Export volumes have ticked up this year, but not by enough to think that JPY weakness is finally boosting sales. That has a silver lining: just as JPY weakness didn't boost real growth, a strengthening currency won't lead to much deterioration. There will, however, be an impact on nominal earnings.

Today's CPI release was less interesting than data released earlier in the week showing a jump in part-time wage growth in March, and comments from MPB member Nakagawa highlighting upside risks to inflation.

The gap between PPI and import prices shows pent-up inflationary pressure, a dynamic that is also showing up in a renewed rise in consumer inflation expectations. These trends probably have further to run, unless there is a global recession or JPY appreciation that causes import prices to fall.

The themes in the Tankan are quite clear: labour market tightness, and rising inflation pressure. Price pressures are most obvious in the services sector, which makes sense, when this is more labour-intensive than manufacturing.

The Tankan showed another rise in price pressures, particularly in non-manufacturing, the sector where labour market conditions are also the tightest and sentiment the strongest. The details of Trump's plans could change things, but domestic dynamics keep the BOJ on track to hike again.

As would be expected, the summary of the March MPC meeting shows more concern about US policy. But this isn't a repeat of summer 2024 when the BOJ got cold feet on new rate hikes. Inflation data remain solid, and the meeting talked about upside risks for prices, driven by domestic factors.

Today's shunto 2025 results are constructive, but not a game changer. Upside risks from other dynamics are bigger: part-time wages, the output gap, inflation expectations, processed food prices, rent, and pent-up inflation pressure in both PPI and public services prices.

Today's Q1 BOS survey shows the labour market still tight, giving a flavour for the early April Tankan. February PPI inflation eased, but the break with the YoY change in import prices is sustaining. That suggests PPI is being driven by the accumulated rise in import prices since 2021.

The standout finding from this year's annual corporate survey from the Cabinet Office is the continued rise in nominal growth expectations. The five-year outlook is now almost at 3%. This is another clear sign of a rise in inflation expectations, with real growth expectations not changing at all.