Japanese exports expanded modestly in July. On a seasonally adjusted basis, the value of exports expanded by 1.8% between June and July. Japanese exports are far from robust though. The export volume, after stripping away price effects, has been steady declining since late 2011 and it remains roughly 10% below the prevailing level before the 2011 earthquake. It almost seems that Japanese exporters went through an irreversible process in 2011. Read more..
The average wage in Japan rose by 1.0% year on year (YoY) in June this year, recording the highest growth rate in 4 years. The growth rate in the basic wage component remained stale at 0.2% YoY, but the summer bonus component rose by 2.0% YoY, adding a boost to the total wage growth. While the news is positive, we must note that the even this 1% growth is nowhere near sufficient to make up for the inflation though. The wage report estimates that the real wage after accounting for inflation is still falling at the rate of 3.2% year on year even with the 1% rise in the nominal wage. While the expansion in the employment base (up 1.5% year on year) and the recovering consumer sentiment may keep the private consumption from plunging further, it is unlikely that consumers play the role of growth driver for the Japanese economy until VAT hike effect fades away. Read more..
The growth in Japan is undershooting the prior expectation The latest GDP data was weak, showing that Japan shrunk by as much as 1.7% in April-June quarter. What are the consequences of the weak Q2 GDP result? First of all, the current government growth outlook of 1.2% for the fiscal year 2014 is now virtually impossible to hit. It will needs to be revised down to below 1%. Then, will the sub-1% growth prompt either the government or the BoJ to implement stimulus? The answer to this question is probably a NO. The government does not want to admit a need for a stimulus as it prefers to avoid the discussion of a possible cancellation of the sales tax hike in 2015. The BoJ, on the other hand, is concerned to overextend its monetary stimulus. Where does it leave Abenomics? While the July-September quarter is likely to register a positive growth on the back of a rebound from April-June, there is not assurance that the growth will come back from October-December onward. Japan is likely to enter 2015 on a weak growth momentum. Read more..
The retail sales in Japan in June was disappointing. 3 months after the VAT hike, the year on year growth still failed to turn positive. Retail sales fell by 0.6% in June from a year ago. Department store sales continued to be severely affected, down 3.3% from a year ago. It was a disappointing result for those who were hoping to see a sign of consumers recovering from the negative shock from the VAT hike in April. The outlook for retail sales is slightly more positive though. Consumer confidence does seem to be recovering through to July and the summer bonus this year should be the highest since 2007. The recent stock market upturn should also help consumers spend in the summer. Read more..
The consumer price in Japan on the whole seems to be maintaining a moderate rising trend in the 3 months after the VAT hike. The nationwide CPI excluding fresh food, the official target for the Bank of Japan, rose by 3.3% year on year in June. It is a slight deceleration from the 3.4% inflation in May, but a mere 0.1% point deceleration is hardly an evidence of a new trend yet. After seasonally adjustment, the same CPI measure is reported to have risen by 0.2% between May and June, showing a continuing presence of an inflationary trend. Read more..