Japan - sluggish In Q3, the economy contracted. Leading indicators suggests that this is noise, and that a mild rate of growth should resume. But corporate sentiment remains unstable, and consumers continue to feel the pressure of rising prices.
cycle Japan – warm, not hot Japan's economy is warm, not hot. That will change if the positive consequences of JPY weakness (corporate competitiveness) start to outweigh the negative (lower real incomes). At that point, some of the nonlinear upwards pressures on prices identified by the BOJ will start to become important.
Japan – CPI rising, BOJ on hold BOJ trimmed mean inflation continues to rise, but the BOJ is keeping policy unchanged. With rates remaining anchored, the JPY continues to sell off. The MOF has been talking about "stealth intervention", but it is unclear if that includes pressure on the GPIF to unwind some of its foreign holdings.
Japan – August Economy Watchers survey The Economy Watchers survey rebounded in August, and is at a level consistent with mild GDP growth. But the survey isn't strong or stable enough to suggest an acceleration in the sluggish pace of the post-pandemic recovery.
Japan – July wages The wage data don't change the macro picture. Wages are creeping up, but are rising less quickly than inflation. The labour market isn't yet tight enough for nominal wages to accelerate much more.
Japan – inflation update Different measures of inflation announced in the last few days show short-term inflation pressure remaining strong. Leading indicators suggest a peak in the next 6M, but that could be wrong if JPY commodity prices take another leg up, or services price inflation in Japan starts to appear.
Japan - recent data Q2 GDP shows economic recovery remains slow and uneven, with downside risks in early Q3. Capex is rising, but really only in nominal terms. Exports are going sideways, though there might be some upside risk from autos. Relatively high inflation will likely peak soon. The monetary base is shrinking.
Japan – July consumer confidence The negative correlation between inflation expectations and consumer confidence continues to hold. So, with inflation expectations rising, consumer confidence is falling quickly.
Japan – June CPI June CPI was still quite strong. But there aren't signs of a transition from goods to services price inflation. Without that shift occurring, the BOJ has justification for arguing that inflation isn't broad-based, and thus that policy doesn't need to change.
