Japan Chart Book 5 February
Japan: Economic Forecast Dashboard Forecast highlights Real GDP growth forecast at. in and. in 5 Slower consumption in -5 but offset by improved exports and investment Gradual improvement in labour market conditions, with exit from deflation to encourage firms to raise wages Further monetary easing and currency weakness to support growth Forecast for Japan (Annual percentage changes unless specified) 5 GDP.7.. Private Consumption..5.5 Government Consumption... Fixed Investment... Exports of Goods and Services...5 Imports of Goods and Services. 5. 5. Consumer Prices... Government Budget ( of GDP) -9. -.7-5. Current Balance ( of GDP).7.. Exchange Rate: Yen per US$ 5. 9.. Short-Term Interest Rates ()... Growth drivers/constraints Χ Monetary expansion Bank of Japan asset purchases to approach 5 of GDP this year Weaker yen depreciation in with further weakening forecast to end-5 Lower real interest rates inflation has turned positive but nominal bond yields still very low Improved global growth improved demand from US and China to support exports Consumption tax rises to restrain household spending in -5 Japan: Contributions to GDP growth - - - GDP Net exports Domestic demand 99 99 99 999 5 7 / CEIC Japan: Business confidence (MoF survey) balance - - - - -5 - -7 Non-manufacturing Manufacturing 5 7 9 Japan: Consumption and investment Investment 9 - - -9 - -5 99 99 99 999 5 7 Consumption Japan and US: QE policies compared Central bank assets, of GDP 7 5 US Japan Economist: Adam Slater Senior Economist Tel: + 5 9 e-mail: aslater@oxfordeconomics.com 7 9 F F Japan: Exchange rates Level 9 7 5 9 7 99 99 99 999 5 7 Japan: Consumer confidence Index 55 5 5 5 YEN/US$ Actual "Equilibrium" measure 5 5 7 9 Forecast
Japan: Activity Consumer spending will be volatile in the coming quarters due to the impact of the consumption tax Government investment has been very supportive of growth in recent quarters Survey indicators of growth remain strong and investment indicators picking up Japan: Government spending and GDP points.... -. -. -. Contribution of government spending to GDP growth (LHS) Government spending (RHS) - - Japan: GDP and consumption quarter - - - - Consumption GDP -. 5 7 9 - -5 5 7 9 Japan: PMIs PMI index 55 5 5 5 Manufacturing Values above 5 indicate expansion in activity; values below 5 indicate contraction 5 7 9 Source : Markit Services Japan: Tankan survey and GDP balance - - - - -5 Tankan headline balance (LHS) - GDP (RHS) - - - - - Japan: Machinery orders and investment - - - Core machinery orders Private nonresidential investment - 99 99 995 99 7 Economist: Adam Slater Senior Economist Tel: + 5 9 e-mail: aslater@oxfordeconomics.com
Japan: Inflation and labour market The headline and core CPI have both moved into clearly positive territory in recent months Import prices have been a key factor driving up inflation; domestically-generated inflation is more subdued The labour market has proved - surprisingly strong in recent months - and some indicators suggest incipient labour shortages - Japan: Inflation Core CPI (ex-food and energy) Headline CPI 7 9 Japan: Inflation - - - Producer prices - 99 99 99 999 5 7 Consumer prices Japan: Import prices and producer prices - - - import prices Corporate goods prices - 99 99 Japan: Unemployment. 5.5 5..5..5..5..5 99 99 99 999 5 7 / CEIC Japan: Labour market balance - - Tankan employment excess (+)/insufficient (-) (LHS) Employment (RHS) Wages (RHS) - 5 7 9 5 - - - - -5 Economist: Adam Slater Senior Economist Tel: + 5 9 e-mail: aslater@oxfordeconomics.com
Japan: External indicators Export volumes have been slow to pick up due to weak demand in key markets but are now improving The yen is at its weakest level since the mid-9s on some measures; external competitiveness has improved markedly The trade balance has deteriorated over the last two years in large part due to increased energy imports after the nuclear shutdowns in Japan: Exports and market growth - - - Export market growth Exports of goods and services - Japan: Export volumes - - Export volumes to Asia Export volumes - Japan: Current account of GDP 5 - - Visibles Invisibles - 99 99 99 999 5 7 Current account Japan: Real effective exchange rate Index = Trend line 97 977 9 99 99 5 Manufacturing unit labour costs Index, = (US$ terms) Korea Germany Japan US 9 99 99 Economist: Adam Slater Senior Economist Tel: + 5 9 e-mail: aslater@oxfordeconomics.com 5
Japan: Money and credit indicators We expect the Bank of Japan to increase its already-sizeable asset purchase plans later in Money and credit growth has picked up strongly in the last year although it may still be too weak to ensure Japan hits the inflation target Corporate price expectations are close to returning to positive territory for the first time since Japan and US: QE policies compared Central bank assets, of GDP 7 US Japan 5 7 9 F F Japan: Monetary policy instruments Long-term interest rate Short-term interest rate Forecast 995 99 7 Japan: Broad money growth Broad Money (L) growth Reference value (based on potential output, inflation and trend velocity) - 9 95 99 99 997 5 9 Japan: Money and credit 7 5 - Broad liquidity - Bank lending to - private sector - Jan-5 Mar- May-7 Jul Sep-9 Nov- Jan- Mar- M Japan: Large firms' price expectations balance - - - balance of firms expecting rising/falling prices in next months - 9 9 99 99 Economist: Adam Slater Senior Economist Tel: + 5 9 e-mail: aslater@oxfordeconomics.com
Japan: Financial market indicators The yen weakened by around on a trade-weighted basis in with further depreciation expected House prices have started to rise significantly again on some measures having shown very weak growth for a number of years Nominal GDP growth is now clearly above long-term interest rates, which was not the case for much of the last two decades this is supportive of growth Japan: House prices and mortgage rates 7 5 - - - Tokyo condominum prices (LHS) Benchmark housing finance rate (RHS) - 97 99 99 99 999 5 5 Japan: Bond yields and yen exchange rate /$ rate 5 95 9 5 75 /$ rate (LHS) 7 5 -year bond yield (RHS) -Jan- -Jun- -Dec- -May- -Nov-..... Japan: Exchange rate per US$ Level 5 9 7 995 99 7 / CEIC Japan: Exchange rates Level 9 7 5 9 YEN/US$ Actual "Equilibrium" measure 7 99 99 99 999 5 7 Forecast Japan: Nominal GDP growth versus long rates - - - Govt. bond yield Nominal GDP - 99 99 99 999 5 7 Forecast Economist: Adam Slater Senior Economist Tel: + 5 9 e-mail: aslater@oxfordeconomics.com 7
Japan: Fiscal and sectoral indicators The budget deficit is set to narrow in the coming years thanks to stronger growth and tax rises Thanks to the consumption tax rises there will be fiscal tightening of. of GDP this year and. next Japan s government debt remains overwhelmingly held by domestic investors, even though the personal saving rate has declined considerably since the 99s Japan: Government finances of GDP - - - - - Government debt (RHS) - 99 99 99 999 5 7 Government budget (LHS) of GDP 5 9 Japan: Fiscal policy Change in structural budget balance, of GDP.... -. -. -.. 97 99 995 999 7 5 Japan: Private savings of income/gdp Personal savings ratio - 99 99 99 99 99 Corporate savings (-qtr average) Japan: Government bond holders.5.5... 5. 9.5 Source : Ministry of Finance Banks Insurance Pension funds Foreigners Households Other Government BoJ World: Foreign debt holdings of total 9 7 5 Japan UK Spain Cyprus US Germany Greece Economist: Adam Slater Senior Economist Tel: + 5 9 e-mail: aslater@oxfordeconomics.com