Japan’s consumption recovery depends on high-income households
The consumption recovery in Japan has been noticeably slower than in other advanced economies. The recent pick up in the pace of the recovery was mainly brought about by an increase in discretionary spending among high-income households, supported by accumulated savings and wealth effects.
What you will learn:
- Households in the low- and middle-income bracket have barely managed to maintain essential consumption in an environment of rising prices of necessities and stagnant wages.
- The fall in discretionary spending among the middle class is particularly significant because their real income has fallen quickly, with little support from savings and assets.
- Although our analysis suggests that there is still unfulfilled pent-up demand for discretionary spending among the rich, it will gradually lose momentum by mid-2023. We don’t expect consumption to regain its 2019 level until 2024.
Wage rises in 2024 look set to be as high as this year in Japan
More market participants appear to have become confident that the wage-driven inflation is real, which will encourage the Bank of Japan to start normalizing its super-accommodative monetary policy in 2024. We revised up our projection for the spring wage settlement in 2024 to match the strength of the settlement in 2023. We believe that wage increase will continue after 2025, but achieving wage-led 2% inflation is still a long way off.Find Out More
Three key idiosyncrasies in Asian trade and why they matter
Idiosyncrasies in recent Asian trade data suggest that country-specific factors are becoming more influential and causing some countries' exports to buck cyclical trends. If that continues, the fortunes of regional exporters will diverge further in 2024, though we still think the overall export trend will be subdued.Find Out More
BoJ to allow 10-year JGB yields to exceed 1%
The Bank of Japan (BoJ) left short- and long-term policy rates unchanged at -0.1% and around 0%, respectively, at the meeting on Oct.31. However, the BoJ decided to tweak the yield curve control (YCC) policy by setting the upper bound of 1% as a reference and by making its Japanese Government Bond (JGB) purchase operations more flexible not to rigidly defend the bound.Find Out More