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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
The third successive monthly increase in consumer confidence suggests that household spending in Japan is unlikely to collapse once the initial boost from government measures has faded. Inflation expectations are rising too. … Consumer Confidence …
The Japanese government is banking on average annual GDP growth of at least 2% over the next ten years to help bring public debt back under control. This would be well above most estimates of Japan’s sustainable growth rate. But this does not mean that 2% …
15th April 2010
Just as the surge in bank lending in late 2008 was hardly evidence of strength in Japan's economy, the recent year-on-year declines may not be a sign of renewed weakness. What's more, in contrast to many other major economies, growth in broad money is …
12th April 2010
Speculation of an imminent resumption of renminbi appreciation has been supporting other Asian currencies against the dollar, including the yen. However, we would give this factor very little weight when thinking about the outlook for the Japanese …
The sharp improvement in the main balances of Japan’s Economy Watchers Survey (EWS) in March is further evidence of an increasingly broad-based recovery. This trumps the bad news of a fall in machinery orders in February; the trend in this key investment …
8th April 2010
The Bank of Japan tweaked its qualitative assessment of the economy today, changing a few words here and there to suggest a more positive outlook. However, we will have to wait until the latest forecasts for economic activity and prices are published at …
7th April 2010
The past week’s Japanese data included some soft spots, but they were not bad enough on their own to justify a more bearish view on the yen. The relative optimism about the US economy and expectations of earlier tightening from the Fed have also been …
5th April 2010
The Bank of Japan's quarterly Tankan survey revealed little that was not already clear from the improvements in the monthly data. The relative pessimism of small firms is a concern, but the Shoko Chukin survey suggests this is overdone. The projected …
1st April 2010
Today’s data on labour cash earnings and housing starts in February continued this week’s run of generally disappointing news on the Japanese economy. The timelier Shoko Chukin survey for March did at least confirm the improving trend in conditions …
31st March 2010
Today’s data on household spending suggest that the recovery in consumption may have faltered in the first quarter. Nonetheless, other evidence from the consumer sector is reassuring and we do not believe this is the start of a double-dip. … Spending, …
30th March 2010
We are raising our forecasts for 10-year Japanese government bond (JGB) yields to a peak of 1.75% later this year (from around 1.40% on Friday). This may not sound like much, but in the context of Japan and of our bullish forecasts for other major bond …
29th March 2010
The plan to raise the caps on postal savings deposits and life insurance is being interpreted by some as positive for Japanese government bonds (JGBs) and by others as a major threat to the banking system. In fact the direct effects, good or bad, are …
26th March 2010
February’s CPI data were not quite as bad as some of the subsequent commentary has suggested. Nationwide prices did at least rise month-on-month on all the main measures. In the meantime, household inflation expectations have remained positive, while …
Japan’s exports are predictably booming in year-on-year terms as the post-Lehmans slump in world trade drops out of the annual comparison. More revealingly, the volume of exports is heading for another large quarter-on-quarter gain in Q1, and the …
24th March 2010
The quarterly Flow of Funds data published by the Bank of Japan today shed a little more light on several hot topics, including households’ holdings of government securities and the huge difference between gross and net public debt. … Which matters more – …
23rd March 2010
In contrast to the position in many other major economies, notably the US, Japan’s broad-based recovery is helping firms of all sizes. Along with the relative strength of consumer confidence, this is another good reason to expect growth to remain firm for …
22nd March 2010
The strength at the end of last year has laid a firm foundation for 2010. With the latest survey evidence showing that momentum remains positive, we continue to expect GDP growth of around 3.0% this year, well above consensus. … 2010 looking good, but …
18th March 2010
The bare minimum the Bank of Japan could have got away with today was to extend the lifetime of the existing ¥10 trillion programme of three-month loans. In the event it has also doubled the size of the programme, to ¥20 trillion. However, with credit …
17th March 2010
The second successive monthly increase in consumer confidence in Japan suggests that household spending will remain strong in the current quarter even after last year's initial boost from government measures has faded. Encouragingly, sentiment towards the …
15th March 2010
The latest suggestions that official statisticians are engaged in some fiendish conspiracy to manipulate Japan’s GDP data are on very shaky ground. We continue to expect growth of around 3.0% in 2010, well above the consensus of 1.5-2.0%. But despite our …
Despite the small downward revision to growth in the fourth quarter, from 1.1% to 0.9% q/q, Japan has still recorded the biggest increase in GDP of any G7 economy since activity bottomed out in Q1 2009. … GDP (Q4, …
11th March 2010
