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Signs of economic recovery in Japan were overshadowed by a flight from risk in global financial markets which caused sharp movements in equity prices and bond yields. The continued strength of the yen was the focus for policymakers, but intervention in …
24th August 2011
Japan’s policymakers have sat on their hands and watched the yen climb to new highs since intervening in foreign exchange markets earlier this month. We expect recent financial market turmoil to be the catalyst that forces authorities to act to both …
23rd August 2011
Now that the hard work of restoring shipments to pre-disaster levels is all but complete, Japan’s exporters face an uphill struggle to achieve further growth. Exports had been flat for a year before the disaster when the global economy was in better shape …
19th August 2011
Japan’s economy contracted again in Q2, despite a faster-than-expected recovery from March’s disaster. GDP should start to expand in Q3 as output continues to recover and reconstruction-related expenditure kicks in. Nonetheless, headwinds will act as a …
16th August 2011
The revision to the CPI base-year resulted in a marked downward revision to inflation, showing clearly that Japan is still in the grip of deflation. Although the Bank of Japan has only recently expanded its asset-purchase scheme, we would not rule out …
Core machinery orders, which are a reliable and timely indicator of business capital spending, jumped in June, however businesses expect orders growth to fall away sharply in Q3. This does not necessarily mean that investment will also be weak since …
12th August 2011
GDP probably fell in Q2, but not by as much as initially expected thanks to the rapid restoration of supply chains. The direct implications for policy are negligible, and are likely to be overshadowed by policy responses to the recent movements in the yen …
11th August 2011
The recent slide in the Nikkei and the continued strength of the yen point to the economy and the exchange rate moving in opposite directions, driven by different forces. The policy prescription, however, is likely to be the same for both ailments: …
10th August 2011
Consumer confidence continued to recover in July, reaching its highest level since March. Consumers remain particularly concerned, however, about employment prospects leaving overall confidence some way below pre-disaster levels. … Consumer Confidence …
The intervention to weaken the yen was only ever going to meet with limited success so long as the forces pushing the currency higher remain intact. That does not necessarily mean that the hollowing out of Japanese industry will accelerate. … Don’t …
9th August 2011
The success of today’s intervention to reduce the value of the yen may prove short-lived, so long as the strong forces pushing the currency higher remain intact. Nonetheless, we still think the yen is likely to come under gradual pressure against the …
5th August 2011
The services PMI was weaker in July than in June, suggesting the recovery in tertiary sector activity may have stalled at the start of Q3. Whilst businesses are optimistic that reconstruction-related spending will support activity in the year ahead, they …
4th August 2011
Salaries in Japan fell unexpectedly in June, as mid-year bonuses and overtime pay was cut. But as hours worked increase and employment gradually picks up, it seems more workers are working longer for less money. … Earnings fall back even as hours …
3rd August 2011
The Bank of Japan’s Policy Board is unlikely to announce any major monetary policy initiatives at the two-day meeting which concludes on Friday. However, the continued strength of the yen makes intervention from the Bank and the Japanese government …
The dip in domestic vehicle sales in Japan in July looks like a speed bump on the road to recovery rather than anything more serious. Overall, the auto sector is rapidly getting back to normal with domestic production almost back to pre-disaster levels. … …
2nd August 2011
The recent strength of the yen has raised the prospect of exchange rate intervention from the Japanese government. We think this is unnecessary and, worse, would probably be ineffective. The yen has departed from fundamentals due to concerns about the …
There was further evidence today that the recovery in Japan was broadly on track at the end of Q2. Although the labour market remains weak, and power shortages continue, businesses are optimistic about the outlook, particularly for domestic demand. … …
30th July 2011
Retail sales in Japan surprised on the upside in June and will provide a small boost to GDP. Temporary factors, including a last-minute surge in demand for digital televisions in June, will diminish and sales are likely to fall back to more normal levels …
29th July 2011
Japan’s small firms continued on the road to recovery in July following the collapse in confidence in the aftermath of March’s disaster. Conditions improved significantly compared to June as supply chains were restored and the impact of the initial …
27th July 2011
Reports of the death of deflation in Japan have been greatly exaggerated. Inflation has only temporarily turned positive, largely as a result of higher commodity prices and base effects in the annual comparison. This will become even clearer when the CPI …
26th July 2011
The rapid rise in Japanese exports in June adds to the evidence that production continued to recover quickly in Q2. In Q3 it is likely the pace of the recovery will slow as growth in the global economy cools and output approaches its pre-disaster level. … …
22nd July 2011
The economy showed further signs of recovery from the earthquake-induced slump at it approached the end of the second quarter. Looking ahead to Q3, survey based measures suggest the recovery is leveling off, in some sectors even before output has returned …
The economic slowdown following March’s disaster caused loan demand from Japanese households and firms to fall sharply in Q2. According to the latest Senior Loan Officer Survey, demand is expected to pick up in Q3, but will remain weak. … Lending survey …
21st July 2011
The government’s plan to “stress test” all nuclear facilities could further delay the restart of currently idle reactors just as we enter the summer period of peak power demand when they are needed most. More worryingly, power supply problems could drag …
19th July 2011
The Bank of Japan today acknowledged that growth prospects for FY2011 will be somewhat lower than it forecast even in April due to the downturn immediately after the earthquake, but it did not think this was sufficient to warrant any new policy …
13th July 2011
Consumer confidence remains low but is gradually rising from the depressed levels seen immediately following the recent disaster. Consumers remain particularly concerned about employment prospects and the lack of income growth. … Consumer Confidence …
12th July 2011
We have nudged up our forecast for Japanese GDP in 2011 but continue to expect a full year recession with the economy contracting by 1.2% . While the initial recovery from March’s disaster has been stronger than we expected, momentum is already fading …
The Economy Watchers Survey bounced back in June, supporting other evidence that the economy continued to rebound through the end of Q2. The outlook component also improved but suggests the recovery is levelling out as we enter Q3. … Economy Watchers …
9th July 2011
Core machinery orders have managed to avoid any negative fallout from March’s disaster and continued on their gentle upward trend in May. But they remain a long way below their pre-financial crisis level and are unlikely to benefit significantly from much …
8th July 2011
The recovery in the services sector has not been as strong nor as quick as in the manufacturing sector. Momentum is fading as we enter Q3, but firms are optimistic that reconstruction efforts will support economic growth over the next year. … Services PMI …
6th July 2011
The Tankan confirmed that Japanese business conditions deteriorated in Q2, but more importantly that they are likely to improve, albeit only slightly, in Q3. As the initial disruption from the earthquake unwinds and reconstruction spending kicks in, …
5th July 2011
The latest survey evidence paints a picture of Japan’s economy well on the way to recovery. Much of the disruption caused by March’s disaster has now unwound and production is rapidly being restored. The impact of electricity shortages in Q3, however, …
1st July 2011
Industrial output in Japan bounced back strongly in May, although not by as much as firms themselves had anticipated. The rapid recovery in vehicle production was the main driver, and is expected to support further gains in June. But this is unlikely to …
30th June 2011
Retail sales have almost recovered to their pre-disaster level, but are unlikely to remain strong. Overall, sales are on a downward trend which is set to continue as unemployment rises and wages fall. SMEs, in contrast, are more optimistic about the …
29th June 2011
According to Ministry of Finance, Japan runs a trade deficit with China. However, when one looks at the trade data from a Chinese standpoint, it appears that China is also running a trade deficit with Japan. Some inconsistency in international trade data …
28th June 2011
Some of the recent economic data have supported hopes of V-shaped rebound in Japan after the March earthquake. However, power shortages will still hold back the recovery, especially in Q3 when electricity demand is at its highest. … The earthquake, …
24th June 2011
The economy weakened further at the start of the second quarter, although signs abound that a pick-up is just around the corner. Businesses are restoring production more quickly than was expected even if not soon enough to show in April’s official data. A …
23rd June 2011
The Bank of Japan appears to be timing its purchases of equity ETFs to support the stock market whenever the Topix falls by more than 1%. However, developments in global markets, and in the yen, remain far more important in determining the performance of …
21st June 2011
May's trade data suggest that the external sector was an even larger drag on Japan's GDP in Q2 than in Q1, but a closer look shows further signs of recovery from March's earthquake on a month by month basis. … External Trade …
The submission to the Diet of a second supplementary budget in early July is not expected to have a large impact. The macroeconomic effects of the additional budget are likely to be small, and it is unlikely to make much difference to the government’s …
Core machinery orders dipped in April but are expected to rebound over the rest of the second quarter. This is consistent with other evidence that the Japanese economy will return to growth in the second half of the year. … Machinery Orders …
14th June 2011
Deliberately embracing higher inflation as a way out of the sovereign debt crisis could have disastrous consequences. Instead, for most advanced countries, wherever it is feasible, a combination of fiscal austerity and sustained economic growth offers the …
Overall bank lending is likely to increase over the rest of the year, but this would not necessarily be a sign of underlying economic strength. We expect business loan demand to rise as the weak economic climate has reduced firms’ main source of internal …
This week the IMF added its voice to those calling for further monetary easing from the Bank of Japan. However, the Policy Board seems more likely to upgrade its own assessment of the state of the economy at the two-day meeting that concludes on Tuesday. …
11th June 2011
The second estimate of Q1 GDP was essentially unchanged though the contraction in Q4 last year was revised up a notch. This confirmed that the Japanese economy is in recession. GDP will likely contract at least as much again in Q2 before a recovery gets …
9th June 2011
Japan’s current account surplus fell further in April, supporting what we already knew about the effect of the disaster on trade. Survey-based evidence suggests things are turning around with improvements already evident in May, including a rapid recovery …
8th June 2011
Japan’s automotive industry was, as we know, hit extremely hard by the March earthquake. Domestic demand collapsed while overseas sales shrank due to a shortage of supply. But both these constraints appear to unwinding and the automotive industry looks to …
6th June 2011
Japan’s DPJ-led administration finally seems ready to bow to the inevitable and double the country’s consumption tax over the next five years. However, this might not be enough to pay for the government’s share of reconstruction spending after the Great …
2nd June 2011
Japanese industry appears to be overcoming the initial disruption caused by the earthquake. Industrial production started to recover in April and is expected to rebound through May and June. The labour market, however, is only just starting to feel the …
31st May 2011
Japan's smaller firms continue to be hit hard by the fallout from March's earthquake. Business conditions did improve in May relative to April's post-disaster low and are expected to recover further in June, but they remain relatively poor. The detail of …
30th May 2011
