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Today's headline data for June were bad, with the unemployment rate unexpectedly rising from 5.2% to 5.3% and industrial production unexpectedly falling by 1.5% m/m. However, these figures probably overstate the extent of the inevitable slowdown from the …
30th July 2010
The slowdown in the annual growth of retail sales reflects both the fading of the boost from government subsidies for car purchases and changes in fuel price inflation. Sales excluding both autos and fuel are continuing to recover, albeit at a much slower …
29th July 2010
Japan's smaller companies remain upbeat about business conditions, emphasising that fears of a double-dip here at least are exaggerated. … Small Business Confidence …
28th July 2010
The Bank of Japan’s apparently relaxed attitude to the strength of the yen can largely be explained by the fact that there is very little that the central bank can do about it anyway. The currency’s status as a safe haven is also, at least in part, a vote …
26th July 2010
The contribution of net trade to the quarterly increase in Japan’s GDP in Q2 was probably similar to the 0.7 percentage points in Q1, suggesting that overall growth was faster than generally anticipated as well. However, exports are already faltering when …
Japan's equity markets have taken their lead today from the overnight weakness in the US and the strength of the yen, but the May activity index at least was consistent with another healthy gain in GDP in the second quarter. … All Industry Activity Index …
22nd July 2010
The Bank of Japan’s latest Senior Loan Officer Survey confirms that banks are more than willing to lend. Demand for loans remains weak, especially from firms, but there is no support here for the claim that a lack of credit is holding back the economic …
21st July 2010
Japan’s trade surplus with China in the first quarter is not enough to justify talk of a fundamental shift in the balance of trade between the two countries. A closer look at the recent data suggests that the surplus was a temporary feature of the global …
20th July 2010
The success of “Your Party” in the Upper House elections has put the idea of an explicit inflation target for the Bank of Japan back on the policy agenda. A decent case can be made for at least a temporary target of 1% or more. But with household …
19th July 2010
The Bank of Japan’s policy statement today was cautious in its assessment of the economic recovery, revising up the growth forecast for this year to reflect the latest data but leaving next year’s growth forecast and the projections for the CPI …
15th July 2010
The further improvement in consumer confidence in June supports other survey evidence that Japan’s economic recovery still has plenty of momentum, despite the recent uncertainty in the financial markets and signs of weakness in some of the labour and …
13th July 2010
Japan’s economy has recently been growing at an annualised rate of around 5%, so some slowdown from here is inevitable. The consumer and business confidence surveys suggest that momentum is holding up well. We are also much less concerned than many about …
12th July 2010
The persistent sluggishness of bank lending has encouraged talk that a shortage of credit is undermining the recovery in Japan’s economy. We still do not find this argument remotely convincing. All the survey evidence suggests that weak lending by the …
The relapse in machinery orders in May was not quite large enough to conclude that the investment recovery is over before it has really begun, but it is unwelcome. The resilience of sentiment in the Economy Watchers Survey is at least reassuring. … …
8th July 2010
Looking back over the first half of the year, we have been right to be relatively bullish on the strength of the economic recovery in Japan. However, the yen has remained stronger and Japanese government bond (JGB) yields lower than we had anticipated, as …
5th July 2010
The third successive monthly increase in the unemployment rate will add to concerns that the recovery in domestic demand is too fragile to offset any slowdown in exports as a result of weakening global demand and the strong yen. In fact the labour market …
29th June 2010
We are not as worried as some about the impact of a stronger yen on the Japanese economy, but the past week saw two timely reminders of why it cannot be ignored completely. The recovery in export revenues (although not volumes) appears to be faltering, …
28th June 2010
May’s external trade data revealed two interesting developments. The first is a growing divergence between trends in the value of exports compared to the volume, probably a consequence of the stronger yen. The second is a sharp pick-up in imports. This …
24th June 2010
In our view the government’s mid to long-term growth strategy and fiscal plan is a triumph of spin over substance. Nonetheless, the markets appear willing to give the new administration the benefit of the doubt, perhaps helped by some misleading headlines …
21st June 2010
The manifestos for next month’s Upper House elections published today show a worrying lack of urgency or ambition in their commitments to sort out Japan’s dire public finances. In particular, the governing DPJ plans to wait until 2021 before starting to …
17th June 2010
The Bank of Japan’s new loan scheme is essentially a tool of industrial policy (and a clumsy one at that) rather than a significant easing of monetary conditions. As such, it will not help the Bank’s credibility or reduce concerns about its independence. …
15th June 2010
Today’s Business Outlook Survey provides further evidence that Japanese companies are much less worried than the markets appear to be about the damage to economic prospects from the crisis in Europe and the strength of the yen. … Firms shrug off financial …
14th June 2010
We have become a bit more positive about the prospects for real progress on Japan’s public finances following the first week of Naoto Kan’s premiership. Nonetheless, the first real test will come at the G20 summit later this month. … New PM makes a good …
GDP growth was unexpectedly revised very slightly higher in the first quarter, keeping the Japanese economy on track to grow by at least 4% this year. Our well-above consensus forecast of 4.5% remains challenging but achievable, especially with consumer …
10th June 2010
The appointment of PM Kan’s cabinet has been accompanied by a flurry of tough rhetoric on the need to bring the public finances under control, echoing the shift of emphasis in this weekend’s G20 statement. The fiscal plan due this month will be the first …
8th June 2010
Speculation that the elevation of Finance Minister Kan to the premiership makes FX intervention more likely is a pretty poor reason to sell the Japanese currency. Nonetheless, we do expect political and fiscal risks to undermine the yen further. … Yen to …
7th June 2010
At face value, the weakness of business spending revealed in today’s Ministry of Finance (MoF) survey points to a downward revision to Q1 GDP, although not necessarily a very large one (perhaps from +1.2% to +0.8% q/q). More importantly, there is every …
3rd June 2010
The markets are probably right to shrug off the resignation of Japan’s Prime Minister, but the fragility of the government is a serious concern given the urgent need for a credible plan to tackle the huge public debt. The likely elevation of current …
2nd June 2010
Today's data were mixed, with weak industrial production and housing starts offset by better news from the manufacturing PMI and the labour market. However, all have been somewhat overshadowed by the Social Democratic Party's decision to quit the …
31st May 2010
The second successive monthly rise in the unemployment rate in April (to 5.1%) has been widely interpreted as a sign that the recovery in the domestic economy is already faltering. We are unconvinced. Most indicators of the health of Japan’s labour market …
Today’s April data on unemployment (up), household spending and prices (both down) were all worse than expected, although they do not yet make a convincing case that the recovery is faltering. … Unemployment, Spending & CPI (Apr …
28th May 2010
Japan’s exports will continue to rebound for several quarters yet, despite the problems in Europe and the surge in the yen. A significant deterioration is unlikely until 2011, by when we expect the world economy to be slowing again. … External Trade …
27th May 2010
The continued rebound of small business confidence in Japan is a good example of the disconnect that sometimes happens between the worries of financial markets and reality on the ground. … Small Business Confidence …
26th May 2010
The turmoil in the euro-zone has hit investor confidence in Japan much harder than we believe is justified by economic fundamentals. … Europe’s crisis will not derail Japan’s …
24th May 2010
The attention of the markets is understandably elsewhere right now. Nonetheless, for the record, the first quarter GDP data kept Japan’s economy on course to grow by at least 4.0% in 2010. Our top of the range forecast of 4.5% is challenging, but …
The Bank of Japan’s proposed one-year loan scheme is designed to support the government’s longerterm industrial policy rather than to ease monetary conditions more generally. As such the immediate impact should be limited. Nonetheless, this step could …
21st May 2010
Another large rise in GDP in Q1 and some upward revisions keep Japan's economy on course to grow by at least 4.0% this year, which would be well above consensus. … GDP (Q1 …
20th May 2010
Machinery orders are now trending higher, which provides further evidence that business capital spending is picking up too. … Machinery Orders …
17th May 2010
Japan’s economy is starting to fire on all cylinders. We expect another robust gain of around 1.5% in first quarter GDP (preliminary official data will be released on Thursday). Our growth forecast of 3.0% for 2010 as a whole has long been at or near the …
The surge in the main balances of Japan’s Economy Watchers Survey (EWS) in April is further evidence of a strong and increasingly broad-based recovery, consistent with our well-above consensus GDP forecast of 3.0% for this year. Indeed, we might soon be …
13th May 2010
Claims that the current weakness of bank lending is due to the poaching of deposits by Japan Post make no sense. The real reason is the lack of demand for this type of credit. … What's really behind the weakness in bank …
11th May 2010
The continued strength of the economic recovery is one important reason why market confidence in Japan’s ability to finance its huge public debt has remained fairly high. GDP appears to have grown at a rapid pace again in the first quarter and the early …
10th May 2010
The DPJ’s economic and fiscal plan, due to be unveiled next month, is likely to be criticised on at least two counts: that the proposed target for the budget balance would still leave debt at very high levels, and that the assumptions for GDP growth are …
The market reaction to the recent events in Greece shows that Japan is still seen as a safe haven rather than one of the next countries in line for a public finance crisis. This makes sense. In addition to the well-known structural advantages that Japan’s …
3rd May 2010
Despite revising its growth and inflation forecasts higher, the Bank of Japan signalled today that it accepts more monetary support will be required to sustain the recovery. We are not sure that the Board really believes this yet. Nonetheless, policy will …
30th April 2010
Today's rush of data showed no sign of the imminent double-dip in the Japanese economy that some still fear. … Activity, Wages and Prices …
The Bank of Japan’s Policy Board is almost certain to raise its projections for both economic growth and consumer prices at tomorrow's meeting. Indeed, reliable media reports suggest it will forecast a return to inflation next fiscal year. However, while …
29th April 2010
In contrast to the position in many other major economies, notably the US, Japan’s relatively broad-based recovery is helping firms of all sizes. Indeed, April's buoyant survey of small business confidence suggests that the risk of a double-dip anytime in …
27th April 2010
Tensions between the Bank of Japan and the government over the need for further monetary stimulus remain high. We can see a number of good reasons for the Bank to resist that pressure for a few months longer, but further substantial easing will eventually …
26th April 2010
Finance Minister Kan's suggestion that any hike in the consumption tax should be used to increase government spending would risk backfiring in the markets. Even if increased public spending in certain areas might boost potential growth in the economy, any …
19th April 2010
