–BOJ Officials Gathering Intel on \u2018Initial Momentum\u2019 Toward Continued Wage Hikes in Fiscal 2026, Key to Justify Rate Action Amid Above-Target Inflation<\/p>\n
–Governor Ueda Stresses It Would Be Like Easing Off Accelerator, Not Stepping on the Brakes for Resilient but Feeble Economic Recovery<\/p>\n
(MaceNews) \u2013 Here are the key Japanese economic events for the coming week after the markets have pretty much priced in an interest rate increase by the Bank of Japan.<\/p>\n
Forget the second reading of the Q3 GDP that is set to confirm Japan\u2019s wobbly economy slipped into its first contraction in six quarters with a slightly downward revision. The slump was mostly in payback for rush exports of autos and metals among other goods to the United Sates in Q2 before stiff import duties hit.<\/p>\n
And never mind the November producer inflation data that is projected to show an easing but sticky annual rate just under 3% (above the bank\u2019s 2% price stability target), as seen in consumer prices in the aftermath of acute domestic rice supply shortages and the relentless effects of having a weak currency that pushes up import costs.<\/p>\n
The market focus will stay on the Dec. 15 release of the far-flung quarterly Tankan business survey conducted by the central bank, with a more-than-usual sharp attention placed on how big the profitability is in the October-December quarter and how serious labor shortages are, which together should indicate how firms would need keep raising wages and benefits in order to secure qualified workers into the new fiscal year starting in April.<\/p>\n
Less than two weeks to the Bank of Japan\u2019s policy decision, it almost sounds like a fait accompli. That\u2019s if you take the cue from the latest remarks by Governor Kazuo Ueda who, together with his deputies, has earned a reputation that he tends to drop a hint as an unofficial guidance in an effort to avoid surprising the markets.<\/p>\n
Speaking to business leaders in Nagoya, the capital of Aichi Prefecture where Toyota Motor is based, Ueda stressed the importance of \u201cconfirming the initial momentum\u201d toward continued solid wage hikes in fiscal 2026 starting on April 1. Major firms settle annual wage talks with unions from early to mid-March but early indications of the pace of wage growth tend to emerge from November to January.<\/p>\n
Ueda noted that corporate profits are expected to remain high despite the drag from stiff U.S. tariffs, the Japanese Trade Union Confederation is demanding wage growth at 5% or more (3% in base wages and 2% in seniority-based pay) \u2013 the same rate targeted for fiscal 2025 \u2013 and the Japan Business Federation is also calling for \u201cfurther anchoring\u201d of raising wages.<\/p>\n
Ahead of the Dec. 18-19 policy meeting, BOJ official at the bank\u2019s head office and branches are \u201cactively\u201d gleaning anecdotal evidence on how firms are planning to raise wages, the governor said.<\/p>\n
\u201cAt the meeting, we will examine and discuss economic activity and prices at home and abroad as well as developments in financial and capital markets\u2026and will consider the pros and cons of raising the policy interest rate and make decisions as appropriate (highlighted by Mace News).\u201d<\/p>\n
Later at a news conference, Ueda was asked whether the bank\u2019s policymakers would have to wait until the next quarterly meeting of BOJ branch managers in mid-January. The BOJ\u2019s last rate hike, the third in the current cycle of unwinding large-scale easing, was conducted at its Jan. 23-24 meeting following the regional economic reports presented by branch managers at their Jan. 9 meeting.<\/p>\n
\u201cWe do get reports at the January branch managers’ meeting, or I should say we always get those at regular branch managers’ meetings,\u201d the governor replied.<\/p>\n
\u201cHowever, at this particular point, the information or key points we especially wish to confirm are whether the mechanism of wages and prices rising gradually together will continue. The core of this at this stage is the movement toward next spring’s wage negotiations, and we are actively conducting special interviews and surveys regarding this issue.\u201d<\/p>\n
In the speech, Ueda repeated his view expressed at the post-meeting news conference in late October that he sees a \u201chigher possibility\u201d that the BOJ board\u2019s medium-term growth and inflation outlook will materialize.<\/p>\n
Both underlying CPI inflation and the core CPI (excluding fresh food) \u201cwill increase gradually and, in the second half of the projection period (fiscal 2025 through fiscal 2027), be at a level that is generally consistent with the (2%) price stability target,\u201d the board said in its quarterly Outlook issued on Oct. 30.<\/p>\n
At its last meeting on Oct. 29-30, the BOJ\u2019s nine-member board decided in a 7 to 2 vote to maintain the target for the overnight interest rate at 0.5% for the sixth straight meeting, as expected, amid uncertainty over the emerging effects of the protectionist U.S. trade policy, geopolitical risks and financial markets.<\/p>\n
Now the governor stressed in his latest speech that \u201cthere is a growing view that the impact of tariff policies on corporate profits will be limited. Considering these factors among others, it appears that the uncertainty surrounding the outlook for Japan’s economy is gradually diminishing (highlighted by Mace News).\u201d<\/p>\n
– Monday, Dec. 8<\/p>\n
0850 JST (2350 GMT\/1850 EST Sunday, Dec. 7) Cabinet Office releases revised GDP (the second preliminary reading) for the July-September quarter.<\/p>\n
Mace News median: -0.5% q\/q (range -0.6% to -0.4%) vs. Q3 prelim -0.4%; -2.1% annualized (range -2.4% to -1.6%) vs. Q3 prelim -1.8%; +1.1% y\/y (range +0.9% to +1.1%) vs. Q3 prelim +1.1%<\/p>\n
Revised GDP data is expected to confirm that Japan\u2019s economy posted its first contraction in six quarters in the July-September quarter, hit by a pullback in net exports after U.S. tariffs front-running skewed exports higher in April-June when the GDP grew 0.6%.<\/p>\n
The contraction is forecast to be revised slightly to 0.5% from the initial reading of 0.4% as business investment in equipment and software is likely to be less robust than previously believed. In addition to supply-side data on capital spending that was used in the preliminary Q3 GDP estimate, the Cabinet Office is adding demand-side capex figures found in the quarterly business survey on earnings, capex and inventories among other topics conducted by the Ministry of Finance.<\/p>\n
The GDP is now estimated to have slumped 2.1% at an annualized pace in Q3, revised down from a preliminary 1.8% and following a 2.3% rise in Q2.<\/p>\n
Looking ahead, economists expect the Q4 GDP to show a slight rebound but warned that the outlook for external demand remains uncertain as the full impact of the protection U.S. trade policy may be emerging toward the end of the year.<\/p>\n
In the preliminary data released last month, the biggest contributors to the Q3 slump were private housing investment (-0.3 percentage point), private inventories (-0.2 point) and net exports (-0.2 point). Housing construction slumped in payback for rush starts before tighter clean energy rules took effect on April 1.<\/p>\n
On the bright side, consumer spending slowed amid sticky inflation but showed some resilience, up 0.1% on quarter and pushing up the GDP by 0.1 point, while labor shortages led business investment in equipment and software to record its fourth straight growth, up 1.0% with a 0.2-point positive contribution.<\/p>\n
In the revised Q3 data, domestic demand is forecast to have trimmed total domestic output by 0.3 percentage point, slightly more than the 0.2-point negative contribution recorded in the initial data.<\/p>\n
Business investment is expected to have risen 0.3% on quarter in Q3, much slower than the initial estimate of a 1.0% expansion. Also on the downside, public investment is now seen down 0.6%, instead of rising 0.1%.<\/p>\n
Consensus forecasts are shown as quarter-on-quarter percentage changes, except for domestic demand, private inventories and net exports, which are expressed in percentage-point contributions. Preliminary figures are in parentheses.<\/p>\n
GDP q\/q: -0.5% (-0.4%); 1st drop in 6 qtrs<\/p>\n
GDP annualized: -2.1% (-1.8%); 1st drop in 6 qtrs<\/p>\n
GDP y\/y: +1.1% (+1.1%); 5th straight rise<\/p>\n
Domestic demand: -0.3 point (-0.2 point); 1st drop in 3 qtrs<\/p>\n
Private consumption: +0.1% (+0.1%); 6th straight rise (incl +0.0% in Q4 2024)<\/p>\n
Business investment: +0.3% (+1.0%); 4th straight rise<\/p>\n
Public investment: -0.6% (+0.1%); 2nd straight drop<\/p>\n
Private inventories: -0.1 point (-0.2 point); 1st drop in 3 qtrs<\/p>\n
Net exports (external demand): -0.2 point (-0.2 point), 1st drop in 2 qtrs<\/p>\n
– Wednesday. Dec. 10<\/p>\n
0850 JST (2350 GMT\/1850 EST Wednesday, Nov. 12) The Bank of Japan releases the November corporate goods price index.<\/p>\n
Mace News median: CGPI +2.7% y\/y (range: +2.5% to +2.9%) vs. Oct +2.7%; +0.3% m\/m (range: +0.2% to +0.5%) vs. Oct +0.4%<\/p>\n
Producer inflation in Japan measured by the corporate goods price index is expected to post a 2.7% increase on year in November after easing slightly to the rate in October from 2.8% in September (revised up from 2.7%), showing elevated production costs boosted by an earlier spike in rice prices in the aftermath of protracted domestic supply shortages.<\/p>\n
But the upstream inflation pressures appear to be easing off, reflecting slower global growth hit by the protectionist U.S. trade policy. The 12-month moving average for November would be 3.3%, down from 3.4% in October, 3.5% in September and 3.6% in August.<\/p>\n
The year-on-year increase in the CGPI decelerated to a 15-month low of 2.5% in July (the slowest since 1.2% in April 2024) from an upwardly revised 2.8% in June after having hit a recent peak of 4.3% in each of February and March this year (the highest since 4.5% in June 2023).<\/p>\n
The key upside risk to producer inflation is the persistent weakness of the yen, which has pushed up import costs. The CGPI import index jumped 2.5% on the month in yen terms in October, posting gains for four months after having declined in the previous five months. The year-on-year drop in the index shrank to 1.5% in October from 12.0% in June.<\/p>\n
The monthly average dollar\/yen exchange rate during the Tokyo trading hours surged to Y155.12 in November from Y151.28 in October and Y147.94 in September and a recent low of Y144.50 in June, according to the BOJ. The U.S. unit stood at Y153.72 in November 2024.<\/p>\n
On the month, the CGPI is forecast by economists to mark a third straight rise, up 0.3%, following a 0.4% gain in October, when the upstream inflation was led by farm produce (polished rice, brown rice and salted and dried seafood products) and nonferrous metals (copper, plastic insulated copper wires and unwrought gold). Fuel prices dipped after recent gains.<\/p>\n","protected":false},"excerpt":{"rendered":"–BOJ Officials Gathering Intel on \u2018Initial Momentum\u2019 Toward Continued Wage Hikes in Fiscal 2026, Key to Justify Rate…\n","protected":false},"author":2,"featured_media":260033,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,101],"class_list":{"0":"post-335308","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/335308","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=335308"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/335308\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/260033"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=335308"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=335308"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=335308"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}