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Japan Unemployment Rate 2.6% (consensus 2.6%) in May-24

- Japan's labour market remains stable, with the unemployment rate constant at 2.6% and a robust jobs-to-applications ratio of 1.24, indicating tightness and potential wage growth.
- Despite contractions in GDP and consumption growth in Q1 2024, positive signals from the Tankan Surveys and PMI indices suggest a nuanced outlook, with the non-manufacturing sector expected to offset manufacturing sector challenges.

Japan Policy Rate 0.1% in Jun-24

• The BOJ maintained its policy rate at 0.0-0.1%, aligning with expectations and signalling a gradual approach to policy normalization. It plans to reduce JGB purchases over the next one to two years.
• Global conditions, domestic economic indicators, inflation dynamics, financial market stability, and government measures will influence future interest rate decisions.
• The BOJ’s strategy focuses on sustaining economic recovery and ensuring financial stability, with the flexibility to adjust policies based on evolving economic and financial conditions.

Japan CPI 2.5% y-o-y in Apr-24

- Japan's CPI growth moderated to 2.5% year-on-year in April 2024, reflecting the lowest increase since January and indicating softer inflationary pressures compared to the recent average.
- Contextual economic indicators reveal a mixed landscape: while bank lending growth remains strong at 3.1%, the modest DCGPI increase and declining cash earnings suggest potential challenges ahead for consumer spending and overall economic momentum.

Peak PMI Pace Probably Passing

• The PMIs probably peaked in the spring, with the US’s jump beyond its peers in May setting it up for a more substantial drop during the summer.
• Residual seasonality from the pandemic-corrupted adjustment factors will likely exaggerate the US payback as part of a softening global story.
• A summer downturn should support the re-emergence of dovish debate in the US, where we still expect a September cut. However, global policy only looks a little tight.

By Philip Rush