US, Australia and UK seek to add Japan to Aukus strategic military alliance to share advanced defence technologies

Banca March: Aukus is a strategic military alliance between three countries in the Anglo-sphere: Australia, the UK and the US. The United States, Australia and the United Kingdom are seeking to add Japan to their strategic alliance known as Aukus. Initially, this strategic military alliance between the three countries was intended to help Australia acquire nuclear-powered submarines and, unofficially, to counter China’s power in the Indo-Pacific region. However, prior to…

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Japan’s January inflation eases for third month in a row to 2.2% vs. 2.6% previously due to mirror effect in energy prices (-12.1%)

Bankinter : January CPI in Japan reaches +2.2% year-on-year vs. +1.9% expected and +2.6% previous. Underlying: +3.5% vs. +3.3% expected and +3.7% previously. Analysis: The price indicator decelerates for the third consecutive month, although it defies expectations in both readings. This slowdown is mostly due to a mirror effect in energy prices (-12.1% year-on-year). Since, after the strong rebound in energy, as of February 2023, the government implemented subsidies to…

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BoJ to remain on hold in January with no confidence on wage growth after earthquake emergency

Alicia Garcia Herrero & Kohei Iwahara (Natixis) | On the New Year’s Day, a strong earthquake hitting the Noto Peninsula created havoc, including Japan’s supply chain. Even if the Hokuriku region did not suffer from a major power failure, in contrasts with Fukushima’s disaster in 2011, disruptions are still relevant. Even if the area being hit this time is small, 4.0% share of Japan’s GDP, it has factories producing semiconductors,…

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Japan raises inflation forecast to 2.6% in 2023, up from previous 1.7%

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…

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IMF points to ‘uncertainty’ over Japan’s monetary policy

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.

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BoJ to nurture seeds of inflation from increasing wages by large firms

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…

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Japan’s GDP rises by 1.1% in 2022, compared to 2.1% growth in 2021

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…

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Japan: The beginning of the end of the BoJ’s Yield Curve Control

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…

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Shinzo Abe’s Economic Legacy: A Glass Half Full

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…

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Japan’s GDP Shrinks By 1% In Q1 2022 Vs Previous Quarter

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…