Japan – strong cycle and savings
Data releases the last couple of days give more evidence that tariffs haven't derailed exports or capex. Even so, the flow of funds for Q3 show corporates remain net savers. With the fiscal deficit now also now narrowing to the lowest level since the 1990s, the result is a growing CA surplus.
Japan – strong Tankan details
The BOJ has been concerned that tariffs would reduce profits, cutting into wages and capex. The Tankan shows no evidence of that: profit and investment expectations remain firm, as do inflation expectations, with the backdrop being a labour market that is tight for all industries.
Japan – a strong Tankan
In Q4 business sentiment improved, the labour market tightened, price pressures picked up, and capex intentions stayed elevated. The BOJ is set to hike on Friday. Today's survey, like other recent data, raise the risk that the bank can also send a clearer message about the outlook for rates in 2026.
Japan – what would turn the JPY around?
My latest video, discussing the BOJ and the outlook for the JPY.
Japan – PPI rises again
The post-August rise in PPI continued in November, with one driver being the JPY-driven rebound in import prices. All told, upstream price pressures remain firm, and suggest that CPI isn't likely to ease much over the next 6M.
Japan – overcoming fiscal fear
The supplementary budget looks big, but this year's fiscal deficit is still budgeted to narrow. Gross debt is high, but the government's net liabilities have fallen. Interest rates have risen, but before Takaichi took office, net annual interest payments by the government had fallen to near zero.
Japan – real wages stop falling
A few releases today – October wages and CA, November Economy Watchers survey, and Q3 revised GDP. The overall picture is mixed, though the acceleration in inflation and drop in real wages into early 2025 has now stabilised, and that is allowing an improvement in household sentiment.
Japan – Ueda becomes constructive again
The tone of governor Ueda's speech today suggests a rate hike is close. He claims that risks to the US are receding, identifies five recent positive wage developments, and with firms' price and wage behaviour changing, argues that exchange rate changes are more likely to affect prices.
Japan – SPPI inflation soft in October
Headline SPPI inflation was stable in October, but weak for high labour-intensive sectors, while part-time wages were strong, likely on the back of the minimum wage hike. That's an unclear picture. But right now, with the JPY so weak, the BOJ will focus more on headline CPI than these messy details.