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Unemployment rate still set to rise in H2 The unemployment rate reversed the sharp rise in March last month and the job-to-applicant ratio stabilised, but a recession in H2 should still see the unemployment rate peak at 3% by year-end. The labour force …
30th May 2023
Looming recession will see unemployment rate hit 3% The unemployment rate fell from 2.8% to 2.6% in April, a better outturn than the 2.7% we and the consensus had pencilled in. The job-to-applicant ratio was unchanged at 1.32, arresting a downtrend that …
Inflationary pressures broadening even further We’ve been highlighting the increasingly broad-based nature of price pressures in Japan and there’s been no let-up. All three underlying measures of inflation published by the Bank of Japan increased in …
26th May 2023
Inflation to fall below 3.0% by year-end Tokyo headline inflation fell to 3.2% in May largely due to a sharp fall in energy inflation, but inflation excluding fresh food and energy ticked up due to faster gains in “core” goods prices. We still expect a …
Inflation has just a bit more to climb Headline inflation in Tokyo fell from 3.5% to 3.2% in May, largely due to a sharp 8.2% fall in energy inflation, which took away almost 0.5%-pts from headline inflation. The drop shows that lower energy import prices …
PMIs suggest economy strengthened further in May May’s flash PMI readings were the strongest they’d been in a while and point to gains in both industrial production and services spending, supporting our assessment that the economy continued to grow in Q2. …
23rd May 2023
Most of the recent acceleration in services inflation reflects pass-through of higher goods prices. While firms have become more willing to pass on higher input costs, we still think that sluggish wage growth and the recent slump in import prices means …
22nd May 2023
Business investment in for a tough H2 We already know that business investment rose despite a plunge in capital goods shipments last quarter . As such, we wouldn’t read too much into the fall in machinery orders in March. The bigger picture is that as …
Business investment likely off to a slow start this quarter We already know that business investment rose last quarter. As such, we wouldn’t read too much into the fall in machinery orders in March. Machine tool orders data point to a slight fall in …
Consumers running out of steam The 0.4% q/q expansion in Q1 real GDP reported on Wednesday outperformed the 0.2% we and the consensus had expected. One reason was that private consumption rose at a quicker 0.6% q/q than the 0.4% the consensus was …
19th May 2023
Inflation should fall rapidly in H2 on stronger yen, weaker wage growth Underlying inflation pushed past 4.0% for the first time in 40 years partly due to a spike in food inflation. Meanwhile, services inflation set a fresh 30-year high, largely …
Underlying inflation to rise further before falling due to stubborn food price pressures Headline inflation rose from 3.2% to 3.5% in April, despite a 4.4% fall in energy prices. As was the case with Tokyo, that was largely due to a rise in underlying …
Exports outlook improving in Q2, but not for long The trade deficit narrowed in April as export values rose faster than import values, largely reflecting the faster fall in import prices. Export climate readings suggest export volumes will continue to …
18th May 2023
Falling energy imports supported trade balance The trade deficit narrowed in April as export values rose faster than import values. That’s more a reflection of lower energy prices, which decreased the value of fuel imports. Export values increased by 2.6% …
Exports downturn to drag economy into recession in H2 GDP surprised to the upside last quarter, mainly because of stronger performances in private consumption and business investment than preliminary data had indicated. That suggests that there is …
17th May 2023
Decent rebound in GDP as investment surprised to the upside GDP surprised to the upside last quarter, mainly because of stronger performances in private consumption and business investment than preliminary data had indicated. That suggests that there is …
Ueda leaves door open to acting before full review Bank of Japan Governor Ueda spoke on Tuesday in the Diet and mostly repeated what he said in the Bank’s post-meeting press conference on 28 th April, when he left monetary policy settings unchanged in his …
12th May 2023
Governor Ueda presided over his first policy meeting late last month and opted to keep all monetary policy settings, including Yield Curve Control (YCC), completely unchanged. To be sure, Mr Ueda also announced that the Bank will conduct a thorough review …
11th May 2023
Brighter outlook in Q2 The further rise in both the current and outlook readings point to continued upward momentum in services spending this quarter. Meanwhile, manufacturing conditions fell slightly but remained robust, boding well for industrial …
Gloomy wage growth outlook in H2 2023 Wage growth held steady in March from February, as a further slowdown in regular and overtime pay growth was offset by a decent increase in volatile payments. We still see further scope for wage growth to slow this …
9th May 2023
More scope for wage growth to slow Labour cash earnings rose by 0.8% for the third consecutive month, broadly in line with our 0.7% forecast and far below the average 1.8% increase across 2022. As we had expected, regular earnings growth slowed from 0.8% …
Pay at small firms not keeping up with large firms While wage growth has been very strong by historical standards in recent months, wages have risen faster for employees of larger firms than at smaller firms. (See Chart 1.) Chart 1: Labour Cash Earnings …
5th May 2023
The slowdown in regular earnings at the start of the year largely reflects sampling changes, with an unchanged sample of firms reporting continued strong wage growth. However, with inflation set to come off the boil before long and the labour market …
4th May 2023
Japan’s large corporate sector surpluses are a key source of deflationary pressure. Corporate savings surged in the 1990s, primarily because net interest payments slumped, and have since remained stubbornly high. Unfortunately, workers have benefited …
2nd May 2023
The Bank of Japan predicted that inflation will fall well below its 2% target in FY2025 when it kept policy settings unchanged today. And while it pledged to conduct a review into its policy measures, the results will only be unveiled next year. The …
28th April 2023
Yield Curve Control here to stay for now The B ank of Japan predicted that inflation will fall well below its 2% target in FY2025 when it kept policy settings unchanged today. And while it pledged to conduct a review into the Bank’s policy measures, the …
Export downturn not over yet Export volumes rose for the second consecutive month in March and with PMIs in Japan’s main trading partners rebounding, the further fall in export volumes we had pencilled in for Q2 looks increasingly unlikely. We’ve now …
Economy may not have shrunk in Q1 The end-month data rush only adds to the dilemma the Bank of Japan is facing. While labour market conditions are now easing in earnest, underlying inflation is set to surpass 4% at the national level. On balance though, …
Resilience in activity won’t last The further rise in industrial production and retail sales in March means that the economy may not have shrunk in Q1 after all, but with recessions in major trading partners looming we still expect GDP growth to be weaker …
Labour market loosening in earnest Labour market conditions loosened visibly in March and there’s room for it to loosen further given the recession we’re expecting in the second half. Meanwhile inflation reversed course and increased in April. Our …
The turmoil in the US banking system is likely to set off the worst decline in Japan’s commercial real estate prices since the Global Financial Crisis by prompting foreign investors to stop buying Japanese assets. In the worst-case scenario, GDP will …
27th April 2023
Note: We’ll be discussing the BOJ’s April decision and the fate of YCC in a 20-minute online briefing at 09:00 BST/16:00 SGT on Friday, 28th April . Register here . GDP growth falling short of expectations, but price pressures increasingly broad-based …
21st April 2023
Note: We’ll be discussing the BOJ’s April decision and the fate of YCC in a 20-minute online briefing at 09:00 BST/16:00 SGT on Friday, 28 th April . Register here . BoJ will signal inflation target close to being met The Bank of Japan will release …
Exports downturn could prove short-lived April’s flash PMIs point to further upside risks to our GDP forecasts, indicating a broad improvement in both domestic and external demand. That suggests the exports downturn may be short-lived. Meanwhile, services …
PMIs suggest exports downturn may be short-lived April’s flash PMIs point to further upside risks to our forecasts, pointing to a broad improvement in both domestic and external demand and suggesting that the exports downturn will be short-lived. …
Stronger yen, falling commodity prices to cool decades-high inflation Underlying inflation saw a sizeable increase in March, while headline inflation inched down thanks to falling energy prices. A stronger yen and falling import price inflation should …
Lower import price inflation will tame underlying inflation March data were very much in line with the Tokyo CPI. Underlying inflation saw a sizeable increase in March, while headline inflation inched down thanks to falling energy prices. A stronger yen …
The trade deficit narrowed in March as import values fell faster than export values. Data for Q1 so far are still consistent with a negative contribution from net trade to GDP. Export values surprised analysts to the upside, rising by 4.3% y/y in March …
20th April 2023
Preliminary volume data confirms Q1 drag from net trade The trade deficit narrowed in March as import volumes fell faster than export volumes. Data for Q1 so far are still consistent with a negative contribution from net trade to GDP. Export values …
Note: We discussed our revamped FCIs and took your questions on global financial conditions in a 20-minute online briefing on Thursday, 20 th April . Watch the recording here . We have revamped our financial conditions indices (FCIs) for advanced …
18th April 2023
A higher corporate tax would reduce corporate sector surpluses and could stimulate demand if the additional revenue were used to finance higher public spending or transfers to households. But the tax would have to be raised to implausibly high levels to …
17th April 2023
Ueda has his eye on wage growth Bank of Japan Governor Kazuo Ueda noted in his inaugural press conference this week that more time is needed to see if wage growth can be sustained at a level where it will support inflation at or above the 2% target. So …
14th April 2023
Japan has escaped the recent banking turmoil in the US and Switzerland relatively unscathed. While banks face some risks arising from their lending exposure overseas , there are no signs of liquidity stress. And unrealised losses on bonds are less of a …
12th April 2023
Another bearish signal on Q1 business investment The fall in “core” machinery orders in February is another bearish signal on business investment last quarter. Domestic machine tool orders suggest a further fall in March, but even if “core” machinery …
Another bearish sign for business investment in Q1 “Core” machinery orders fell by 4.5% m/m in February, following a 9.5% rise in January. Orders from the manufacturing sector saw a strong 10.2% m/m rebound, largely due to a huge spike in orders from the …
Strong consumption momentum to carry over into Q2 Both the current and outlook readings in March hit their highest in more than a year, capping off a strong first quarter for the EWS. This is another sign that private consumption remained resilient in Q1 …
10th April 2023
Tankan paints gloomy picture This week’s Q1 Tankan headline indices supported our assessment that Japan’s economy will slip into a mild recession in the first half of this year. The Bank subsequently released the comprehensive data from the survey on …
6th April 2023
Faltering business conditions, investment intentions point to recession Today’s Tankan survey suggests that while the services sector remains resilient, the outlook for the manufacturing sector has worsened materially. The Tankan’s headline index for …
3rd April 2023
Tankan points to sharp investment slowdown The Tankan’s headline index for large manufacturers fell for the fifth consecutive quarter from +7 to +1, broadly consistent with decline indicated by the monthly Reuters Tankan (Bloomberg consensus: +3, CE …
