Japan Country Profile - Economy, Currency, Central Bank, Canadian Dollar, CAD

Introduction

Japan is the 2^nd largest economy in the world with GDP valued at $4.367 trillion in 2006, and a population of 127 million. The Japanese economy has highly developed banking, insurance, real estate, retail, transportation and telecommunications industries. Its technology advanced factories produce motor vehicles, electronics equipment, machine tools, steel and nonferrous metals, ships, chemicals. Japan is the 4^th largest exporter in the world behind Germany, the US, and China. However, Japan needs to import most of its energy and food as it does not have much agricultural land or oil reserves.

Go to Central Bank Watch Go to Economic and Financial Profile

Japan's Fundamental Indicators and Chart

Monthly Data for July, 2008

Date	EST	Indicator	Actual	Forecast	Previous
7/1	7:50pm	Monetary Base y/y	0.4%	0.0%	-0.9%
7/4	1:00am	Leading Index	92.6	93.0%	92.8%
		Preliminary Measure for May Provided by: Cabinet Office Coincident Index: 103.0%, forecast 103.4%, pr. 101.7% (Apr), 102.4% (Mar)
7/7	7:50pm	M2+CD Money Supply y/y	2.3%	2.0%	2.0%
7/8	1:00am	Eco Watchers Survey	29.5	31.0	32.1
		For June Provided by: Economy Watchers Survey Economic conditions in Japan posted its 4th consecutive monthly decline, dropping to a 6 year low. Business conditions for merchants like barbers, taxi drivers and others who deal with consumers, are being pressured by higher prices to consumers which is causing reduced consumers spending. For Japan, a downturn in its domestic economy is corresponding to a global slowdown, which means foreign demand will slacken as well.
7/8	7:50pm	Core Machinery Orders	10.4%	1.1%	5.5%
		For May "Core Private Sector Machinery Orders" Provided by: Cabinet Office Orders for Japanese machinery rose 10.4%, a large jump compared to forecasts, which at 1.1% were about a 10th of the actual figure. Demand for equipment used to make semiconductors and steel led the way. The demand is coming from emerging economies as the US, the UK and Euro-zone feel the pressure of higher oil costs, higher credit costs and higher inflation. Still the data comes as a response perhaps to weak orders in February and March, which were down 12.3% and 8.3%. Japanese companies will have to deal with the same factors, mainly higher commodity costs and weaker demand at home, that the other big economies are facing, and so the positive number should moderate in the coming months. Manufacturing confidence fell to a 4-year low earlier this week, and it will be interesting to note if capital spending declines or not going forward as a result of squeezed profits.
7/9	2:00am	Machinery Tool Orders y/y	-2.7%		1.4%
		Preliminary Measure for June Provided by: Cabinet Office
7/9	7:50pm	Corporate Goods Price Index y/y	5.6%	5.2%	4.8% 4.7%
		For June Provided by: Bank of Japan Importance: Medium CGPI m/m: 0.8%, forecast 0.6%, pr. 1.1% (May), 0.6% (Apr), 0.5% (Mar) The Corporate Goods Price Index, a measure of producer prices rose 5.6% in June compared to a year ago. It's the fastest rate in 27 years. On the month, prices were up 0.8%. Prices are being pushed up by record oil and higher commodity prices, which companies are passing on to consumers. It is also eating into companies' profits which will affect hiring and the health of the economy. The news is evident of the type of pressures facing the major economies, the UK, Europe and the US, which are also absorbing the price of oil. Still, the news will not have much effect on the Bank of Japan which is reluctant to raise rates while the domestic economy is weakening, but may hurt stocks.
7/9	7:50pm	Current Account	2.000T	2.052T	1.380T
		For May, Unadjusted Provided by: Ministry of Finance Official Release: PDF Current Account (s.a.): 2.032T, forecast 1.90T, pr. 1.51T Trade Balance - BOP Basis: 0.529T, forecast 0.487T, pr. 0.634T The unadjusted current account surplus for Japan shrank 5.9% on the year to 2 trillion yen ($18.7 billion). Export growth slowed to a pace of 4.2% on the year from 4.9% in April, and record high oil prices increased the amount spent on imports. Imports were up 4%, compared with 13.4% in April. On a seasonally adjusted basis the current account measured 2.032 trillion yen, a 34% jump on last April's 1.51 trillion yen.
7/11	12:30am	Industrial Production m/m	2.8%	2.9%	2.9%
		Final version for May Latest Release Provided by Ministry of Economy, Trade and Industry Industrial Production y/y: 1.1%, prelim. 1.2%, pr. 1.8% Slight downward revisions were made in shipments, which rose 2.0% instead of the prelimary reading of 2.1%, as inventories remained unchanged. May's factory operation ratio rose 2.2% to 104.1 from the previous month.
7/11	1:00am	Consumer Confidence	32.6	31.5	33.9
		"Household" Confidence for June Provided by: Cabinet Office Official Release: Page and data Japanese consumer confidence continued to dip for the 3rd straight month in June. The 32.6, down from May's 33.9 reading, is the a new record. 87.2% of the respondences see prices of goods to rise in the coming 12 months, which is 1.1% higher than in May. Inflation is dampening apetite to purchase goods. Japanese exports to the US, specifically motor vehicles, have also been slow. Businesses are feeling their profits deteriorate, as retailers reported weak earnings recently.
7/14	11:00pm	BOJ Interest Rate Statement	0.50%	0.50%	0.50%
		Release from Bank of Japan Official Release: PDF The Bank of Japan held rates at 0.5% amid weaker growth in the economy. Consumers and firms are being pressured by higher food, energy, and raw-materials costs, which is cutting into spending. The Bank lowered its projections for growth this year. The economy is now expected to grow 1.2% through the year ending March 31, slower than the 1.5% forecast on April 30th. From the Release: "Economic growth is slowing further reflecting weaker growth in business fixed investment and private consumption against the backdrop of high energy and materials prices. While growth will likely remain slow for the time being, it is expected to gradually return onto a moderate growth path thereafter. CPI inflation rate (excluding fresh food) is currently around 1.5 percent due to increased prices of petroleum products and food. CPI inflation is expected to gradually moderate after becoming somewhat elevated in coming months. These suggest that the possibility of the economy remaining on a sustainable growth path with price stability is relatively high. With regard to risk factors, global financial markets remain unstable and there are downside risks to the U.S. and the world economy. In addition, weaker income generation due to upsurge in commodity prices has the potential to weigh on domestic private demand. These downside risks to the economy demand attention. On prices, inflationary pressures are increasing globally. In Japan, it is necessary to be mindful of upside risks due to changes in the inflation expectations of households and the price-setting behavior of firms in addition to developments in energy and materials prices. Meanwhile, if the downside risks to the economy turn out to decrease, this will increase the risk of possible swings in economic activity and prices due to prolonged period of accommodative financial conditions"
7/15	2:00am	BOJ Monetary Policy Report
		Provided by: Bank of Japan Official Release: Press Release (English) From the Release: "Japan's economic growth is slowing, mainly due to the effects of high energy and materials prices. Exports have continued to increase, although the pace of increase has somewhat slowed lately. Corporate profits have been decreasing recently, mainly due to the deterioration in the terms of trade. In this situation, the pace of increase in business fixed investment has become slower. Private consumption has been firm in a situation where household income has continued rising moderately. On the other hand, public investment has been sluggish. Meanwhile, housing investment has been recovering moderately. With these developments in demand both at home and abroad, production has been more or less flat. Japan's economy is expected to grow at a slower pace for the time being and follow a moderate growth path thereafter."
7/15	7:50pm	Tertiary Industry Activity Index	-0.2%	0.0%	1.8%
7/17	7:50pm	BOJ Meeting Minutes
7/21	7:50pm	All Industrial Activity Index	0.4%	0.4%	0.8%
		For May Provided by: Ministry of Economy, Trade and Industry (METI) Official Release: Data - PDF All Industrial Activity Index y/y: -0.5%, pr. 0.3% The all industrial activity index, a measure of overall production by all sectors of the Japanese economy, rose 0.4% for the May period. This was slower than the pace in April. Industrial output (up 2.8%) was the main positive contributor, on the back of production of cars and mobile phones. Services activity fell 0.2%, as consumers spend less and limit their spending on retail, dining and travel. The annual pace of activity fell 0.5%, showing the slowdown the Japanese economy is undergoing recently.
7/23	7:50pm	Trade Balance	0.14T	0.28T	0.52T 0.64T
		For June - Merchandise Trade Seasonally Adjusted Provided by: Ministry of Finance Official Release: PDF Total Merchandise Trade Balance: 0.138T, forecast ¥0.506T, pr. ¥0.365T Japan's exports fell for the first time in 4 years, declining 1.7% in June compared to the same time last year. Demand for cars and electronics has been waning from Japan's biggest market the US, but slower global growth may be cutting into dermand from emerging economies. Still, export growth has sustained the Japanese economy as domestic demand became leaner in the face of rising costs for both consumers and firms. Exports to the US are down 15.4% y/y and shipments to Europe fell 11.2% y/y. Emerging market economies have been able to offset these figures, but recently with central banks raising rates to combat inflation, it is tempering spending in these areas as well. Exports to Asia were up 1.5%, the slowest pace in 2 years. See page of of the release for a breakdown of exports to various countries.
7/24	7:30pm	Consumer Price Index y/y	2.0%	1.9%	1.3%
		National CPI For June Latest Release Provided by: Statistics Bureau CPI Ex. Food y/y: 1.9%, forecast 1.9%, pr. 1.5% (May), 0.9% (Apr) CPI Ex. Food & Energy y/y: 0.1%, forecast 0.0%, pr. -0.1% (May), -0.1% (Apr) CPI m/m: 0.5%, pr. 0.8% (May), -0.1% (Apr) CPI Ex. Food m/m: 0.4%, pr.0.8% (May), 0.0% (Apr) CPI Ex. Food & Energy m/m: 0.0%, pr. 0.1% (May), 0.2% (Apr) Consumer inflation in Japan for June rose 2% compared to the level seen last year. It was the fastest pace in 10 years. Inflation excluding food was up 1.9%, compared to May's 1.5%. Looking at inflation minus both food and energy, prices were up 0.1%. It's easy to see who the real culprit is consumers are paying more for gas and electricity. The effect of rising prices has had a clear impact on household spending which has been negative for several months now. Weaker spending filters into all other parts of the economy and with falling exports as a result of a global slowdown, the Japanese economy may be heading for negative growth in the second quarter of 2008. A second report today showed that the prices companies paid for services were up 1.2% for June compared to a year ago, the fastest pace this year. That means companies profits are being squeezed just as sales are falling as a result of weaker consumer spending.
7/24	7:50pm	Tokyo Consumer Price Index y/y	1.6%	1.8%	1.5%
		For July Latest Release Provided by: Statistics Bureau Tokyo CPI Ex Food y/y: 1.6%, forecast 1.6%, pr. 1.3% (Jun), 0.9% (May) Tokyo CPI Ex Food & Energy y/y: 0.3%, forecast 0.4%, pr 0.3% (Jun), 0.1% (May) Tokyo CPI m/m: -0.1%, pr. 0.3% (Jun), 0.5% (May) Tokyo CPI Ex Food m/m: 0.1%, pr. 0.2% (Jun), 0.4% (May) Tokyo CPI Ex Food & Energy m/m: -0.2%, pr. -0.1% (Jun), 0.3% (May) Consumer prices in the Tokyo area were up 1.6% for July, an increase from last month, but below expectations of a 1.8% gain. Excluding food and energy prices were up 0.3% on the year, matching June's figure. On the month, prices excluding both food and energy were actually down 0.2%. The price of food for instance fell 0.5% in July compared to June and clothes and footwear were down 3.9%. Fuel was up 1.9% on the month (5.8% y/y) while transportation increased 1%.
7/24	7:50pm	Corporate Service Price Index y/y	1.2%	0.6%	0.7% 0.6%
		For June Provided by: The Bank of Japan Indicator Page: Main Page Previous Release: PDF CSPI m/m: 0.5%, pr. 0.3% (May), 0.1% (Apr), 0.4% (Mar), 0.3% (Feb) The prices that corporations pay for services rose 1.2% in June compared to last year. May's figure was revised up as well. Transportation led the increase, climbing 6.2% compared to last year even as other services like communications (-1.6%) and advertising (-2.6) were down for the year. The Japanese economy has seen rising inflation figures in 2008, but with economic growth slowing, the Bank does not seem to be in much position to do anything about it, i.e. raise rates. Consumer inflation figures were higher, mainly on energy costs.
7/28	7:30pm	Household Spending y/y	-1.8%	-2.8%	-3.2%
		For June Provided by: Statistics Bureau Latest Release: Summary Overall household spending was down 1.8% in June compared to a year ago, which was better than forecast. It's the 4th month in a row that the figure was negative. Incomes were down 2.1%, with extraordinary income, a measure usually of bonuses, fell 7.1% in June from a year earlier. From the Release: "(1) Expenditures for Two-or-more-person Households The average amount of monthly consumption expenditures per household for June 2008 was 281,951 yen, up 0.5% in nominal terms but down 1.8% in real terms from the previous year. (2) Income and Expenditures for Workers' Households The average amount of monthly income per household stood at 737,166 yen, up 0.2% in nominal terms but down 2.1% in real terms from the previous year. The amount of consumption expenditures was 307,975 yen, up 2.6% in nominal terms and up 0.3% in real terms from the previous year."
7/28	7:30pm	Unemployment Rate	4.1%	4.0%	4.0%
		For June (s.a.) Latest Release Provided by: Statistics Bureau The Japanese unemployment rate rose to 4.1%, surprising forecasts and reaching the highest level in 2 years. A weaker labor market has caused households to limit their spending a trend that has been apparent the last several months. Weaker consumer spending will hurt domestic demand just as foreign demand for Japanese exports hits a snag as a result of a global slowdown. Consumer confidence has been beaten down by high energy prices as well, which has been the main driver in higher inflation. The jobless rate increased as more woman entered the labor market or sought higher paying jobs to supplement household incomes which have been squeezed by higher prices.
7/28	7:50pm	Retail Sales y/y	0.3%	-0.2%	0.3% 0.2%
		For June Provided by: Ministry of Economy, Trade and Industry Official Release: Data Large Retailer's Sales y/y: -3.9%, forecast -1.6%, pr. -2.0%, -2.2% (Apr) Retail Sales m/m: 0.0%, forecast -0.5%, pr. -0.1%, -0.1% (Apr) Retail sales in Japan were up 0.3% in June compared to a year ago, defying expectations of a decrease. Its the 11th month in a row of positive increases, and shows that although household spending is down overall, retail sales have not yet turned negative. Large retailers' posted a 3.9% drop in sales compared toa year ago, worse than expectations of a -1.6% change
7/28	7:50pm	Large Retailers	-3.9%	-3.4%	-2.0% -2.1%
7/29	7:50pm	Industrial Production m/m	-2.0%	-1.7%	2.8%
		Preliminary version for June Latest Release Provided by Ministry of Economy, Trade and Industry Industrial Production y/y: 0.2%, forecast 0.6%, pr. 1.2% (May), 1.8% (Apr) Japan's industrial production declined 2% in June compared to May, preliminary data showed. It was slightly worse than the pace expected by a consensus of economists. Production was up 2.8% in May. The data shouldn't come as too much of surprise since Japan's main trading partners are being hit by the credit crunch and therefore reducing demand for industrial goods. Japanese growth for the 2nd quarter is expected to show an annualized 0.5% rate.
7/30	7:15pm	Manufacturing PMI	47.0		46.5
		For June The NTC Research/Nomura/JMMA Purchasing Managers Index Manufacturing activity in Japan contracted again in June. The PMI measured 47,0, as domestic demand cools and foreign demand for Japanese goods also decreases as a result of the global credit crunch.
7/30	9:30pm	Average Cash Earnings y/y	-0.6%	0.6%	0.8% 0.2%
		For June Provided by: Ministry of Health, Labor and Welfare Monthly wages, including overtime and bonuses, decreased 0.6% in June compared to the same time last year. Bonuses were down 1.5%. It's the first time this year that wages were negative. Japanese households have already been cutting back on spending as a result of higher prices for gas, food and other goods. Lower wages will only further depress consumer confidence. Japanese growth is set to show a very weak 2nd quarter as exports, production and household spending decline.
7/31	1:00am	Housing Starts y/y	-16.7%	-18.1%	-6.5%
		For June Provided by: Ministry of Land, Infrastructure, Transport and Tourism Previous Release: Excel Data (.xls) Annualized Starts: 1.130M, forecast 1.110M, pr. 1.072 (May) Construction Orders y/y: -11.7%, pr. -25.2% (May), -8.4% (Apr)

Previous Month's Releases

Next Month's Releases

Central Bank Watch - Latest Bank of Japan Decision

Back to top»

October
6th, 2008

Actual

Forecast

Revised Form

0.50%

N/A

Release from Bank of Japan
Previous Release: Statement on Monetary Policy

Go to Japan's Interest Rate Fundamental Indicator Page

Central Bank Watch - Bank Officials' Comments

Back to top»

November 22 (BOJ Seiji Nakamura) -- Bank of Japan board member Nakamura said that "downside risks" to US economic growth are rising as the housing recesssion worsens. ``Housing investment continues to decline and consumer sentiment-related indicators are worsening because of the subprime-mortgage problem.'' The US is Japan's biggest export market, and puts back chances of an interest rate hike by the Bank.

See archived comments

Central Bank Watch - Latest Bank of Canada Decision

Back to top»

Closely Linked to Global Stock Markets

The Japanese currency has a very low interest rate, 0.5%, and for a long time had the ZIRP (Zero Interest Rate Policy). Such a low interest rate made the Yen a funding currency for carry trade. In carry trade an investor borrows Yen to purchase assets with higher interest rates abroad. In order to purchase these assets abroad, the investor must sell the Yen and buy the local currency, thereby reducing demand for the Yen. During times of turmoil in global stock markets, investors hurry to pay back their loans in Yen, therefore strengthening the Yen.

This figure is a weekly chart, of the GBP/JPY pair. Prices moving upward favor the strength of the Pound (the top currency in the GBP/JPY quote). When prices move down they favor the Yen (the bottom currency in the pair).

Japan's Economic Slump

Interest rates in the country are so low because the Japanese economy has battled back from an economic slump starting in 1990, after a stock market tumble. The country the had to battle deflation, which gave rise to lower wages and lower investment. In 2003, the Bank of Japan aggressively boosted the money supply to keep the yen weak. Increased cost-effectiveness in the export sector has led to business profits. Economic data, such as inflation, does not give the central bank much room to raise rates, and the country is vulnerable to a cool down in US spending and growth.