In 2015, 86.7% of university new graduates in Japan seeking employment received at least one job offer by February 1. It is a significant improvement from 82.9% last year and the highest rate since 2008. By gender, we see that the offer rate is now higher for female graduates than for male. In 2015, the job offer rate for female new graduates was 88.3%, the highest since the survey started in 1997. Is the Womanomics of Prime Minister Abe at play? May be. However, we think the long term change in the economic structure of Japan, rather than policy measures, is behind the rise in the job offer rate for female graduates. Read more..
Judging from the BoJ March Tankan results, the combination of the weak yen and falling commodity prices are apparently not enough for Japanese manufacturers to fully restore their profitability. In our view, the cost of an additional monetary easing still outweighs its benefit and the BoJ should sit tight. But if the incoming economic indicators in the next 6 months fail to deliver a picture of a growing and reflating economy, policy makers may need to ponder what stimulus measures are appropriate. Not meeting the 2% inflation target in 2015 is perfectly defensible in light of the falling commodity prices, but the BoJ will be putting its credibility on the line if the target is not met even in 2016. Read more..
The batch of economic data released on March 27 in Japan looked quite chilly, even cold. The 1.8% decline in retail sales in February was quite awful, and the sharp decline in new job offers to applicant ratio was alarming. On a closer inspection though, the data look somewhat warmer, say, lukewarm. The decline in fuel sales explains the decline in retail sales. Department store sales in fact had the best year on year growth in the last 11 months. We also found that the sharp decline in new job offers to applicant ratio could be a statistical glitch. All in all, the set of data from February was disappointing, but not so disappointing as for us to reconsider our upbeat outlook on Japan. We continue to think that the labor market in Japan is already in full employment and we are likely to see more visible sign of wage inflation by the end of 2015. Japanese corporations are already enjoying the fattest profit margin in many decades and corporate managers will likely expand their capital investment in 2015, fueling the growth in Japan. There is no need for the BoJ to ease. We think there is a high chance that the BoJ will achieve its 2% inflation target on the back of the rising wage inflation. Trying to bring such moment forward risks accelerating the growth too much, exposing Japan to a risk of excessive inflation in future. Read more..
In February 2015, exports from Japan grew by only 2.4% year on year, a significant slowdown from 17.0% year on year growth registered in January. The slowdown is largely due to the Chinese new year effects, but some of the slowdown should be regarded as genuine, stemming from the weakening in the economic activity in China. In February, the export volume from Japan to China hit the lowest level since the Lehman shock episode in 2008-9. On the import side, while the import value declined in February, the decline is entirely due to the fall in commodity prices. The import volume in fact rose for two consecutive months through January and February, a reflection of an acceleration in the economic activity in Japan, in our view. Read more..
The wage inflation seems to have finally arrived in Japan. In January, regular wages rose by 0.9% year on year. It may seem pitiful for an international observer, but in Japan it is the highest rate yet for well over 10 years. In our view, this is only the beginning of goods news for workers in Japan. Companies are already struggling to find workers. In January 2015, there are almost twice as many new job offers as new job seekers. We expect the wage inflation to gradually accelerate through the course of 2015-16. Read more..