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Inflation will fall below 2% by mid-2023 Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of Japan’s 2% target by mid-2023. The increase in inflation from 3.7% to 3.8% in …
23rd December 2022
We are resending this publication due to an error in the previous version. Inflation will fall below 2% by mid-2023 Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of …
22nd December 2022
The jump in bond yields and the further strengthening of the yen following the widening of the Bank of Japan’s tolerance band for 10-year JGB yields will lower the value of assets owned by Japanese investors. Insurance firms will be most affected by …
21st December 2022
The surge in government bond yields around the world in response to today’s decision by the Bank of Japan (BoJ) to tweak its policy of Yield Curve Control (YCC) highlights the risks to international markets posed by the country’s huge investment overseas. …
20th December 2022
The Bank of Japan’s unexpected decision to alter its yield curve control (YCC) policy has led to a surge in the yen today; we now expect the USD/JPY rate to drop further, reaching 125 by end-2023. The yen has jumped by ~3% against other major currencies, …
Wider YCC band not start of tightening cycle The Bank of Japan today tweaked its Yield Curve Control (YCC) settings by widening the tolerance band around its yield target but we don’t expect it to hike its short-term policy rate anytime soon. The Bank’s …
Bank won’t follow band widening with rate hikes The Bank of Japan today widened the tolerance band around its yield target but we don’t expect it to hike its short-term policy rate anytime soon. The Bank’s decision to keep its short-term policy rate at …
A mooted adjustment to the joint statement between the Bank of Japan and the government has been widely interpreted as a step towards the withdrawal of ultra-loose policy. However, the policy implications of giving the Bank more flexibility in meeting its …
19th December 2022
Large build-up in manufacturing inventories One important detail in the Bank of Japan’s Q4 Tankan this week that we didn’t fully address in our Data Response was the large build-up in manufacturing inventories. These are a coincident indicator of economic …
16th December 2022
Annual falls in industrial output to continue while services recover December’s flash PMIs point to further annual contractions in industrial output but suggest services spending rebounded towards year-end. According to today’s flash estimate, the …
Divergence between manufacturing and services to continue According to today’s flash estimate, the manufacturing PMI fell slightly deeper into contraction from 49.0 in November to 48.8 in December. The output sub-index rose to 46.4 but is still the second …
Export downturn will start before long While the trade deficit narrowed sharply in November, most of that reflects falling import prices. Export volumes seem to hold up well but with the global downturn weighing on external demand next year, export growth …
15th December 2022
Exports downturn has begun The trade deficit narrowed substantially in November and has further scope to do so again in December. But with the global downturn weighing on external demand next year, further progress towards a more balanced goods trade …
14th December 2022
Strong investment intentions won’t survive coming recession Today’s Tankan survey suggests that while the services sector is going from strength to strength, the outlook for the manufacturing sector continues to worsen. Meanwhile, machinery orders were …
Services race ahead while manufacturing struggle Today’s Tankan survey suggests that while the services sector is going from strength to strength, the outlook for the manufacturing sector continues to worsen. The Tankan’s headline index for large …
Consumers shedding virus-related caution and inflation surging to multi-decades highs However, global headwinds are strengthening and import prices are slowing Bank would be very brave to start tightening during a global recession Window for policy …
13th December 2022
We expect inflation to remain above the Bank of Japan’s 2% target through the middle of next year despite government utility price caps and falling non-food inflation over that period. One reason is that higher food import prices in recent months will …
12th December 2022
Q3 private consumption revised down Q3 real GDP growth was revised up to a contraction of 0.2% q/q from a 0.3% fall in the second estimate released yesterday. However, private consumption was revised down from a 0.3% q/q rise to 0.1% q/q. Rather than …
9th December 2022
Household real incomes to fall in 2023 despite energy subsidies Labour cash earnings increased by a slower 1.8% y/y in October due mostly to a much smaller gain in volatile bonus payments. However, real wage losses have extended for a seventh consecutive …
6th December 2022
Regular earnings growth to maintain quicker pace Labour cash earnings increased by a slower 1.8% in October due mostly to a much smaller gain in volatile bonus payments. Regular earnings held steady due to high inflation and the boost from the reopening, …
5th December 2022
Overview – The global downturn will pull Japan into recession next year. And with government caps on utility bills pushing inflation below the Bank of Japan’s 2% target by mid-2023, the Bank will remain the outlier by keeping monetary policy loose. Key …
China’s EV push a major threat The 2.6% m/m drop in industrial production in October was the second consecutive fall. And while motor vehicle output rebounded from the plunge in September, it was still 16% below its 2019 level. Firms are still pinning …
2nd December 2022
Industrial production looking to end 2022 with a whimper Industrial production saw a steeper contraction in October, while firms’ output forecasts for November and December point to a weak rebound. Industrial production contracted by a sharper 2.6% m/m in …
30th November 2022
Production to rebound in last two months of 2022 Industrial production saw a steeper contraction in October but firms' output forecasts for November and December point to a rebound. Industrial production contracted by a sharper 2.6% m/m in October, …
Labour market tightening on hold, soaring inflation to drag retail sales The unemployment rate stayed unchanged in October and will hover around 2.5% through 2023 due to a looming economic recession. Meanwhile, retail sales values barely grew in October …
29th November 2022
Soaring inflation weighing on retail sales Retail sales values barely grew in October from September and soaring inflation points to risks that growth will remain muted this quarter. Growth in retail sales values slowed sharply from 1.5% m/m to 0.2% m/m …
Halt to labour market tightening as recession looms The unemployment rate stayed unchanged in August and will hover around 2.5% through 2023 due to a looming economic recession. The job-to-applicant ratio rose from 1.34 to 1.35, the highest it has been …
28th November 2022
Foreign visitor numbers jump but services struggle Japan received 461,000 foreign visitors in October (seasonally adjusted), almost double the September figure. This is helping businesses in accommodation and transport, which media reports say are …
25th November 2022
Nationwide inflation to rise further and drag spending growth Headline inflation in the capital set a new three-decade high in November on aggressive rises in food inflation excluding fresh food and industrial goods inflation. The upshot is that …
Tokyo prices point to further rises in nationwide inflation Headline inflation in the capital set a new three-decade high in November on aggressive rises in food inflation excluding fresh food and industrial goods inflation. The upshot is that nationwide …
24th November 2022
Inflation to fall alongside November output price index November’s flash PMIs point to further weakness in the manufacturing sector, corroborating firms’ forecasts. At the same time, services activity appears to be struggling due to the rapid rise in …
Downbeat readings reinforce 2023 recession narrative November’s flash PMIs point to further weakness in the manufacturing sector, corroborating other data. At the same time, services activity appears to be struggling under the weight of rising inflation. …
Headline inflation shot up to 3.7% y/y in October , the strongest since December 1990 while inflation excluding fresh food and energy rose from 1.8% to 2.5%. Although this puts inflation well above the Bank of Japan’s target, the case for tightening is …
21st November 2022
Media blaming weak yen and virus for Q3 GDP fall The economy shrank by 0.3% q/q in Q3 due to a surge in real imports, as well as disappointing private consumption and investment growth. Some media outlets have blamed the weak yen and COVID for the …
18th November 2022
Government intervention to tame inflation Headline inflation set a new three-decade high in October on aggressive rises in food inflation excluding fresh food and will remain near those highs this quarter. That said, government support measures will lower …
Bank of Japan to maintain policy despite soaring inflation Headline inflation remained set a new three-decade high in October and will remain near those highs this quarter. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy …
17th November 2022
Deficit to narrow by end-2022 The trade deficit widened but stayed below the record high in August, but with the yen strengthening significantly in recent weeks, the deficit should narrow later this quarter. Export values rose by a slower 25.3% y/y …
Yen rally to help narrow trade deficit The trade deficit widened but stayed below the record high in August, but with the yen strengthening significantly in recent weeks, the deficit should narrow later this quarter. Export values rose by a slower 25.3% …
16th November 2022
Losing streak has further to run Weakness in the manufacturing sector led to “core” machinery orders falling for a second consecutive month in September. Worse still, machine tool orders indicate that the two-month losing streak, rare as it is, hasn’t …
Imminent rebound in orders to be soft “Core” machinery orders fell for a second consecutive month in September due to weakness in manufacturing orders. While the usual see-saw patterns in orders point to a rebound that should materialise in October’s …
15th November 2022
Technical recession looms in H1 2023 Japan’s economy contracted in Q3, with private consumption and business investment posting far weaker results than timelier data had suggested. Growth should turn positive in Q4, amid a rebound in inbound tourism and a …
Economy to rebound in Q4 after Q3 contraction Japan’s economy contracted in Q3, with both private consumption and business investment posting far weaker results than timelier data had suggested. The single largest drag was from net trade due mostly to a …
14th November 2022
Consumption resilient against Q3 virus wave The seventh COVID wave in Q3 has been the worst on record so far in terms of daily infections. Yet the Cabinet Office’s monthly estimate of private consumption for July and August was 0.6% above the Q2 average …
11th November 2022
We still expect consumer spending to rise rapidly over the coming year. But with many overseas trading partners entering recession, exports will decline. That will prompt firms to pull in their horns and weigh on business investment. The upshot is that we …
10th November 2022
Q4 spending rebound may not materialise Current readings picked up in October’s Economy Watchers Survey but remain well short of the peaks seen after previous virus waves ended. The deepening gloom captured by the outlook readings suggest that spending …
9th November 2022
A strong rebound in working hours in the accommodation and food services sector is one reason why regular pay is growing at the fastest pace in a generation. However, there’s been a broad-based upward shift in the distribution of pay hikes so the …
8th November 2022
Regular wage growth to fall alongside inflation and profitability The 2.1% rise in labour cash earnings in September was the fastest since 1997 but it was mostly driven by volatile bonus payments and won’t be sustained. However, regular earnings growth …
Inflation and reopening boost to keep earnings growth high Overall earnings rose 2.1% y/y in September, the fastest since 1997, but we don’t think this can be kept up consistently, given that a large spike in volatile bonus payments was key to hitting …
7th November 2022
Business investment strong in Q3 Data released on Monday showed that capital goods shipments fell by 4.1% m/m in September. But across Q3, capital goods shipments rose 11.4% q/q to the strongest they have been since Q4 2018. Meanwhile, the Bank of Japan’s …
4th November 2022
The Bank of Japan’s renewed difficulties in defending its 10-year yield target have prompted fresh speculation that it may abandon Yield Curve Control. However, neither concerns about the functioning of the bond market nor worries about a weaker yen …
1st November 2022
