Japan – AI boosting manufacturing
The detailed release of the Tankan confirms the message of yesterday's summary: price pressures are rising again, and momentum in the corporate sector is strong. There is some sluggishness in autos, but as in export data, that is being offset by AI demand for electronics.
Japan – sentiment strong, prices stronger
The detailed version of the Tankan won't be released until tomorrow. But the headlines today show a clear story: business sentiment remains strong, and inflation pressures have risen yet again. The BOJ needs to become more hawkish.
Japan – manufacturing upturn
Before the war, Japan's manufacturing cycle was gaining momentum. If the war is now over, then today's releases of machine orders, exports and business sentiment suggest that strengthening momentum can now become an important theme for Japan macro.
Japan – import prices up, but export prices too
The renewed rise in import prices is certainly inflationary, especially when the level of prices remains elevated after the hikes of 2021-22. However, this time export prices are rising too, and while that isn't enough to prevent the ToT from falling, it does limit the damage to the domestic economy
Japan – enough, if the BOJ decides it is
The narrowing budget deficit and widening BOP surplus likely won't move market opinion on either rates or fx. What is needed remains a more hawkish BOJ. Accelerating credit and wage growth push in that direction, though the wage data aren't great quality, and sentiment surveys are still weak.
Japan – Ueda stresses inflation risks
Some highlights from governor's speech today: his remarks about strong bank lending, higher prices being a bigger burden to firms than rising rates, the link between low policy rates and the rise in market yields, and the upside risks to prices now that the "deflationary mindset has been dispelled".
Japan – offsets to Iran
Tuition as well as energy subsidies make inflation look particularly low relative to the likely upside from the Iran war. The conflict will also slow growth. However, both export data for April and Koeda's speech yesterday indicate that growth downside will be limited if global tech demand sustains.
Region – import prices up, export prices up more
Data today for Japan and Korea show the inflationary impact of the War, with import prices in both economies rising at double-digit rates. However, such rises have been seen before. By contrast, export price inflation is setting records, offsetting the hit from energy prices to domestic growth.
Japan – upside risks to inflation
With the Iran War meaning both uncertainty and a negative terms of trade shock, the BOJ can justify some caution in moving rates. But the bank's detailed analysis last week was heavy on upside risks to inflation. Not addressing that means underlying upwards pressure on $JPY likely persists.