Kuroda knows when to go ALL in. Bank of Japan unexpectedly eased today (Oct.31) by announcing a massive expansion of their asset purchase program. The bank will increase its net-purchase of JGB from 50 trillion yen per year to 80 trillion yen and reallocate its purchase toward longer and riskier JGBs. In our estimate, the BoJ doubled its purchase of JGB duration risk by today's measure. The BoJ is effectively betting all it has to achieve its inflation target and to urge fiscal policy makers to regain the fiscal sustainability of Japan. In our estimate, it would have been 2020 when the BoJ owns 50% of the JGB market. With today's announcement, the BoJ could end up owning 50% of JGB market by as early as in 2018. The BoJ is basically declaring that Japan will need to fix its long term problems by 2018, or risk becoming a failed nation. Read more..
Japanese manufacturers ended the July-September quarter on a positive note, with production increasing by 2.7% month on month (MoM) in September. However, the positive finish does not change the fact that production has declined for two consecutive quarters, putting Japanese manufacturers in a technical recession. Read more..
Retail sales results in September provided another hint that Japanese consumers are recovering from the shock caused by the sales tax hike in April. In September, retail sales rose by 2.3% year on year (YoY), the third consecutive month with positive YoY growth. After a seasonal adjustment, retail sales grew as much as 2.7% from August. Compared with its average in 2013, the retail sales level in September was 3.8% higher. In our view, the Japanese consumers seem to be breaking free from the negative shock caused by the consumption tax rate hike in April. Read more..
September trade data provided some moderately positive news for Japan. Japanese exports in September was up 6.9% year on year (YoY), the highest growth in the last 8 months. Exports to China was up 8.8% YoY, exports to US was up 4.4% YoY. After a seasonal adjustment, Japanese exports are at its largest level since October 2008. Read more..
A new hope is emerging that the corporate Japan is becoming more active in its capital investment. Core machinery orders, a leading indicator for the private capital expenditure in Japan, expanded by 4.7% month on month in August, marking the third consecutive monthly expansion. The outlook for corporate capital investment has been ambiguous. Various surveys, including BoJ Tankan, suggested that companies in Japan are planning to increase their capital expenditure, but there has been no matching evidences in the actual statistics. The latest machinery orders data alone are still insufficient to become positive on the outlook, but it does give a glimpse of hope that the private capital expenditure may start to contribute to the growth in Japan while consumers suffer under the weight of sales tax hike, both in 2014 and in 2015. Read more..