monetary base is not feeding through to broader money growth as demand for credit, particularly from businesses, is weakening. … Monetary Indicators Monitor …
14th August 2012
Japan’s economy slowed to a crawl in Q2, with growth remaining dependent on government support for a second consecutive quarter. With the external economy weak and private demand fragile, GDP is likely to contract in Q3 as government support fades. … …
13th August 2012
The government’s latest economic assessment suggests that the recovery has “paused”. As we approach the middle of the third quarter, it looks increasingly likely that the recovery has in fact started to unwind having stalled during the second quarter. In …
10th August 2012
The Bank of Japan left monetary policy unchanged at its August meeting, as was widely expected. However, it continues to state that the economy is “picking up moderately” despite the growing body of evidence to the contrary. Figures released today, on …
9th August 2012
The Economy Watchers’ Survey, published today, adds to the growing body of evidence that Japan’s economic recovery has not just paused but has started to unravel. Worryingly, labour market conditions already appear to be weakening, undermining the ability …
8th August 2012
The recent fall in Japan’s unemployment rate looks less encouraging when we consider that the level of employment has been little changed for three years. Much of the decline in unemployment is due to people removing themselves from the labour market as …
3rd August 2012
The main concern for the Bank of Japan’s Policy Board at its August meeting, concluding next Thursday (9th), is likely to remain the situation in Europe. The slowdown overseas threatens to further undermine the recovery in the domestic economy which …
2nd August 2012
The latest figures on Japan’s economy do little to assuage fears that the recovery has lost its way. The sharp fall in the manufacturing PMI in July suggests that the industrial sector continues to contract and is unlikely to bounce back quickly. …
31st July 2012
June’s weak industrial production data may have caught the markets by surprise but were only the latest in a run of poor figures and surveys from the sector. Activity could drop more sharply once the full impact of the crisis in Europe and the strong yen …
30th July 2012
The latest figures for the consumer price index in June showed the economy continues to struggle to escape deflation. Underlying price pressures remain very weak with energy prices determining short-term movements in inflation. In the long term it is the …
27th July 2012
Japan’s merchandise trade figures, released today, showed a reduction in the seasonally-adjusted deficit in June, but the country remains firmly on course to end the year in the red. At the same time, the Ministry of Finance (MoF) has upped its rhetoric …
25th July 2012
The IMF downgraded its global growth forecasts last week including those for Japan, but they still remain well above our own. In this Weekly we explain why our forecasts differ from theirs and where the risks to the respective forecasts lie. … Why we …
20th July 2012
According to the Bank of Japan’s Senior Loan Officer Survey (SLOS), there was a large divergence in loan demand in Q2. Household demand picked-up but business demand dropped. Rising household borrowing appears to be due to higher consumer spending which …
19th July 2012
The Japanese economy continued to slow throughout the second quarter and businesses expect only an anaemic recovery in Q3. The economy remains reliant on government support, with reconstruction spending supporting construction and the auto-subsidy …
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
