BancaMarch: Japan’s government has raised its inflation forecast to 2.6% for 2023, well above the previous 1.7%. Considering that on Thursday of next week there is to be a meeting of the Central Bank of Japan, the market is closely watching the consequences that this announcement may have on the lax monetary policy that the Asian country has been defending. It should be recalled that, at the beginning of this…
BancaMarch | The International Monetary Fund today alluded to “uncertainty” around the direction of Japan’s monetary policy, saying a possible shift to ultra-low interest rates could have a significant impact on global financial markets. Krishna Srinivasan, head of the agency’s Asia-Pacific Department, also pointed to risks surrounding Asia’s economic outlook, such as weakening exports to advanced economies, slowing productivity in China and fragmentation of global trade.
Alicia García Herrero (Natixis) | Japan has developed an unusual social consensus to raise wages, to protect people’s livelihood from rising inflation. With this background, the spring wage negotiation among major firms is expected to result in a rise of +3.8%, the largest increase in 30 years. However, subdued productivity gains at a macro level are expected to limit a sustainable wage increase in Japan. Because large firms have improved…
Link Securities | According to data from the Japanese government cabinet, Japan’s gross domestic product (GDP) increased by 0.2% in 4Q2022 compared to 3Q2022, compared to a revised contraction of 0.3% in the previous quarter, although the reading was below the 0.5% growth expected by the analyst consensus, which was in line with the preliminary reading of the figure. Private consumption rose after the removal of tight border controls, and…
Alicia García Herrero (Natixis) | Financial markets were caught off guard when the Bank of Japan (BoJ) adjusted its monetary policy on December 20th, 2022. The Bank decided to lift the ceiling on the 10-year JGB yield to 0.5% from 0.25% under the yield control (YCC). One interesting point to make is that the BoJ did not take the decision against the wall. In fact, the upward pressure on the…
Alicia García Herrero (Natixis) | The assassination on 8 July 2022 of Japan’s longest-serving prime minister Shinzo Abe was one of the most shocking and saddest events in contemporary Japanese history. Abe had surprised Japanese citizens with his sudden health-related resignation in 2020. His resignation opened the way for Japan’s then foreign minister, Fumio Kishida, to win Liberal Democratic Party (LDP) support and the November 2021 general election, to become…
Link Securities | Japan’s GDP contracted by 1% in Q1 2022 from the previous quarter on an annualised basis, a smaller decline than the 1.8% drop expected by analysts. In addition, in the previous quarter Japan recorded GDP growth of 3.8%, revised downwards from an initial estimate of 4.6% growth. The main surprise was a marginal 0.1% annualised fall in private consumption, which is explained as the main drag on…
Alicia García Herrero (Natixis) | As the Yen rapidly depreciates above USDJPY=120, the unintended consequences of the Bank of Japan (BoJ)’s Yield Curve Control (YCC) has become increasingly apparent. Last month, the BoJ announced it would intervene in the JGB market to protect the 0.25% ceiling on the 10-year JGB yields as they were being pushed up by higher US Treasury yields. Furthermore, after the Fed began to tighten last…
Akira Horiguchi (Capital Group) | 2020 was a rather eventful year for Japan following a series of headline-grabbing events, including COVID-19, a delay of the Tokyo Summer Olympics and a surprise change in leadership in September. Yoshihide Suga’s succession of his ally Shinzo Abe as prime minister, in particular, has provided investors plenty to think about in terms of what Suga’s leadership could mean for Japanese stocks heading into the new year.
Keith Wade (Schroders) | Clearly, Japan’s debt is significantly higher than the US’. However, it is stable rather than rising. This reflects the poor position of US government finances before Covid-19, where the budget deficit was running at 6.3% of GDP at a time when the economy was doing well with unemployment at less than 4%, a 50-year low. (In net terms the comparison is less stark with Japan at 180% GDP versus 114% in the US).