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Employment and wages are bound to be much slower to respond to the Great East Japan Earthquake than either production or sales, but the business and consumer surveys suggest that the labour market will weaken significantly in the months ahead. This will …
30th May 2011
Japanese consumer price inflation increased in April, rising at its fastest rate in two years. Higher utility and gasoline prices helped push the all items rate of inflation into positive territory, but it was base effects in education costs that …
27th May 2011
Japan registered her first seasonally-adjusted trade deficit in two years in April. Exports not only failed to increase after the initial disruption caused by the earthquake but also fell further, while imports regained the ground they lost in March. It …
25th May 2011
The sharp contraction in activity in March tipped Japan into recession in Q1. The effect on GDP growth will be more acute in Q2 due to the very low base from which the economy must recover. Even if economic activity is around 3% higher on average in the …
23rd May 2011
Even though Deputy Governor Kiyohiko Nishimura today dropped his call for another increase in the asset purchases, our view is still that it is only a question of “when”, rather than “if”, the Bank of Japan eases policy again. … Bank of Japan to announce …
20th May 2011
The detrimental impact of the earthquake and tsunami in March was sufficient to tip Japan into recession in the first quarter. Early evidence for the start of the second quarter shows no sign of a meaningful recovery, supporting our view that GDP will …
The further contraction in GDP in Q1 confirms that Japan is now in recession and we expect the decline in Q2 to be even bigger. The economy was weak before the Great East Japan Earthquake struck on 11 th March and the full impact of that catastrophe has …
19th May 2011
The index of consumer confidence declined further in April as households’ assessment of conditions over the next six months darkened. April’s fall was even larger than the one seen in March, and pushed the headline index to its lowest level in two years. …
16th May 2011
The week ahead will be dominated by the release of Q1 GDP on Thursday, which is almost certain to show the 11th March earthquake tipped the Japanese economy into recession. The low starting point will also make it extremely hard for the economy to grow …
Respondents to Japan’s Economy Watchers Survey are not as pessimistic about the outlook as they were immediately after the disaster in March, but confidence is still relatively low and there is no sign of a meaningful rebound in current conditions in …
12th May 2011
The attractiveness of the PMI surveys lies in their ability to provide an accurate and timely assessment of business conditions. Shocks to the Japan economy, such as the financial crisis and the recent earthquake, have not diminished their usefulness, but …
9th May 2011
Much of our recent coverage of the Japanese economy has been distinctly gloomy, summed up in our forecast that GDP will fall outright this year. This view has been supported by the recent activity data. Nonetheless, with the holiday spirit in mind, it is …
2nd May 2011
The impact of the recent disaster has all but guaranteed that the economy will contract for a second successive quarter in Q1. Releases for March show plunging output, activity and spending, while business and consumer confidence has collapsed. What’s …
28th April 2011
The revised growth forecasts published today by the Bank of Japan’s Policy Board do not, in our opinion, adequately reflect the damage caused by the recent natural disaster. This is probably due to a mix of conservative working assumptions, genuine …
Japanese retail sales plunged in March as consumers reined in spending following the devastating earthquake and tsunami. Despite a strong start to the quarter, sales fell at an annualised rate of 1.3% in Q1, providing further evidence that the economy has …
27th April 2011
The Bank of Japan’s Policy Board is certain to cut its GDP forecasts for the current fiscal year on Thursday, but not, we think, by enough to reflect the full impact of the recent disaster. Nor are the revisions likely to be sufficiently large to prompt a …
26th April 2011
The Shoko Chukin survey of small business conditions in April was released a day earlier than expected, and the results were even worse than projected. The earthquake has clearly taken a heavy toll on business confidence and no industry has been immune. …
In the six weeks since the earthquake, largely survey-based evidence has pointed to a sharp downturn in activity and sentiment in March. A flurry of official data before the Golden Week holidays begin will help provide a more concrete assessment of how …
25th April 2011
Japanese trade took a sharp turn for the worse in March after the earthquake and tsunami disrupted production and damaged infrastructure. The trade surplus fell to its lowest level in two years as exports dropped back and imports continued to flow …
20th April 2011
Consumer confidence held up surprisingly well in March, dipping lower after the earthquake but not by as much as might have been expected. Other indicators, such as the Economy Watchers’ Survey (EWS), have suggested a more marked downturn in consumer …
19th April 2011
The chances of an imminent fiscal crisis may be small, but public finances have limited room fo rmanoeuvre. Another shock to the economy or investor confidence could mark a tipping point in the government’s ability to secure affordable funding. … Little …
18th April 2011
Most analysis of the impact of the recent natural disaster on Japan’s economy has focused on the impact on production. However, the fundamental drivers of consumer spending were already weak before the earthquake struck and are likely to deteriorate …
13th April 2011
Japanese inflation was always likely to turn positive this year due to commodity price movements and base effects in the year-on-year comparison. The recent disaster means inflation is likely to be higher still. This will not lead the Bank of Japan to …
11th April 2011
Today’s retail sales and unemployment data for February were better than expected and small business confidence was high in early March. These figures pre-date the full impact of the earthquake that struck Japan on 11th March, but they do suggest that the …
8th April 2011
There were no major policy initiatives from the Bank of Japan today and we do not anticipate any at the second April meeting either. This might bring the decline in the yen to a temporary halt, but we continue to expect the currency to end the year no …
7th April 2011
Signs that the initial blow to economic activity will be even larger than first feared have prompted us to revise our 2011 forecast down further. We now expect Japan’s GDP to fall outright by 1.5% this calendar year and by 1.0% in the fiscal year from …
5th April 2011
The slump in the services PMI in March, following the collapse in the equivalent manufacturing series, all but confirms that Japan's economy contracted for a second successive quarter in the first three months of the year. Indeed, with activity also …
The breakdown of the Bank of Japan’s Tankan survey of business conditions into pre- and post-earthquake responses showed that conditions were already expected to weaken before the disaster and are now expected to do so at a faster rate afterwards. …
4th April 2011
Some commentators have argued that Japan’s ability to sell assets or print money to service its government debt means it makes no sense to worry about a “fiscal crisis”. The chances that the Japanese government will default are indeed vanishingly small. …
The first results from the Bank of Japan's March Tankan survey of business conditions, released today, are not much use because we do not yet have a split between pre- and post-quake responses. The Bank will publish a breakdown on Monday. But today's …
1st April 2011
Japan’s manufacturing PMI index is the first business survey to reflect the impact of the Tohoku Pacific Ocean Earthquake. The results were not quite as awful as many had feared but they were still bad and the detail suggests there is worse to come. … …
31st March 2011
Japanese industrial output edged up in February, but will have collapsed in March. Production could easily fall by 10% in just one month in the wake of the Tohoku-Pacific Ocean earthquake, which alone would knock around 0.6 percentage points from GDP. … …
30th March 2011
Japan’s economy will eventually recover from the Tohoku-Pacific Ocean earthquake as the initial disruption to activity is replaced by a surge in spending on reconstruction. However, the boost to growth could be largely offset by the increases in taxes and …
29th March 2011
This Update provides a calendar to show when the devastation caused by the earthquake and tsunami that struck Japan on 11th March should start to appear in the regular economic data. … When will the effects of the earthquake show in the …
28th March 2011
The risks to the markets from the Tankan seem to be skewed in just one direction . If the results o fthe Q1 survey published on Friday are in line or slightly better than consensus, they could be dismissed as “old news” before the full impact of …
Recent economic data releases have of course been overtaken by the tragedy of the earthquake and tsunami that hit Japan on 11 th March. This edition of our monthly chart book has therefore turned out to be a snapshot of the situation before the disaster …
24th March 2011
The range of views on the impact of the earthquake on Japan’s GDP remains remarkably wide and government estimates of the cost of repairing the damage, published today, appear to have caused even more confusion. It therefore seems worth reiterating our …
23rd March 2011
The economic costs of natural disasters, although nowhere near as important as the loss of life, are typically much less than those of major financial shocks. A discussion of why this is the case might shed more light on the implications of the earthquake …
The Japanese economy as a whole managed to shrug off the impact of the Kobe earthquake in 1995. However, this time it’s different: the recent disaster has had national effects and the blow to confidence could severely curtail any rebound. … Why it's worse …
21st March 2011
Following last Friday’s earthquake and tsunami we are cutting our Japan GDP growth forecast for CY 2011 from 1.0% to zero. We were already expecting GDP to contract for a second successive quarter in the first three months of 2011 and now expect this …
17th March 2011
The economic and market impact of the terrible tragedy that has hit Japan will depend partly on the amount of the damage but also on who pays the bills. A large share of the cost will probably have to be met by the government rather than the global …
14th March 2011
The Bank of Japan has announced that the two-day Policy Board meeting previously scheduled for Monday and Tuesday will now be cut short to one day and conclude on Monday. No reason was given, but the obvious explanation is that the Bank wants to bring …
The consequences of the major earthquake and tsunami that hit Miyagi Prefecture and other areas in north-eastern Japan today are not yet clear and the impact on local people is of course foremost in everyone’s minds. But the financial markets also need to …
11th March 2011
January's machinery orders data are consistent with only a feeble recovery in investment this year. Admittedly it is early days, but the bulk of the data on capital spending suggest that momentum in this potentially key driver of growth remains weak. … …
9th March 2011
The current conditions component of February's Economy Watchers Survey (EWS) was even more upbeat than the improvement signalled by the outlook in the previous month. However, the forward-looking component held steady, casting doubt on the durability of …
8th March 2011
Prime Minister Kan is pushing his budget through parliament but will face a much tougher time passing the financing bills required to fund it. The opposition may only play ball if he tenders his resignation or calls an early election. The alternative is a …
7th March 2011
The unemployment rate remained relatively high (by Japanese standards) at 4.9% in January. The forward-looking labour market indicators are mostly improving, including vacancies, but employment and real wage growth are both subdued. … Unemployment …
1st March 2011
The jumps in both industrial production and the value of retail sales in January look good but the former was smaller than expected and the latter was flattered by higher prices for food and fuel. Housing starts actually fell. However, the first business …
28th February 2011
We expect the latest spike in oil prices to be short-lived as fears over supply from the Middle East and North Africa start to ease. Nonetheless, Japanese inflation will pick up further in the coming months as a result both of higher energy prices and …
