But the persistent weak growth in tourists from China, mere 2% in May 2017, is a concern. (June 21st)
BoJ Governor Kuroda gave somewhat straighter answers in the press conference. He shared his assessment that BoJ can control the yield curve with less JGB purchase as the liquidity in the JGB market dwindles. Officially, the BoJ has no tapering strategy, but the direction to reduce its JGB purchase is becoming clearer.
Read more..The Japanese economy had a robust and well-balanced growth in the first quarter of 2017. It is also remarkable that Japan is continuing on the 5 quarters of positive growth streak. Thanks for the robust growth, the output gap, a potential source of inflationary pressure, is turning positive. If Japan manages to continue to grow at the current pace pace for 2 to 3 more years, there is a hope that Japan can achieve its reflation goal.
Read more..In the April 26-27 policy meeting, the Bank of Japan (BoJ) made minor adjustments to its growth and inflation outlook, but there were no changes in its generally cautious view. In the press conference after the meeting, the governor Kuroda was bombarded with questions on the exit strategy, but the governor flatly refused to provide any answers. In our view, the exit has already started as we see the BoJ starting to reduce its JGB purchase. In April, the net purchase of JGB was more closer to the annual pace of 70 trillion yen, rather than at 80 trillion yen.
Read more..On the surface, Japan is having the best of its times. Corporate profits are at a record high and the unemployment rate is at its 22 year low. However, we think Japan is on borrowed time. Japan owes its current prosperity to an unsustainable monetary policy. In our view, the BoJ is likely to reach its limit before the end of 2018.
Read more..The rising energy prices are starting to affect the trade balance of Japan. In January 2017, the trade surplus of Japan fell to 156 billion yen, equivalent to mere 0.3% of GDP in an annualized term. January 2017 also marks as the month Japan started to import LNG from the United States. As a result, energy imports from US more than doubled from a year ago. The news must be a godsend for the Shinzo Abe administration as it struggles to contain a potential trade war with US.
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