Whither the USD-JPY?

Well it wasn't all that long ago that Claus was asking us when and whether the Japanese authorities would feel the need to intervene to stop the - at that point (9 Nov) - seemingly inexorable rise of the yen against the dollar. Obviously a few short weeks in currency markets are a very long time (which is why playing them has to be such a complicated business I feel), and as we can see from the

Inflation, Employment and Various Interpretations of What is Happening In Japan

Well, promises are promises, but a birthday is a birthday, and since today it is my turn - and being a good Capricorn - what better way to spend it than in updating my excel files with all the new data coming out of Japan. And a veritable raft of data it has been, since there are releases about Consumer Prices, Family Income and Expenditure, the November Labour Force Survey, building starts, (

Japan Building Starts November 2007

Japan's housing starts fell for a fifth straight month in November, indicating that stricter rules for obtaining building permits, and the knock-on effects of the US sub-prime crisis may continue to act as a drag on economic growth in the first quarter of 2008. Ground broken on new homes and condominiums fell 27 percent from a year earlier after falling 35 percent in October and 44 percent in

Merry Xmas and A Happy New Year

Well, a Merry Xmas and a Happy New Year to all our readers from me (Edward), Scott and Claus. Thank you for taking the time and trouble to pass-by. This blog will now - failing major and surprising new developments in the global economy - be offline till the end of the first week in January, or till after the festival of Los Reyes Magos in Spain (for those of you who know what this is all about).

Japan in 2008 ... ZIRP Coming Closer?

None of the writers here at Japan Economy Watch are professional forecasters and analysts per se. Yet, with what seems to be happening 'next' in Japan I can not help but think that you have been extraordinarily well served here at JEW during the past year. As such, let us have a look at what I said on Japan (and indeed the global economy) about a year ago as we stood on the brink of 2007.(...) we

Japan Exports November 2007

Japan's export growth slowed in November as the U.S. housing cut demand for automobiles and construction equipment, and the knock-on effect of the sub-prime turmoil started to be noted in other developed economies. Also worthy of note this month is that exports to China fell back slightly, from a revised 1.17 trillion yen in October to 1.14 trillion yen in November. Likewise exports to Europe,

Japan Economy 2007/2008, The Moment Of Truth?

Well the Japan Cabinet Office have just published their monthly economic report together with their their revised forecasts for fiscal year 2008. As could be expected, downward revisions are to be seen everywhere, except in the plans for government spending, which commentators expect may well be up (details of the 2008 budget are due to be released tomorrow), but even this last detail seems

Japan services Index October 2007

Japan's services sector rebounded slightly in October from the biggest drop in six months. Japan's tertiary index, which is a gauge of money households and businesses spend on phone calls, power and transport etc, climbed 1.1 percent in October after dropping a revised 1.8 percent in September, the Trade Ministry said today in Tokyo.Consumer spending accounts for more than half of Japan's economy

Japan in a 'Mild Recession?' ... Sounds about Right to Me

During 2007, myself and especially Feldman and Takehiro Sato from Morgan Stanley have tended to move pretty much in unison when it comes to the economic analysis on Japan (non colluding!). Of course, this is very much due to the fact that I always make sure to read, at least, what the MS' Japan analysts have to say before saying anything myself on Japan. In this way, it is one thing to

Japan Consumer Confidence Index November 2007

Japanese households became the most pessimistic they've been in almost four years in November as fuel and food prices rose even while wage growth remained stationary, leaving consumers even less willing and able to spend. An index that measures confidence among households with two or more people slid to 39.8 last month from 42.8 in October, the Cabinet Office said in Tokyo today. A reading below

Japan Economy Watchers Index November 2007

Well, even while machinery manufacturers ride on the back of strong export demand, the internal situation in Japan continues to deteriorate. The latest indication of this is the November edition of the Economy Watchers Index. This survey of barbers, shopkeepers and others who deal with consumers, fell for an eighth month to 38.8 from 41.5 in October, the Cabinet Office said today in Tokyo (

Japan Machinery Orders October 2007

Japan's October machinery orders rose at a rapid 18.7% year on year clip, signaling that companies have been increasing spending plans to meet Asian and European demand for chips, cars and electronics. Private sector orders climbed 12.7 percent to 1.08 trillion yen ($9.7 billion) from September, when they fell 7.6 percent, the Cabinet Office said in Tokyo today. But the biggest push came from

Japan Q3 2007 GDP Revised Down

Japan revised down its third-quarter GDP growth estimate today, surprising both market participants and the great majority economic observers - although not, it should be noted, those of us who run the Japan Economy Watch Blog, or posters at Global Economy Matters (and remember Claus was writing this last piece back in January). Neither will the result exactly catch the ever readable MacroMan

Japan Index of Leading Indicators October 2007

Well, perhaps the only positive thing that can be said about the latest release from the Cabinet Office of the Index of Leading Indicators is that it is above last months zero reading. The index, which is Japan's broadest indicator of the outlook for the economy was in contraction mode for a third consecutive month, a signal that growth may well be stalling. The leading index was at 20 in

Japan Company Capital Spending Q3 2007 and Japanese Wages in October

Japan's companies cut spending for a second quarter between July and September according to data from the Finance Ministry today. Capital spending fell 1.2 percent in the three months ended 30 Sept 2007 (when compared with Q3 2006) after a 4.9 percent year on year drop in the previous quarter.Profit at the 24,000 companies surveyed fell for the first time in five years, giving them less cash to

Japan Building Construction Starts November 2007

Japan's housing starts fell for a fourth month in October as stricter rules for obtaining building permits and the impact of the US sub-prime credit tightening continue to place a burden on economic growth. Starts tumbled 35 percent in November from a year earlier after falling 44 percent in September, the Ministry of Land Infrastructure and Transport said in Tokyo today. The government eased

Japan Retail Prices, Employment, Income and Consumption October 2007

Japan's economy showed its first signs of inflation this year after food and energy prices both rose in October. Core consumer prices, which exclude fresh food, climbed 0.1 percent in October from a year earlier, the first increase since December 2006, the statistics bureau said today in Tokyo, while the index excluding food and energy continued to fall (by 0,3%).Claus - who is busy with exams

Japan Industrial Output October 2007

Well, industrial output in Japan seems to be performing well at the moment since Japan's industrial production rose to a record in October. Output rose a seasonally adjusted 1.6 percent from a month earlier, when it fell 1.4 percent, the Trade Ministry said in Tokyo today. The year on year rise was 3.5 percent.Clearly this would seem to indicate that exports continue to hold up well, although

Japan Retail Sales October 2007, the Employment Outlook and the Topix Bear Market

Japan's retail sales rose at the fastest pace in more than a year in October as consumers bought new-model cars and record gas prices increased revenue at filling stations. Sales climbed 0.8 percent in October from a year earlier, and this constituted the third monthly gain, according to the Ministry of Economy, Trade and Industry in Tokyo this morning. Well, that's the headline news, and here's

Ageing and Japan's Fiscal Position

According to an article in the Japan Times (based on data from Japan's Internal Affairs and Communications Ministry) the over 75s now constitute 10 percent of the Japanese population. This figure was 1.3 percent in 1950, when the government first started tracking such data, and rose to 5 percent in 1991 before breaking the 10 percent mark this year.As of Nov. 1, Japan's population is estimated

Moving Money Into Emerging Asia

Two minor pieces of news caught my eye over the weekend. In the first place Bloomberg draws our attention to a Goldman Sachs report about hedge funds shifting Asian investments out of Japan (because of lower returns and poor corporate governance) to other areas of emerging Asia.Japan's average return on equity will be about 10.2 percent this fiscal year, compared with 20 percent in the U.S. and

Japanese Exports and Global Recoupling

Claus drew my attention this morning to this interesting piece from Nouriel Roubini about global recoupling. Actually this post raises a number of points, all of them interesting ones, and some not as semantic as they seem at first sight.But before we get into all of this lets take a quick look at the latest set of trade figures from Japan. As Bloomberg tell us:Japan's exports rose to a record in

Japan Q3 2007 GDP

Well Claus will doubtless be commenting in depth on the provisional data which have been released today, so I will limit myself here to simply sticking up a couple of charts. Basically the headline news is that the Japanese economy expanded an annualized 2.6% in the three months ended Sept. 30 (or a quarterly increase of 0.6%) following a revised 1.6% contraction in Q2, according to data released

Japan Consumer Confidence Index October 2007

Japanese consumer confidence fell in October, and to the lowest levels in three years. I guess there is nothing especially surprising about this given everything else we have been seeing of late, but it is another data point.Japan in fact maintains two separate consumer confidence indexes, one is an index that measures confidence among households with two or more people, and this slid to 42.8

When Will Japan Intervene?

Well my dear JEW readers, as the global dollar sell-off continues in full swing against all major currencies we are moving into a territory which I just a few days implied to be wholly theoretical. You see, while indeed the USD has been trading at all time lows against Sterling and the Euro (to name but a few) the recent day's fall against the Yen has been particularly drastic. In time of writing

Machinery Orders September 2007 and the Economy Watchers Index in October

Well, this week really has been a pretty gloomy and forlorn one in Japan, since following hard on the heels of the zero reading on the leading indicators index we now have the September machinery orders data, and the latest edition of the Economy Watchers index (Japanese only at present). First the machinery orders.Machinery orders fell sharply in Japan in September, far more more than economists

Japanese Leading Indicators-all negative

Just to follow up on Edward's chart, I had assumed on seeing the news item about this index that the result of zero was due to an equal number of positive versus negative components. That is not the case...if you follow the link in Edward's post you will see that every single available component was negative. So the headline number is a bit misleading if you are not familiar with the details of

Japan Leading Index Falls To Zero

Japan's broadest indicator of what the outlook for the economy may be fell to the lowest level in a decade today, signaling growth may be in the process of grinding to a halt. The leading index was zero percent in September, according to the Cabinet Office in Tokyo today. A reading of below 50 is normally considered to indicate that the economy may slow in the coming three to six months. Since

Where is Japan Heading?

[This is a big one and if you are not in the mood I recommend that you just skip down to my summary which should give you the main thrust of my argument and analysis. This note also features over at my personal weblog Alpha.Sources.] I would imagine that the answer to the question above remains quite at the forefront of many an investor's and economic analyst's mind. In this entry I will try to

Japan Unemployment September 2007

Japan's unemployment rate rose in September for the second month in succession, giving us just one more reason why the BoJ may not be raising interest rates anytime in the immediate future. The jobless rate climbed to 4 percent in September from 3.8 percent last month and 3.6 percent in July, according the Japanese Statistics Office at the end of last week.The Bank of Japan had been expecting

Japan Retail Sales September 2007

As in August, Japan retail sales in September 2007 managed to eke out a small (0.5%) year on year increase - according to data released by METI today - but as in August this was largely due to a low base effect, since sales in August and September of 2006 were not exactly spectacular (see chart below). Quarter on quarter sales in July-September were down 0.5% on sales in April-June, an outcome

Japan Industrial Output September 2007

Japan's industrial production fell in slightly September from the record August level, as makers of cars and general machinery cut manufacturing following a slowdown in overseas demand. Production was down a seasonally adjusted 1.4 percent from a month earlier, when it surged 3.5 percent, according to data from the Trade Ministry in Tokyo today.Claus will probably have a fuller comment on the

Japan Exports September 2007

Japan's exports grew at the slowest pace in two years in September as shipments to the U.S. dropped back. In total exports rose 6.5 percent from a year earlier, according to data from the Japanese Finance Ministry released earlier today. At the same time imports declined for the first time in more than three years, helping the trade surplus widen to yet another record.Shipments to China, the

David Pilling on Koizumi and Reform

Financial Times journalist David Pilling - who is a very able Japan watcher - has a most interesting piece in the FT today. Since he makes some very simple points in a very clear fashion, I will take the unusual step - for this blog at least - of quoting at some length.David Pilling makes several points which are very well taken. In the first place, he points out that Japan's recent "recovery" is

Japan August 2007 Consumer Confidence Index

Japanese household sentiment stayed stuck hoevering around a three-year low in September, and there is little indication in the latest consumer confidence index that Japanese consumer spending is likely to accelerate any time soon. The sentiment index that measures confidence among households with two or more people edged up to 44.1 points last month from 44 in August, arresting what had been a

Not Much News from the BOJ

Today's meeting in the BOJ did not bring much news from the eastern shores of Asia as the overnight rate was kept at 0.5%. Relative to the mixed signals from the economic readings on August there is not much new data available apart from Ken Worsley's note that one of the leading economic sentiment indices (Economy watchers) fell for a sixth consecutive month. As for the meeting itself

Japan August 2007 Machinery Orders

Just a brief note on future orders in the key machinery sector. Machine orders declined by a more-than-expected 7.7 percent in August, after gaining 17 percent the month before, according to data from the Cabinet Office in Tokyo today. This is not quite as bleak a picture as it appears, since in fact overseas orders rose 23% over what had been a rather low level in July. To get some idea of where

Japan Economy Watchers Index September 2007

The Economy Watchers index, which is a gauge of Japanese domestic demand based on a survey of workers who deal with consumers, fell for a sixth consecutive month in September, to 42.9, down from 44.1 in August, according to the Japanese Cabinet Office in Tokyo today (Japanese only). A number less than 50 means pessimists outnumber optimists.Today's report, which is the first piece of

Feldman on Japan

Over at the Japan Economy and News blog Ken Worsley alerts us to a notification he got from Bloomberg about a recent interview conducted by Tom Keene with Morgan Stanley's Robert Alan Feldman on the political and economic situation in Japan. Here at JEW we have on several occasions applauded Feldman's work on Japan and its ageing problem. For my own part many of my notes on Japan have been

September Tankan and August Earnings

The September Tankan index of sentiment at large manufacturers came in with a more or less neutral reading. At 23 it was unchanged from June. Since people were expecting worse this is being generally well received, but beyond that I have little more to say, since we need to await data. Also out today was the Provisional Report of the Monthly Labour Survey for August 2007, and here I do have

Finally Some Good News from Japan?

(cross-post from Alpha.Sources)On the back of a miserable Q2 GDP reading and general uncertainty in markets Japan's economy has not exactly been the harbinger of pleasant data reading as of late unless of course you have been short on the Yen. As I said in a recent small post on Japan Economy Watch this week would bring some pretty interesting data releases from Japan in terms of figures for

Japan Retail Sales August 2007

METI have just released the latest retail sales data. The yen value of both retail sales and sales at large stores actually fell from July, although total retail sales did manage to eke out a small 0.5% increase year on year, which was notable since in 9 of the previous 10 months they have actually been down even year on year.

Japan Industrial Output August 2007

Well industrial output was certainly up in Japan in August.Japan's industrial output surged at the fastest pace in almost four years....Production rose 3.4 percent from July to a record, the Ministry of Economy, Trade and Industry said in Tokyo today.As I say, the August numbers certainly shot up. The question is what to make of this reading. Claus is preparing a fuller analysis even as I post

Japan Employment and Unemployment August 2007

Well, as reported in the Financial Times today, Japanese unemployment crept up slightly last month:Japan’s jobless rate rose for the first time in 11 months as more people sought work, underlining concerns about the slow pace at which economic growth has translated into higher wages.The unemployment rate rose 0.2 point to 3.8 per cent in August, while the job to job-seekers ratio deteriorated

Raising Consumption Taxes To Finance Pensions?

According to reuters today:Japan may finance its basic pension scheme through a rise in its consumption tax, a senior official from the ruling party said on Thursday."We are not going to resort to using the sales tax from the beginning, but in the end I think we will conclude that it's best to finance the pension scheme with the sales tax," said Sadakazu Tanigaki, the Liberal Democratic Party's

Japan Trade Surplus August 2007

Well as Claus forecast in his last post, I have indeed been preparing something on the last trade figures. First off, the headline numbers.Japan's August trade surplus widened to 743.2 billion yen ($6.5 billion). On an annual basis exports rose at more than twice the pace of imports, according to the latest data released by the Finance Ministry today. The surplus has nearly quadrupled - and

On We Go?

Well, I know that Edward is already preparing something on today's reading on the Japanese surplus which seems to be muddling along just fine even in the midst of ever more uncertain global economic conditions. The question is of course whether this will continue?Meanwhile, Bloomberg also looks forward this morning to a slew of data due at the end of the week. And the predictions?On inflation the

No Hike in Sight at the BOJ

(Cross-post from Alpha.Sources)As Bernanke chooses to cut 50 basis points and as economic growth is visibly slowing in Europe and even contracting in Japan I don't think many of us expected the BOJ to raise rates. As such, Fukui and his colleagues duly chose to stand firm yet again yesterday as the economy contracted in Q2 2007 and remained mired in deflation. In this way it indeed seems as if

Japan Services Activity Down In July

Demand for services in Japan fell in July (slightly).The tertiary index, which is a gauge of money households and businesses spend on services ranging from phone calls to leisure, slipped 0.5 percent from June, according to data from the Trade Ministry released this morning. This data point is significant since services these days form such an important part of domestic consumption (Actually,

Catch-22...Japanese-style

A Google search very quickly turned up an article by William Pesek Jr. from the International Herald Tribune which states that "roughly 96 percent of Japan's government securities are held domestically, enabling officials to avoid capital flight even as they sell mountains of debt." This is a very important factor to consider when reviewing the data and commentary that Edward and Claus have

Japanese Appetite For US Bonds On The Rise?

Japanese investors bought more foreign bonds in net terms last week than at any time in the last two years. The appetite for US bonds seems to have been boosted, rather than deterred, by increasing expectations of a cut in the US benchmark interest rate.This would seem to be for the rather perverse reason that if the Fed have to lower interest rates this is probably an indication that the US

Moody's Don't Miss A Shot

Following all the stick that they have taken over the sub prime scandal, one should now expect the ratings agencies to use the vocabulary of "strong vigilance" in connection with those sovereign debts whose scale defy the limits of credulity, especially Italy and Japan. Hence, with all the uncertainty surrounding policy direction following Abe's departure (and see the last post for some

Richard Katz in the FT

Japan economy expert Richard Katz had an op-ed in the Financial Times earlier this week which is well worth reading in its entirety. Here I will just pick out one or two points:Firstly he argues most cogently that Japan has not in any meaningful way "decoupled" from the US."Despite talk that Japan has “decoupled” from the US economy, the opposite is the case. The turbulence in Japan’s financial

Japan Consumer Confidence Index August 2007

The Cabinet Office today released the August consumer confidence survey results. I think they speak for themselves. Here's the general index:and here are the various sub-components:Of course, could it be any coincidence that all of this is announced on just the day that Abe decides to resign?

The Ratings Agencies and Japan Government Debt

As explained here, with outstanding Japan government debt variously estimated to be somewhere in the region of 150% of GDP, and structural liabilities growing as Japan's population ages rapidly, the fiscal situation in Japan has to be a matter of growing concern. In particular given the recent severe criticism that has been leveled against the ratings agencies, we can increasingly expect them to

Machinery Orders Fall in July

Yes, that's right, fall. This isn't the impression you would get from reading Bloomberg though:Japan's machinery orders surged in July at three times the pace forecast by economists, easing concern the economy will contract for a second quarter.Orders climbed a seasonally adjusted 17 percent to 1.12 trillion yen ($9.9 billion) from June, the Cabinet Office said in Tokyo today. The gain was led by

Yen vs Dollar: recent trend

Here is a chart produced by Yahoo Finance of the dollar-yen exchange rate:This would seem to reinforce Claus's assertion that the BoJ will do nothing with interest rates, as that would only exacerbate the strengthening of the yen versus the dollar. Given that the export sector is supporting Japan's GDP, Japanese officials aren't going to want to touch anything that would damage exports with a

Japan Contracts in Q2

(cross-post from Alpha.Sources)I see not reasons to mince my words on this one with the recent stark downward revision of Japanese GDP in Q2. (From Bloomberg) Japan's economy contracted at almost twice the pace forecast by analysts in the second quarter, reinforcing speculation the central bank will leave interest rates unchanged this year. The economy shrank at a 1.2 percent annual

GDP Q2 2007 Downward Revisions

"Is Japan Heading for a Recession?" Claus asks us in his last post, and the answer looking at the latest set of GDP revisions may well be yes.Japan’s economy shrank more sharply than expected in the second quarter, and revised growth domestic product data released today show an annualised contraction of 1.2 per cent. In general we had been expecting a downward revision following evidence last

Is Japan Heading for a Recession?

By Claus VistesenWhile financial markets are gazing firmly towards the US economy shadowing Ben Bernanke's every word and gesture for a hint of future rate decisions economic fundamentals in Japan are trending firmly and steadily downwards into worrisome territory. At this point however the headline chosen for this entry might still seem rather alarmist but given the nature of lag of economic

Japan July 2007 Wages

Japanese monthly wages, including overtime pay and bonuses, dropped 1.9 percent in July, the eighth monthly decline and the fastest pace in three years according to the Labor Ministry in Tokyo today.This development in Japanese wages is by no means new, as can be seen from this chart for annual changes over the last 4 years. In fact total earnings went down in both 2003 and 2004:Comment The

Investment In Plant and Equipment Q2 2007

Corporate investment in Japan declined in the second quarter of 2007 following a sharp fall in spending in the predominantly domestically focused non-manufacturing sector. According to data released by the Ministry of Finance in Tokyo today, capital spending sank 4.9 percent in the three months ended June 30 after advancing 13.6 percent in the first quarter. Here's the chart.We can also see that

Unemployment and the Japanese Labour Force

I'm afraid there are going to be rather a lot of charts on this post, since it is a complex story, and it is important to try and understand what is happening to unemployment in Japan, since if you don't you won't get to see why this recovery isn't a "normal" one. First off the statistics bureau have published the July monthly results from the Labour Force Survey. The headline story is, of course

Japan July 2007 Industrial Output

Numbers released today by the Ministry of Trade, Economy and Industry showed a fall in industrial production in July, a development which will provide further encouragement for BoJ bearishness on interest rates. Industrial output fell a seasonally adjusted 0.4 per cent from June.In this case it doesn't so much seem to be the weather which is being given the reponsibility, but rather the

Japan July 2007 Income and Expenditure Survey

Spending by households dropped in Japan in July for the first time in seven months, according to data released today by the Statistics Bureau. Here's the chart:As usual, we are being told that the weather is the problem:Spending by households unexpectedly dropped for the first time in seven months, as a typhoon kept shoppers at home and a tax increase weighed on sentiment.BloombergIn fact, just a

Japan Consumer Prices July 2007

Japan remained mired in deflation for the sixth straight month in July, according to figures published by the statistics Office today that showed a 0.1 per cent fall in core consumer prices (excluding fresh food) over July 2006. The news obviously will make it even harder for a Bank of Japan which was already struggling to find arguments to justify a raise in interest rates at its September

Projections on Japan's Fiscal Liabilities

According to Bloomberg this morning the Japanese government may well have to set aside a record fraction of the budget just for debt interest payments in the next fiscal year as outstanding bond issuances rise and interest rates increase. According to Japan government officials - who spoke to Bloomberg on condition of anonymity - interest payments on government bonds and debt-redemption costs

Japan Retail Sales July 2007

Well, the Japan retail sales numbers (preliminary data) for July are now out, and sales are actually up on June, but down significantly (2.2%) year on year. The Financial Times covers the story here, and Bloomberg here.As is becoming customary in the traditional media, bad weather is presented as the principal culprit:The value of retail sales was 2.2 per cent lower in July than a year before –

Economic Impact of the Cabinet Changes

Well it is now hardly breaking news that Abe has shuffled his cabinet. Still there are some interesting points to comment on from an economic perspective. Among the most important details are the fact that Hiroko Ota remains as Economic Minister, while former Minister of State in the Defence Agency Fukushiro Nukaga becomes Finance Minister.Hiroko Ota has once more been quick off the mark in

Japanese GDP

I think we were all more or less on holiday here at Japan Economy Watch when the Q2 2007 GDP data came out, but Ken Worsley over at Japan Economy News did cover the release.Scott in a comment to Claus's last post points us to a Bloomberg article which discusses a Goldman Sachs research note about whether or not a recession in Japan is now "inevitable". The good news, I suppose, is that a

Still Holding at the BOJ

Cross-Post from Alpha.SourcesAt this point you could of course argue that with the current and ongoing uncertainty about the robustness of financial markets (i.e. a big black void of downside risk to just about any position) the BOJ's decision to keep rates on hold yesterday was expected. However, if we look at the way expectations of a hike have been trending steadily down in the past month it

GEM note on Japan

Cross-post from Alpha.Sources Many clouds surround the coming decision by the BOJ to raise rates to 0.75% or whether to stay put. Today's rather dim data on domestic consumption further adds to the issues facing the BOJ at the August meeting. However, there also seems to be mounting evidence that what seemed to represent a sustainable recovery based on domestic demand at the end of 2006

Blogging The Japanese Elections

Well, since it is a very hot Sunday here in Barcelona, I am going to try and keep cool by live-blogging the Japanese elections. JEW's in-house political analyst Manuel Alvarez of Election Resources on the Internet will also be updating his Global Economy Matters Post as events unfold.Apart from all the heat - and as Claus indicates in his last post here - these elections come at an especially

Japan Goes to the Polls

Japanese voters go to the polls this Sunday to decide the future composition of the upper house of the parliament. As you will read in the analyses this election is not of major importance regarding the government of Japan (see more of the political system at Manuel Alvarez' Electionressources) but the election is still an important test for the ruling party LDP which is set alongside its partner

Why Japanese consumers are feeling even worse off than US consumers

I just discovered Japan Economy News & Blog, mentioned by Edward in a previous post, which has a recent post concerning "Increased tax burdens, consumer pessimism, excessively low interest rates, and the BOJ’s June Standard of Living Survey." That is certainly a mouthful; the gist of the article is that "With many households nervous over future prospects, a potential rise in the consumption tax,

June Trade Surplus

Well, Japan's trade surplus powered ahead again in June, up 53.4% from June 2006, according to Bloomberg. Japan's trade surplus surged in June as a weaker yen and higher overseas demand for electronics and cars helped exports rise at the fastest pace in five months.The surplus expanded 53.4 percent to 1.23 trillion yen ($10.2 billion) from a year earlier, the Ministry of Finance said in Tokyo.

The Eternal Yen Waiting Game?

This is UBS' Jonathan Anderson writing on the Yen (hat tip; RGE's Economonitor) ... This is a well written piece which point to a number of important structural characteristics of the Japanese economy ... the question then becomes, why are we seeing these structural characteristics?Here is Jonathan ...(...)Every one of Japan’s neighbors is strengthening against the dollar ... what will it take to

A Bit of Both from the Domestic Economy

This small snippet is really a recognition of the fine job by Ken Worsley who maintains the Japan Economy and News blog. Between him and JEW you should be able to find top notch economic commentary and coverage on Japan. So what is in store this time? Well, as I have argued before regarding the much hailed August meeting at the BOJ much will depend on the outlook of domestic demand. In fact, I

Price Measurement in Japan

Cross-post from Alpha.SourcesIf you have been following my notes on Japan's economy you might have noticed that the measures of inflation represent something of a maze. Basically, I usually cite three measures of inflation in ny notes on Japan as can be seen from the graph below from one of my recenc posts ... Regarding the official data which comes out of the Japanese statistical office and

Economic consequences of July 16th earthquake

The AP is reporting that "Japanese automakers, including No. 1 Toyota Motor Corp., called production halts Wednesday at factories in Japan because of quake damage at a major parts supplier.The temporary closure of auto parts maker Riken Corp.'s plant at Kashiwazaki city, near the epicenter of Monday's magnitude 6.8 quake, has forced Toyota, Nissan Motor Co. Mitsubishi Motors Corp. and Fuji Heavy

Upping the Pressure on the BOJ

Well today's economic news continues to pile on the pressure over at the BoJ:Demand for services in Japan unexpectedly fell in May, suggesting waning consumer spending is slowing growth in the world's second-largest economy. The tertiary index, a gauge of money spent on phone calls, dining and shopping, dropped 0.1 percent after climbing a revised 1.6 percent in April, the Trade Ministry said

Summer Hike at the BOJ?

Cross-post from Alpha.Sources Things are suddenly getting interesting in Japan and at the BOJ with markets solidifying for a August hike on the one side and somewhat deteriorating economic fundamentals on the other. Yesterday, the BOJ chose to hold rates steady with a vote of 8 to 1 but by taking a quick sweep across market indicators they all indicate that an August hike is in the bag or

BoJ Rate Decision Vote

The fact that the BoJ vote on holding the interest rate were it is came in at 8-1 is causing a bit of a stir:"The 8-1 vote left an impression that BOJ board members were more cautious about a rate hike than previously thought, spurring short covering in bonds," said Takeo Okuhara, a bond strategist at Daiwa Institute of Research.Now back at the end of June Morgan Stanley's Takehiro Sato

Japan's energy dependency

A key quote from the Bloomberg article that Edward referenced in the previous post is the statement that "rising food and energy prices are eating into the cost of living." While the USA's dependence on foreign oil is frequently discussed in mainstream media, it is important to remember that Japan is even more dependent on foreign supplies of essentially all fuels; whether it be oil, natural gas

Consumer Confidence on the Slide

According to Bloomberg this morning:Japan's consumers were the most pessimistic in more than two years last month as higher taxes, falling wages and lost pension records chipped away at people's confidence in the economy. An index that measures confidence among households with two or more people dropped to 45 in June from 47.3 in May, the Cabinet Office said today in Tokyo. Sentiment was the

Machinery Orders and the Economy Watchers Index

Data coming out of Japan at the moment is really mixed at the moment. Really, as Claus Vistesen notes here, we are all busily holding our breath right now.The latest news on the machinery orders front seems, on the face of it, quite positive on the surface:Japan's machinery orders, a key indicator of corporate spending plans, rose at triple the pace economists predicted, reinforcing expectations

Savvy Housewives and Mum and Pop Investors

This time Bloomberg has a new angle on all this:Yen sales by Japanese mom and pop investors this week exceeded professional traders' bets against the currency on the Chicago Mercantile Exchange.Net short positions on the yen against the dollar, or wagers Japan's currency will fall, reached $1.1 billion among traders using borrowed funds on July 4, according to Tokyo Financial Exchange. Based on

Japan's Leading Index

Well, the latest reading on the leading index seems to be causing some controversy. Earlier this week the Tankan came in with an unexciting but basically positive reading.The Bank of Japan's closely watched Tankan survey of business confidence showed the large manufacturers' diffusion index, which subtracts pessimists from optimists, unchanged at +23. However, the index for medium and small

Playing the Waiting Game in Japan

(cross-post from Alpha.Sources)As I reported a couple of days ago on Japan the next few days would see the release of a slew of economic indicators pointing forward to the future course from the BOJ in Q3 and Q4 (with the nature of the just released data I find it very unlikely that the BOJ will jump-start markets with a surprise raise in July). These 'few days' have now passed and we can now do

Japan Industrial Production

The latest data on Japanese industrial production have raised some eyebrows. Below I am putting up a quick excel chart of manufacturing and mining output on a monthly basis since April 2006 I have just knocked out. (The raw data can be accessed from here).The trend should be reasonably clear, and certainly the recent wave seems to have peaked back in December last year. Of course, as Claus was

Tokyo real estate still too expensive

Burbed came up with this link:Japanese find sleep, shelter in cyber cafes Men make use of the internet service in the private rooms of an internet cafe in Tokyo May 2, 2007. Some low-wage earning young people who cannot afford apartments in Tokyo are choosing to live in internet cafes, which are cheaper than a hotel and even offer showers, microwaves and large libraries of manga to read. Picture

Where There is Hope ...

Cross-post from Alpha.SourcesSmall things matter in terms of the Japanese economy and especially when it comes to the indicators for domestic demand and inflation. As such, the next couple of days will see important releases on the Japanese economy which, according to the forecasts, are going to come out on the positive side thus further bolstering the BOJ towards a potential hike in August or

Toyota and Honda increasing factory capacity in Japan

Brad Setser points to a WSJ article to the effect that "Toyota has invested three times as much in Japan as in North America over the past three years. Honda is building its first auto factory in Japan in nearly three decades. " The context of Setser's discussion is that exchange rates result in greater profits for these two companies from cars manufactured in Japan and sold in the US than from

Summer Bonus Season

Just following up on Scott's point here, there is more news from Bloomberg this morning:The yen traded near the weakest in more than four years versus the dollar and a record low against the euro on speculation Japanese workers being paid bonuses this month will invest overseas for higher returns. Finance companies will market more than 1.5 trillion yen ($12.1 billion) of foreign-currency

Japan's Shifting Trade Surplus

The big headline today is the increase in Japan's trade surplus, but the important news behind the headline is the shifting composition of Japan's exports. According to the Financial Times:Japan’s exports rose 15.1 per cent to a record high for May, but brisk imports and sluggish shipments to the US meant the trade surplus rose a slower-than-expected 9.3 per cent from a year earlier.Exports rose

More on Japanese retail investors participating in carry trade

According to Marketwatch, "Analysts said the yen has also been pressured by growing appetites for risk among Japanese individuals who are borrowing in yen to fund positions in higher-yielding currencies. Currency trading by Japanese individuals rose to record $11 billion per day in the fiscal year ended in March -- a threefold increase from a year earlier, according to figures from Tokyo firm

Japan's Low Fertility

Earlier this month the Japanese Health Ministry revealed that the Total Fertility Rate (TFR) recorded in Japan rose slightly - to 1.32 babies per woman - in 2006, a figure which is up from the record low ever of 1.26 recorded in 2005.Japan's fertility rate rose last year for the first time in six years in 2006, while the number of suicides fell below the 30,000-case mark for the first time in

Japan's retail carry trade

It seems that Claus and I have been thinking along the same lines recently, that the increase in currency trading by individuals in Japan is particularly noteworthy. One fact from the Bloomberg story that Claus pointed out is that "In Japan, individuals have opened 600,000 so-called margin trading accounts at brokerages that lend money for currency bets, 80 percent more than a year ago,

Those Savvy Japanese Housewives

(Cross-post from Alpha.Sources) It has been a while since I have last reported on Japan so let us start with the basics which you may or may not already know. Last week the BOJ chose, as expected, to hold yet again on the continuing dim outlook for wages and inflation in Japan. Economic momentum as measured by investment and domestic demand seems to be doing fairly well but at the end of the

Outflow of yen from Japanese savers accelerating

That is according to Bloomberg, which has a story today describing how, referring to yen flows: ``It's reaching the point where the central bank must take rate action,'' says Hiromichi Shirakawa, a former Bank of Japan official and now chief economist at Credit Suisse Group in Tokyo. ``Capital is flowing out of Japan too quickly, making the economy vulnerable to currency fluctuations.''Driving

Unemployment in Japan

Now as we have been noting here on JEW over the last months, unemployment in Japan is trending steadily down, as can bee sen in the graph below which comes from the Labour Force Survey of the Japan Statistics bureau:Now in part the decline in unemployment is a natural response to the - largely export driven - extended economic boom Japan has been enjoying recently, but this is certainly not the

Immigration In Japan

Since the Japanese labour market is tightening all the time, and this process must have a limit given the declining labour force issue, I thought I'd take a look at the Japan immigration situation, and I found the graph I am posting below, which makes pretty sombre viewing. I think it shows what they call "flatlining".Net Migration Compared. EU, USA and JapanSource: OECD, Labour Force

Japanese Wages

Well adding more fuel to the fire on my post yesterday, wages data release today say that monthly wages in Japan, including overtime and bonuses, fell (0.7) for the fifth consecutive month in April (as compared with a year earlier):Japan's wages unexpectedly fell for a fifth month, hampering a recovery in consumer spending that's being fueled by job growth.Monthly wages, including overtime and

Time For The BoJ To Move?

by Claus VistesenIt has been a while since I have last reported on Japan and I even manged to slip on the Q1 GDP figures which showed in unconventional fashion how consumer spending acted as a cushion for declining industrial production. As such, here is a short note which should bring you up to date with the latest ... On the Q1 GDP figures they should of course to be taken with a pinch of salt

Employment in Japan: Theory and Practice

Well unemployment in Japan has fallen yet one more time (and here in Bloomberg). Now there is nothing really surprising about this, since Japan's economic expansion is continuing (albeit driven by exports rather than by domestic consumption) and the population of working age is declining, so there is evidently a "capacity" problem here (although it would perhaps be interesting to ask in the light

Japanese foreign direct investment in other countries

An IMF study titled "Japanese Foreign Direct Investment and Regional Trade" details Japan's investment abroad since the early 1980's. The most noticeable fact that the study turns up is that 'outflows have exceeded inflows by more than a factor of 10"...I think that is at least in part attributable to the closed nature of Japan's economy which has only recently begun to open up to foreign

The IMF in Japan

The FT today has an interesting article about the opinions of the IMF delegation which is currently in Japan. These opinions seem to be much more reasoned than much of the current consensus opinion which is emanating from the G7 or the Economist (for example) and especially in connection to the deflation problem and the issues it presents. According to John Lipsky (IMF First Deputy Managing

Dis-saving in Japan: a logical consequence of an aging population

The above chart is courtesy of Claus at Alpha.Sources blog, and bears close examination. You see that household income has experienced negative growth since about 1997 and household savings has been shrinking since the turn of the century. I believe this data is consistent with an increasing proportion of retirees to the Japanese population as a whole; as once the breadwinner retires income

Japan's space program: an opportunity for growth?

by Scott PetersonIt seems to me that a sector that Japan could be a solid competitor globally would be in the commercial launch business. Basd on my cursory scan of the Japan Aerospace Exploration Agency's page on it's H-IIA-primary large-scale launch vehicle, the vehicle could be competitivewith other commercial launch ventures, such as International Launch Services and Sea-Launch.In addition,

The Bank of Japan's decision and the underlying data

The BoJ decided not to change the overnight rate, which was not a surprise. However data that was released in the same time frame is concerning. GDP data was released which showed that annualized Q1 GDP growth of 2.4%, was a sharp sequential decline from a revised 5.0% (previously 5.5%). SeekingAlpha quotes a Tokyo analyst to the effect that "the BoJ will hold at 0.5% over the next three to six

Another high-value export possibility for Japanese manufacturers

Financial Times Deutschland posted a report recently that describes how "China's introduction of locally assembled Japanese "bullet trains" shows that the country has completed the transfer of foreign world-class high-speed rail technology, Beijing's Ministry of Railways has claimed. Lightly modified versions of Japan's E2-1000 Shinkansen went into service on lines around Shanghai recently but

Potential new export market for Japanese manufacturers

According to Aviation Today, "Boeing’s jetliner product rejuvenation coupled with Lockheed Martin’s F-35 and broad U.S. defense export market dominance means expansion of the United States’ share of the industry, and with it dominance in leading edge technologies in such areas as avionics."The military aircraft sector seems like a logical business for a large Japanese conglomerate to invest in.

Exports and Mayonaise in Japan

By Claus Vistesen(cross-post from Alpha.Sources)Many things can be learned from the recent report on Japan's trade surplus which saw a whopping increase on 36.9% y-o-y in March. Japan's current account surplus widened to a record in March, as exports to Asia and Europe helped counter slower growth in shipments to the U.S. The surplus expanded 36.9 percent to 3.32 trillion yen ($28

The state of the Japanese stock market

by Scott PetersonCarl T. Delfeld over at SeekingAlpha asks "Is Japan's Stock Market on a Downward Spiral?"...he points out a couple of facts that I hadn't noticed before:-"Having comprised a third of global market capitalization in 1990, Japan's market capitalization is now less than one tenth that of the world's $49,900 bn"...-"Michiyo Nakamoto of the Financial Times goes on to say that in a

Likely Effects of Interest Rate Hike by the Bank of Japan

by Scott PetersonThe Economist describes how "a few brave economists believe, to the contrary, that higher interest rates would actually encourage (Japanese)households to spend more, not less."I thought the most interesting piece of information from that story was the fact that personal savings rates in Japan have actually been falling essentially since the ZIRP was put into place("the sharp fall

Japan, Still Stuck

by Claus Vistesen It did not come as a big surprise that the BOJ chose to hold rates steady once again on the outlook on inflation which seems to be deteriorating somewhat. More gravely for Japan the healthy growth clip of private consumption expenditures recorded in February of 1.3% seems to have ebbed out already in March where consumption expenditures rose a mere 0.1% and although this

What Now in Japan

by Claus VistesenThe BOJ is holding at 0.5%, exports are booming, and capex stays afloat. So what will happen in Japan as we venture forward into 2007. Well, this is what I am trying to answer in a recent note over at GEM. Here is an exerpt from my summary. So, on the economic outlook for Japan going forward I would especially like to stress one thing to watch, and that is the substantial risk of

Japan Goes To AA

by Claus VistesenIndeed, Japan seems to be in a very vigorous economic mood at the moment with particularly consumption figures looking healthy in Q1. Perhaps the recent upbeat performance in Q4 2006 and Q1 2007 is in part why Standard Poor chose today to raise the credit rating on Japan (i.e. government debt) from AA- to AA. Japan's debt ratings were raised one level to AA, the third-highest

Japan and the Fertility Trap - A Worst Case Scenario?

by Scott PetersonThe way I understand how a negative scenario for population dynamics could play out in Japan is as follows:Japan has a large segment of its population that is approaching retirement. When all of those people retire, they expected to be supported by the working population which is now far too small to support the large number of retired persons. Of course, theoretically those

Standing Fast in Japan

by Claus Visteseneing a BOJ watcher can indeed be a tough job in terms of forecasting but sometimes it is also pretty easy. Consequently, the BOJ chose today, pretty much as expected, to hold rates steady on the back of a return of deflation in the recent months and also I guess on the back of the outlook that deflation will persist in Q1 07 and perhaps even well into Q2 07 as well. Also of

Kazumasa Iwata: the Current State of the Japanese Economy

by Claus Vistesenhave been pretty preoccupied as of late with Japan and as such I thought I would also share with you a recent speech by Deputy governor of the Bank of Japan Kazumasa Iwata on the immediate outlook of the Japanese economy and monetary policy. As you can see he is much more optimistic on the rebound of inflation and consumer spending than I am. Moreover the speech also gives a

Following Up on Japan

by Claus Vistesen A week ago I had a note on the economic outlook on Japan and now, with the recent data, I think it is time to do a whee round up. First of all, the chance (or risk) for an additional hike by the BOJ seems to have dissipated with the recent inflation data showing a -0.1% (overall consumer prices -0.2%) y-o-y drop in February on the back of a steady (0%) inflation rate in

Standing Fast

by Claus VistesenHardly any economist or analyst battered an eyelid when the BOJ chose yesterday to hold the main interest rate at 0.5%. Indeed much of the recent data coming out Japan (and here) recently point to considerable risk of Japan slipping into deflation in 2007 and on that note most economists (including yours truly) expect the BOJ to be in a holding mode for the time being especially

Please Take Note

by Claus Vistesen My regular postings and data watching from the Eurozone and Japan have been somewhat absent as of late. However, I am going to take it up again now and I will begin with Japan. There are many aspects here and one of them is of course the recent rate hike in the overnight lending rate from 0.25% to 0.50% where Edward so eloquently reminded us to look to the past in order

Japan In The Front View Mirror

This week the Japanese economy has suddenly become the centre of everyone's attention, and just today we have the news that the Bank of Japan has finally bitten the bullet, and gone for a further 0.25% increase in its overnight lending rate. However I cannot help having the unfortunate feeling that everyone is so busy eagerly looking forward (to the recovery, the end of the carry trade, or

Central Bankers and Political Pressures

Sorry I've been away for a while: too much work chasing too little time.Now this interview in the FT today with Barney Frank, Democratic chairman of the House financial services committee, is reasonably interesting. Frank is worried about any possible decision by the Federal Reserve, following the lead of Ben Bernanke, to introduce inflation targeting as policy:In an interview, Mr Frank told the

Japan: To Raise or Not to Raise, That is the Question

Well in some ways this is an interesting week in Japan. The Boj has to take a decision on whether or not to raise interest rates. As Claus Vistesen says in an aptly titled post, this is just too close to call. Nonetheless I will stick my neck out just a little, I don't think they will raise, but I wouldn't attach a very high level of certainty to this, since there are a lot of pressures in both

Export Dominated Growth In Germany and Japan

Well it is now more or less official, growth in the fourth quarter was largely a story of strong export performance in both Germany and Japan. Domestic consumption remained congenitally weak in both cases.In Germany, as Bloomberg reports:Booming exports drove an unexpected acceleration in German economic growth in the fourth quarter, capping the best year for Europe's largest economy since 2000.

BoJ: No Hurry To Raise Rates

Bank of Japan policy board member Hidehiko Haru has underlined what most Bonobo readers should already know, that internal consumption in Japan is week and that there's no threat that rising prices will cripple economic growth. Conclusion: there's no hurry to raise rates:``Given that there's no evidence of any inflationary risk, there's no need to rush,'' Haru, 69, said today in a speech to

G7: Why All the Pressure on Japan?

The Group of Seven industrialized nations is meeting in Essen, Germany, later this week, and despite the fact that there are a lot of people trying hard to suggest otherwise, it appears that the topic of global liquidity will be high on the agenda.Now what I think it is interesting for people to think about is why this is. Why does the yen loom so large in people's thoughts (even though there is

No signs of Inflation in Japan

by Claus Vistesen In this note, I will adopt a two-pronged approach. Firstly, I will do a round-up of the domestic scene in Japan and more specifically the inflation outlook as well as the subsequent outlook for a possible interest rate hike by the BOJ come February or March. Secondly, I will take a look at the international perspective on Japan, where there has been a recent flurry of

Japan Consumption Falls as Output Accelerates

Here's the latest bit of news from Japan:Japan's factory production rose to a record, while household spending fell, underscoring the central bank's concern that growth has bypassed consumers and left the economy dependent on exports to expand.Industrial production climbed a seasonally adjusted 0.7 percent in December, the trade ministry said in Tokyo today. Household spending declined for a 12th

Japanese Labour Market Conditions

Following on from my last post about the continuing Japanese consumption decline, I have put a somewhat larger post up on Afoe, trying to link this in with the latest figures for declining retail sales in Germany. This piece from the FT which in general simply confirms the overall picture, does contain a useful perspective on how the dynamics of intergenerational transition may be also affecting

Japan's Economy: Chasing Illusions?

(Cross-post from Global Economy Matters)What happened in Japan this week obviously came as something of a surprise for many a financial commentator and analyst; over at Morgan Stanley's GEF Takehiro Sato even felt the need to apologize to GEF's readers for erroneously making the call that the BOJ would raise interest rates this month. He has not been alone in this, however, and last Monday

Japan's Economy: Chasing Illusions?

by Claus VistesenWhat happened in Japan this week obviously came as something of a surprise for many a financial commentator and analyst; over at Morgan Stanley's GEF Takehiro Sato even felt the need to apologize to GEF's readers for erroneously making the call that the BOJ would raise interest rates this month. He has not been alone in this, however, and last Monday Bloomberg reported that 76%

Steady as She Goes?

(Cross-post from Alpha.Sources)Thursday has arrived and so has the BOJ's decision to hold as well. In terms of the general market expectations this is quite surprising since most major analysts predicted at the end of 2006 that the BOJ would raise rates in 2007 starting off with a raise in January. This has not been the case and now of course questions are mounting on the real state of the

Faceoff in Japan

(Cross-post from Alpha.Sources)If you thought in the beginning of this week that a raise by the BOJ come tomorrow was a sure bet you should perhaps think about revising your views. The situation in Japan is a difficult one; ever since the BOJ ended its ZIRP policy back in June 2006 markets have more or less been expecting the transition towards a normalization process where the BOJ would be able

Japan in a Quandry

To raise or not to raise, that is the question, for the BoJ at least. This seems to be just one more between a rock and a hard place situation. According to Bloomberg:The Bank of Japan may raise its benchmark lending rate from 0.25 percent, stepping up efforts to head off an investment bubble.The reason for the fear is not a sudden and excessive rise in consumer related activity (like

Machine Orders Reinforce a Hike by the BOJ ...

(Cross-post from Alpha.Sources) or do they? If you ask the investors, of which most admittedly live in a quite different short term world than myself, a firm 76% according to Bloomberg believe that the BOJ will raise the rate this Thursday which will bring the rate up to 0.50% from the current 0.25% as it has been held ever since the BOJ ended ZIRP back in June 2006. (From Bloomberg linked above)

To Raise or not to Raise ...

(Cross-post from Alpha.Sources)This still seems to be the most vexing question concerning the Japanese economy at the moment. In terms of economic data going out of 2006 the news flow has been anything but positive thus raising serious question about the BOJ's strategy of returning to normal or at least moving further away from its quantitative easing policy operationalized as ZIRP which was