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Ministry of Finance data showed on Thursday that exports rose 0.6% year-on-year in May, for the 27th straight month of rises, led by 66% growth in car shipments. Reuters GraphicsThis year, domestic demand may temporarily outpace slumping exports as a key driver of growth, said Takeshi Minami, chief economist at Norinchukin Research Institute. Separate government machinery orders data, also released Thursday, underlined the struggles faced by manufacturers though the overall numbers suggested the services sector is providing some cushion to the economy. U.S.-bound exports, another key market for Japanese exports, grew 9.4% in the year to May on double-digit gain in car shipment. "For the outlook of Japanese exports, the U.S. Fed's rate-hike pause is a positive news that will further vitalise American private consumption", said Kazuma Kishikawa, economist at Daiwa Institute of Research.

Persons: Darren Tay, Takeshi Minami, Kazuma Kishikawa, Tetsushi Kajimoto, Riddhima Talwani, Shri Navaratnam Organizations: Ministry of Finance, Capital Economics, Reuters, Norinchukin Research, Bank of Japan, Daiwa Institute of Research, Thomson Locations: TOKYO, Taiwan, South Korea, Japan, China, U.S

Services inflation accelerated to 1.7% in April from 1.5% in March, the data showed, suggesting that rising labour costs may be starting to feed into broader consumer inflation. "Given stubborn food price pressures, we now expect underlying inflation to peak at 4.5% by mid-year," said Darren Tay, Japan economist at Capital Economics. "But the inflationary cycle is probably at its tail end - producer price inflation has fallen significantly over the past three months. Ueda has stressed the need to keep monetary policy ultra-loose until inflation is sustainably around 2% and accompanied by wage hikes. He has also said Japan's core consumer inflation will slow back below 2% toward the latter half of the current fiscal year ending in March 2024.

The Tokyo core consumer price index (CPI), which excludes fresh food but includes fuel costs, exceeded the BOJ's 2% target for nine straight months. The slowdown was mostly due to the effect of government energy subsidies to curb soaring utility bills, the data showed. It marked the fastest year-on-year pace of increase since August 1991, when the index also rose 3.2%. Service inflation, which the BOJ sees as key to achieving sustained wage growth, perked up to 1.3% in February from 1.2% in January, the data showed. Nationwide core consumer prices rose 4.2% in January from a year earlier, hitting a fresh 41-year high, as an increasing number of companies passed on higher costs to households.

☆ Japan's factory output posts biggest fall in 8 months on weak autos, chips sectors
▼ + stars: | 2023-02-28 | by ( Kantaro Komiya | ) www.reuters.com time to read: +4 min

In contrast, retail sales posted their fastest growth in nearly two years, separate data showed, highlighting the divergent paths between soft manufacturing and robust service-sector activity. Factory output fell 4.6% in January from a month earlier on a seasonally adjusted basis, government data showed on Tuesday. Separate data showed Japanese retail sales rose 6.3% in January from a year earlier, beating a median market forecast for a 4.0% gain and posting an eleventh consecutive month of expansion. Despite the production cuts, retail sales of autos rose 19.3% year-on-year, suggesting strong pent-up demand among domestic consumers caused by delivery delays. Compared with the previous month, retail sales expanded 1.9% in January, following a 1.1% rise in December, the data showed.

☆ Japan's economy averts recession, but rebounds much less than expected in fourth quarter
▼ + stars: | 2023-02-14 | by ( ) www.cnbc.com time to read: +1 min

A Japanese national flag flies outside the Bank of Japan headquarters in Tokyo, Japan, on Sept. 27, 2021. Japan's economy averted recession but rebounded much less than expected in October-December as business investment slumped, a sign of the challenge the central bank faces in phasing out its massive stimulus program. The world's third-largest economy expanded an annualized 0.6% in the final quarter of last year after slumping a revised 1.0% in July-September, government data showed on Tuesday. The increase in gross domestic product (GDP) was much smaller than a median market forecast for a 2.0% rise, due to a downswing in capital expenditure and inventory. "With other advanced economies heading into recessions, we still expect net trade to drag Japan into a recession as well in the first half, especially since business investment is weakening faster than we had expected," said Darren Tay, Japan economist at Capital Economics.

[1/3] FILE PHOTO-A woman in a traditional costume makes her way at a shopping district in Tokyo, Japan November 15, 2022. "From a negative growth in July-September, the rebound isn't very impressive," said Toru Suehiro, chief economist at Daiwa Securities. But it's difficult to project a strong recovery partly due to pressure from rising inflation," he said. RECESSION RISKSFor the full year, the economy expanded 1.1% compared with a 2.1% increase in 2021, the data showed. Economy minister Shigeyuki Goto told reporters the economy was on course for a recovery as the pandemic's impact fades.

It followed a 3.9% rise in December and stayed above the central bank's 2% target for an eighth straight month, data showed on Friday. "These readings point squarely at a further, large increase in inflation at the national level this month," said Darren Tay, Japan economist at Capital Economics. Government measures to lower energy bills will kick in next month and bring inflation down by about 1% point," he said. The BOJ kept monetary policy ultra-loose this month but raised its inflation forecasts in fresh quarterly projections, as companies continued to pass on higher raw material costs to households. Kuroda, whose term will end in April, has stressed the need to keep monetary policy ultra-loose until wages rise more, changing the recent cost-push inflation into inflation driven by robust domestic demand.

[1/3] A cargo ship and containers are seen at an industrial port in Tokyo, Japan, February 15, 2022. The world's third-biggest economy has struggled to motor on despite the recent lifting of COVID curbs, and has faced intensifying pressure from red-hot global inflation, sweeping interest rate increases worldwide and the Ukraine war. GLOBAL RISKSHowever, the risks to Japan's outlook have risen as the global economy teeters on the brink of recession. Economy Minister Shigeyuki Goto said a global recession could hit households and businesses. "As for 2023, Japan will be dragged into a mild recession in H1 by a global downturn that will weigh on exports and business investment."

☆ Japan's economy shrinks for first time in a year
▼ + stars: | 2022-11-14 | by ( ) edition.cnn.com time to read: +3 min

Japan’s economy unexpectedly shrank for the first time in a year in the third quarter, stoking further uncertainty about the outlook as global recession risks, a weak yen and higher import costs took a toll on household consumption and businesses. The world’s third biggest economy has struggled to motor on despite the recent lifting of Covid curbs, and has faced intensifying pressure from red-hot global inflation, sweeping interest rate increases worldwide and the Ukraine war. “But the three key pillars of demand - consumption, capital expenditure and exports - remained in positive territory, if not robust, so demand is not as weak as the headline figure shows.”Global risksHowever, the risks to Japan’s outlook have risen as the global economy teeters on the brink of recession. Economy Minister Shigeyuki Goto said a global recession could hit households and businesses. The Bank of Japan has also maintained its ultra-loose monetary stimulus program to help revive the economy.

☆ Weak Japanese yen will boost tourism to Japan, says economist
▼ + stars: | 2022-10-11 | by ( ) www.cnbc.com time to read: 1 min

Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailWeak Japanese yen will boost tourism to Japan, says economistDarren Tay of Capital Economics says the yen hasn't been "as cheap as it is now in living memory."

The core core index is closely watched by the BOJ as a gauge on how much of the inflationary pressure is driven by domestic demand. Headline inflation hit 3.0% in August, the highest since 1991, underscoring the pain consumers are suffering from rising living costs. "Headline inflation jumped in August to yet another high since 1991 and it still has a stretch higher to climb. read moreWhile inflation is still modest compared with many other advanced nations, a global slowdown and high energy prices are clouding the outlook. The BOJ has pledged to keep interest rates ultra-low and remain an outlier in a global wave of monetary policy tightening.

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