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Japan: Japan: Slowly recovering?

2016/01/04

Advanced indicators still point to a fragile outlook. The trade balance in November deteriorated to -JPY379.7bn (+JPY108.3bn in October). Export volumes contracted (-3.1% y/y) due to lower request from the U.S. and Asia and imports registered a small upturn (+1.6%y/y from -3.8%) as request for EU goods recovered. Industrial activity gained some traction, with production increasing +1.4% m/m in October (+1.1% in September). Business surveys point to a robust outlook, with manufacturing PMI at 52.5 in December.

Meanwhile, policy actions to support increase were announced, inclunding a stimulus package of USD27bn. On the monetary front, the Bank of Japan maintained its easing stance but added some changes inclunding: (i) an extension in the average remaining maturity of the Bank's JGB purchases to 7-12 years (from 7-10) and (ii) supplementary annual purchase of exchange-traded funds (JPY300bn) composed of stock issued by companies that are “proactively making investment in physical and human capital”.

EH expects GDP increase of +1.3% in 2016 (from +0.8% in 2015).

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