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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Jan 06 2014

Japan’s Cyclical Outlook and Abenomics

Three months ago, based on its forward-looking Japanese Long Leading Index (JALLI), ECRI recognized a new Japanese growth rate cycle downturn that was underway. Sure enough, in December, not only did the third quarter GDP revisions disappoint the consensus, but the Japanese government also predicted that GDP growth would slow to 1.4% in 2014 from 2.6% in 2013. This confirmation of ECRI’s outlook came in sharp contrast to optimism about the three arrows of Abenomics: monetary, fiscal and structural reforms.

Our latest analysis highlights important trends in key aspects of GDP growth that have not been recognized elsewhere, underscoring the necessity for reliable leading indexes like the JALLI to stay ahead of shifts in the Japanese economy.

Notably, the 2013 stock market rally was always predicated in significant measure on optimism about the third phase of Abenomics, the structural reforms that have yet to materialize.

Related News & Events

Becoming Japan: Update

ECRI December 11, 2013

The ECB rate cut was spurred by a “surprise” drop in Eurozone inflation in Oct. But, U.S. inflation was even lower then, and the Fed’s key inflation measure fell further below its 2% target. More

 

Becoming Japan (Part 2)

ECRI November 4, 2013

Inflation has already turned lower in the U.S. and the Eurozone than in Japan. More