There is good news for Japan's economy -- the Japanese job market is experiencing a boom. This is the best the Japanese job market has performed in last 22 years.
Japan's economy is showing steady signs of recovery. More recently, the country registered an increase in household spending. This has triggered the expectation of employers who have increased hiring in the hope that the domestic economy will perform well in the third quarter.
According to figures released by the Labour Ministry of Japan, the jobs-to-applicant ratio has also increased from 1.09 in May 2015 to 1.10 in June 2015. This figure is close to the numbers witnessed during June 1992 when Japan underwent a brief spell of an asset-inflation bubble burst which eventually lead to the stagnation that the country is fighting even today.
An increasing number of potential employees are trying to make the best of this new development. This is precisely why the jobless rate grew from 3.5 percent in May 2015 to 3.7 percent in June 2015. Given the demand for labour in retail and construction sectors, it is unlikely that the jobless rate will grow further.
The effect of a sales tax hike, which was implemented in April this year, is receding gradually. A Bank of Japan employee cautioned that net exports might see some fluctuations this year. Many of the Japanese companies are in the process of shifting factories and this may affect exports in a negative way.
Nikko-Desjardins, Head of Corporate trading, Stuart Poulson says, "Japan's economy can benefit greatly from an increase in household spending. However, for household spending to continue to register a rise, it is important that Japanese people be convinced that in the near future, their incomes will rise too."
Saturday, May 21, 2016
Friday, May 20, 2016
The Saudi Arabian Oil Giants Aramco Value Listing Stuns
Aramco, the Saudi Arabian oil super giant has managed to obtain a multi-dollar listing through only a part of its total corporate heft. The oil super giant is now all set to become the largest oil company in the world.
More recently, the Saudi government also declared that it is planning to sell out a 5% stake in its state oil company. The government is doing this with the intention of boosting its staggering economy. It plans to dedicate its $3 trillion sovereign fund for this purpose.
The Saudi economy will get a major boost from the Aramco deal which will produce anywhere between $2 trillion to $2.5 trillion. This is being hailed as the biggest stock market flotation in history.
Armaco is the only oil producer in Saudi Arabia, a country which is the biggest producer of oil in the world. For this very reason, Aramco exerts huge influence in the global oil markets.
According to statistics, Aramco produces 12 million barrels a day -- one in every nine barrels is produced by Aramco. Aramco's crude oil production capacity is unmatched by any other company in the world. It is believed that in a situation of hypothetical supply disruption, the Saudi Arabian oil giant is capable of solely stabilizing the global oil market.
However, global investors are already pondering over the actual worth of this Saudi Arabian oil giant. If economists and analysts go by the words of Mohammad bin Salman, the deputy crown Prince of Saudi Arabia, Aramco will easily rout Exxon Mobil, another oil giant who’s estimated worth is close to $350 billion. As a matter of fact, the net value of Aramco will leave behind the combined net value of Apple, Exxon, Berkshire Hathaway and Google.
The net value figures of Aramco are mind-blowing. If the company plans to sell 20 percent of its shares, it will raise $400 billion. This figure is capable of changing the face of Saudi stock market.
Stuart Poulson, Head of Corporate Trading at Nikko Desjardins Asset Management says, "Aramco might actually be worth all that money. It is a well-known fact that the company's oil reserves are vast. Aramco's 5 percent may be worth around $2 trillion because the cost of oil production is quite low in Saudi Arabia. Aramco spends only about $2 to produce a barrel of oil."
Saudi Arabia is the one of the few countries that have managed to drive profits from oil production even after prices fell.
More recently, the Saudi government also declared that it is planning to sell out a 5% stake in its state oil company. The government is doing this with the intention of boosting its staggering economy. It plans to dedicate its $3 trillion sovereign fund for this purpose.
The Saudi economy will get a major boost from the Aramco deal which will produce anywhere between $2 trillion to $2.5 trillion. This is being hailed as the biggest stock market flotation in history.
Armaco is the only oil producer in Saudi Arabia, a country which is the biggest producer of oil in the world. For this very reason, Aramco exerts huge influence in the global oil markets.
According to statistics, Aramco produces 12 million barrels a day -- one in every nine barrels is produced by Aramco. Aramco's crude oil production capacity is unmatched by any other company in the world. It is believed that in a situation of hypothetical supply disruption, the Saudi Arabian oil giant is capable of solely stabilizing the global oil market.
However, global investors are already pondering over the actual worth of this Saudi Arabian oil giant. If economists and analysts go by the words of Mohammad bin Salman, the deputy crown Prince of Saudi Arabia, Aramco will easily rout Exxon Mobil, another oil giant who’s estimated worth is close to $350 billion. As a matter of fact, the net value of Aramco will leave behind the combined net value of Apple, Exxon, Berkshire Hathaway and Google.
The net value figures of Aramco are mind-blowing. If the company plans to sell 20 percent of its shares, it will raise $400 billion. This figure is capable of changing the face of Saudi stock market.
Stuart Poulson, Head of Corporate Trading at Nikko Desjardins Asset Management says, "Aramco might actually be worth all that money. It is a well-known fact that the company's oil reserves are vast. Aramco's 5 percent may be worth around $2 trillion because the cost of oil production is quite low in Saudi Arabia. Aramco spends only about $2 to produce a barrel of oil."
Saudi Arabia is the one of the few countries that have managed to drive profits from oil production even after prices fell.
Saturday, May 7, 2016
Scott Morison Insinuates a Tax Cut, Says It's Part of an 'Economic Plan'
Scott Morrison, the Treasurer of Australia, recently made a statement saying that his first budget will be unlike any budgets that Australia has seen. Morrison hinted towards a tax cut and said that he plans to increase education spending.
The government announced that it will be pushing in an extra $1.2 billion in the education budget. If reports are to be believed, under the new budget, people earning more than $80,000 will have to pay lesser taxes than before.
However, Morrison also promised that the new budget had nothing to do with the impending federal election which is to happen on 2 July. The Treasurer said that the new budget is aimed at creating more jobs and that the focus will be on growth and creating a diversified economy.
He also said that he had been allocating his time to the budget for a while now because he understands that Australia does not need a typical budget, but a budget that would strengthen the future of the country.
However, Morrison restrained from making any direct comments about the expected tax cut. At the same time, he also said in a garbed statement that government does not plan to increase the tax burden on Australian citizens and the Australian economy beyond what it is right, because increasing tax will hamper growth and kill jobs, something that Australia cannot afford to do at present.
Stuart Poulson, Head of Corporate Trading at Nikko-Desjardins Asset Management said, "The government must ensure that after the tax revision, an average wage earner should not move into the second highest tax bracket category. If the treasurer is indeed able to reduce taxes, people who earn more than $80,000 will benefit doubly as the temporary deficit levy which was introduced in 2014 will end in 2017."
However, Chris Bowen, the Shadow Treasurer of Australia, has said that he will not support any tax cuts for people who are earning more than $80,000 without first going through the details of the package. Bowen further said that if the government plans to reduce taxes, it will have to justify such an action first and that the entire process will be looked on merits.
Bowen added that the even though the Treasurer says that budget deficits do not count any more, it is hard to ignore the fact that the AAA credit rating is under immense pressure. On top of that, the government has increased overall spending since the last year which is as yet unfunded. Bowen said that he will have to take under consideration all these circumstances before he can approve a tax cut.
More recently, Bill Shorten, the opposition leader of Australia, addressed a conference of journalists in Melbourne where he said that the present Australian government is trying to entice voters by offering them a modest tax cut. However, the people of Australia are smart enough to not fall for such false promises.
He further added that in the last three years, the Liberal government has only stolen money from its voters. Now that the elections are near, the government is trying to buy back voters by offering them money.
The government announced that it will be pushing in an extra $1.2 billion in the education budget. If reports are to be believed, under the new budget, people earning more than $80,000 will have to pay lesser taxes than before.
However, Morrison also promised that the new budget had nothing to do with the impending federal election which is to happen on 2 July. The Treasurer said that the new budget is aimed at creating more jobs and that the focus will be on growth and creating a diversified economy.
He also said that he had been allocating his time to the budget for a while now because he understands that Australia does not need a typical budget, but a budget that would strengthen the future of the country.
However, Morrison restrained from making any direct comments about the expected tax cut. At the same time, he also said in a garbed statement that government does not plan to increase the tax burden on Australian citizens and the Australian economy beyond what it is right, because increasing tax will hamper growth and kill jobs, something that Australia cannot afford to do at present.
Stuart Poulson, Head of Corporate Trading at Nikko-Desjardins Asset Management said, "The government must ensure that after the tax revision, an average wage earner should not move into the second highest tax bracket category. If the treasurer is indeed able to reduce taxes, people who earn more than $80,000 will benefit doubly as the temporary deficit levy which was introduced in 2014 will end in 2017."
However, Chris Bowen, the Shadow Treasurer of Australia, has said that he will not support any tax cuts for people who are earning more than $80,000 without first going through the details of the package. Bowen further said that if the government plans to reduce taxes, it will have to justify such an action first and that the entire process will be looked on merits.
Bowen added that the even though the Treasurer says that budget deficits do not count any more, it is hard to ignore the fact that the AAA credit rating is under immense pressure. On top of that, the government has increased overall spending since the last year which is as yet unfunded. Bowen said that he will have to take under consideration all these circumstances before he can approve a tax cut.
More recently, Bill Shorten, the opposition leader of Australia, addressed a conference of journalists in Melbourne where he said that the present Australian government is trying to entice voters by offering them a modest tax cut. However, the people of Australia are smart enough to not fall for such false promises.
He further added that in the last three years, the Liberal government has only stolen money from its voters. Now that the elections are near, the government is trying to buy back voters by offering them money.
Monday, April 18, 2016
Delay urged in Japanese sales tax increase:
Japan is in danger of falling into another financial crisis
if it continues to pursue its current approach to taxation, according to one of
the foremost experts on Japanese economic affairs. Stuart Poulson, who acts as
Head of Corporate Trading for the highly respected Nikko-Desjardins Asset
Management firm, said that it was too soon to go ahead with the planned
increase in sales tax, currently slated to come into force next year.
The tax on consumer goods, which stood at 5% as recently as
2014, now has a general rate of 8%, he said, and even this had caused
considerable slowdown, with the year to February seeing consumer prices rising
at a mere 0.3%. Japanese consumers are renowned as some of the most risk-averse
in the world, and the original plan to increase the tax further to 10% as early
as fall 2015 could have led to the country slipping into recession once again.
While the proposed second stage increase to 10% was not in
itself a bad idea, said Mr Poulson, the timing was less than optimal. He
pointed out that Japan's economy was still showing considerable signs of
weakness, and that consumer confidence was still shaky in the wake of the
country's last recessionary period, from which it emerged only at the end of
2015, after preliminary figures indicating another recession were revised
upward.
According to research carried out by Nikko-Desjardins
analysts, even the possibility of another recession could lead many in Japan to
keep their money in their pockets, with potentially severe consequences,
especially for the retail and consumer services sectors. The Japanese economy
is the third largest in the world, meaning that any significant slowdown there
is likely to have serious repercussions across the globe.
A number of prominent Japanese commentators and economists
have also called on the government to delay the implementation of the new rate
of sales tax, citing concerns over possible market instability and the effect
on Japanese manufacturers, especially those which are highly dependent on the
consumer market. Even the prime minister's own advisers have voiced their
worries in unusually emphatic language.
Mr Poulson suggested that the ideal approach would not be to
withdraw the tax increase entirely, as this would likely lead to businesses
becoming less likely to believe government assurances on a wide range of
economic issues. By world standards, the Japanese government enjoys high levels
of trust from the business community, thanks to its generally cautious approach
and the nature of the country's society.
Instead, he proposed that the introduction of the new tax
rate should be put on hold for an indefinite period, and that it should be
brought into force only when the economy could be shown to be in good and
stable health. If this was not done, he warned, it might have similar effects
to a doctor introducing new medication to a patient before the efficacy of that
patient's initial treatment had been assessed.
Japan's unique geographical factors also need to be taken
into account, say Nikko-Desjardins analysts. The devastating earthquake and
subsequent tsunami that hit the east coast of Honshu Island in 2011 caused
major disruption to Japan's economy, with the after-effects of the event still
being felt today. Japan's Pacific Rim location makes it highly prone to
suffering further earthquakes in the future.
Stuart Poulson expressed praise for Japanese Prime Minister
Shinzo Abe's "Three Arrows" policy, which puts strong emphasis on
structural reform to accompany monetary expansion and fiscal stimulus. However,
he expressed doubt as to whether all elements of the policy were being put into
practice in a sufficiently strong way, citing the sales tax proposals as an
example of a policy good in principle but in need of fine tuning.
Political factors complicate the situation, limiting the
government's ability to make quick decisions. Increasing the sales tax rate to
10% in April 2017 has been passed by the country's parliament, meaning that
Japan faced a snap election if attempts were made to postpone the move's
introduction. This could impose yet further uncertainty on an already jittery
market, warned Mr Poulson.
The Bank of Japan is injecting trillions of yen into the
economy, as well as receiving a certain amount of revenue thanks to negative
interest rates. Mr Poulson expressed concern at the impact of this policy
continuing in the longer term, given that they also tended to unsettle markets.
He referenced the warnings given by Nobel-winning economist Paul Krugman,
saying that the market was too sensitive for a sales tax increase now to be
appropriate.
Monday, December 15, 2014
Looking at the Japanese economy
Business analysts were of the view that the Japanese economy will register growth during the third quarter. However, all such notions received a setback when data proved that the Japanese economy had actually contracted during the third quarter. In such a situation, Prime Minister Shinzo Abe's decision to delay the implementation of a sales tax hike comes across as a far-sighted and a good move.
The revised Gross Domestic Product data proved that the previous Aprils sales tax hike had in fact hit Japan more strongly than was expected. The data clarified that the Japanese economy had actually slumped by 1.9 percent and not 1.6 percent, which was the predicted number. These statistics prove that Abe and the Bank of Japan have a gigantic task ahead of them - pulling Japan out of deflation is not going to be easy.
Japan is about to witness a snap election this coming Sunday. Abe and his supporters firmly believe that the induced delay in the sales-tax hike combined with stimulus policies will win him voters. Media houses have already predicted a victory for Abe's coalition.
Stuart Poulson Head of Corporate Trading with Tokyo and Toronto based Nikko-Desjardins Asset Management says:
“A mediocre hike in wages will impact private consumption and economic activity in a negative way. What's worse is that manufacturers, too, are getting anxious. This has led to a slump on the production side as well.”
A decline in business investment is driving these negative changes in the Japanese economy and has led the GDP to decline. Whereas analysts believed that business investment will fall by 0.2 percent, it actually went down by 0.4 percent.
The initial survey sample base did not include small businesses which have been witnessing fragile spending. The inclusion of these small businesses further pushed down the revised GDP figures.
In April, the Japanese government hiked the sales tax from 5 percent to 8 percent. The sales tax was hiked to create a fiscal stimulus and facilitate structural reforms. However, the tax hike hit the economy negatively by reducing the overall household spending. 'Abenomics' already has fingers pointing towards Prime Minister Shinzo Abe.
GOVERNMENT IS FACING POLICY CHALLENGES
Policies based on 'Abenomics' actually delivered results in the start. Initial measures taken by Abe and his cabinet weakened the Yen and promoted investment. This led to a growth in the household income and business investment. It also increased stock prices of important players. And thus, despite two quarters of slow down, Japan's economy is still doing better than what it was back in 2012 when Abe took oath as the country's Prime Minister.
More recently, when Abe pushed the second tax hike (which will bring the country's sale tax to 10%) to 2017, he broadened the scope for consumer spending which makes 60% of the total GDP.
However, the technical recession that Japan is facing has also proved that Abe and his cabinet must take more actions and introduce more effective stimulus policies to drag Japan out of deflation.
Mr. Poulson says:
“The government has been in office for two years now and yet, wage hikes and capital spending have only been mediocre.”
The monthly Reuters Tankan registered weakened business interest. The Reuters Tankan survey has also predicted a decline during the fourth quarter. This is a sign of concern, especially for the Bank of Japan.
In April last year, the Bank of Japan induced a massive stimulus to bring inflation to the targeted 2 percent. The Bank further pushed this stimulus in October. However, the Tankan survey's results have caused anxiousness among analysts.
If these policies do not fare well during the BOJ tankan survey scheduled to take place on December, 15, it would mean that the bank's stimulus program hasn't done well. In such a scenario, the BOJ may come under pressure to expand its stimulus again.
However, it is assumed that the BOJ will not change its policies and instead, will encourage its idea of a buoyant economy during its next meeting which is scheduled to happen on December, 19.
Many economists including Mr. Poulson are of the opinion that Japan's economy will regain momentum during this quarter. Households and businesses are slowly recovering from the last sales tax hike. The consumption has shown signs of recovery. Likewise, exports are also likely to register an increase during this quarter. This is a sign of relief as exports have remained largely low even after Yen going down against the Dollar.
Source
Stuart Poulson – Nikko-Desjardins Asset Management
About
Established in 2006, Nikko-Desjardins Asset Management is an independent, full-service brokerage, wealth management and business management provider dedicated to providing wealth preservation solutions from Asia to North America for affluent individuals, families and Institutions.
Contact
www.nikkoholdings.com
The revised Gross Domestic Product data proved that the previous Aprils sales tax hike had in fact hit Japan more strongly than was expected. The data clarified that the Japanese economy had actually slumped by 1.9 percent and not 1.6 percent, which was the predicted number. These statistics prove that Abe and the Bank of Japan have a gigantic task ahead of them - pulling Japan out of deflation is not going to be easy.
Japan is about to witness a snap election this coming Sunday. Abe and his supporters firmly believe that the induced delay in the sales-tax hike combined with stimulus policies will win him voters. Media houses have already predicted a victory for Abe's coalition.
Stuart Poulson Head of Corporate Trading with Tokyo and Toronto based Nikko-Desjardins Asset Management says:
“A mediocre hike in wages will impact private consumption and economic activity in a negative way. What's worse is that manufacturers, too, are getting anxious. This has led to a slump on the production side as well.”
A decline in business investment is driving these negative changes in the Japanese economy and has led the GDP to decline. Whereas analysts believed that business investment will fall by 0.2 percent, it actually went down by 0.4 percent.
The initial survey sample base did not include small businesses which have been witnessing fragile spending. The inclusion of these small businesses further pushed down the revised GDP figures.
In April, the Japanese government hiked the sales tax from 5 percent to 8 percent. The sales tax was hiked to create a fiscal stimulus and facilitate structural reforms. However, the tax hike hit the economy negatively by reducing the overall household spending. 'Abenomics' already has fingers pointing towards Prime Minister Shinzo Abe.
GOVERNMENT IS FACING POLICY CHALLENGES
Policies based on 'Abenomics' actually delivered results in the start. Initial measures taken by Abe and his cabinet weakened the Yen and promoted investment. This led to a growth in the household income and business investment. It also increased stock prices of important players. And thus, despite two quarters of slow down, Japan's economy is still doing better than what it was back in 2012 when Abe took oath as the country's Prime Minister.
More recently, when Abe pushed the second tax hike (which will bring the country's sale tax to 10%) to 2017, he broadened the scope for consumer spending which makes 60% of the total GDP.
However, the technical recession that Japan is facing has also proved that Abe and his cabinet must take more actions and introduce more effective stimulus policies to drag Japan out of deflation.
Mr. Poulson says:
“The government has been in office for two years now and yet, wage hikes and capital spending have only been mediocre.”
The monthly Reuters Tankan registered weakened business interest. The Reuters Tankan survey has also predicted a decline during the fourth quarter. This is a sign of concern, especially for the Bank of Japan.
In April last year, the Bank of Japan induced a massive stimulus to bring inflation to the targeted 2 percent. The Bank further pushed this stimulus in October. However, the Tankan survey's results have caused anxiousness among analysts.
If these policies do not fare well during the BOJ tankan survey scheduled to take place on December, 15, it would mean that the bank's stimulus program hasn't done well. In such a scenario, the BOJ may come under pressure to expand its stimulus again.
However, it is assumed that the BOJ will not change its policies and instead, will encourage its idea of a buoyant economy during its next meeting which is scheduled to happen on December, 19.
Many economists including Mr. Poulson are of the opinion that Japan's economy will regain momentum during this quarter. Households and businesses are slowly recovering from the last sales tax hike. The consumption has shown signs of recovery. Likewise, exports are also likely to register an increase during this quarter. This is a sign of relief as exports have remained largely low even after Yen going down against the Dollar.
Source
Stuart Poulson – Nikko-Desjardins Asset Management
About
Established in 2006, Nikko-Desjardins Asset Management is an independent, full-service brokerage, wealth management and business management provider dedicated to providing wealth preservation solutions from Asia to North America for affluent individuals, families and Institutions.
Contact
www.nikkoholdings.com
Friday, November 26, 2010
Japan introduces new financial stimulus
The lower house of
the Japanese parliament has given the green light on a new sixty billion dollar
stimulus package which they hope will boost small businesses and consumer
spending with the end goal to create new jobs and push forward the nation’s
tentative economic rebound.
This is the latest in a string of packages
the government has previously introduced, with recent figures showing that the
nation’s consumer prices have dropped for the twentieth consecutive month.
The government have worked hard to get this
latest package through parliament, and today’s vote represents a significant
victory for prime minister Nato Kan.
Japan’s stimulus methods are frowned upon
by western nations, who prefer to concentrate on decreased spending to ensure
economic recovery.
Japan, the world’s second largest economy,
has been battling against a high yen, deflation and decreased growth and their
core consumer price index dropped by 0.7 percent compared to last year, latest
data showed.
Deflation is one of the factors that stunts
growth the most, as consumers hold off on their buying until prices drop
further. Analysts say the recent upswing is not necessarily a sign that
consumer demand has improved.
“Yes, there was a slowdown in the decline
in prices in the latest study,” said Stuart Poulson, Head of Corporate trading
at Nikko-Desjardins Asset Management in an email to clients, “But we needn’t
get carried away, this may not be an accurate reflection of the demand-supply
situation in real terms.”
“We could be looking at one-off factors
affecting the balance, such as an increase in cigarette prices.
In summary, it
looks like the recovery from deflation may take a little longer than forecast,”
Poulsen added.
International trade has become less
attractive due to the high yen, a factor the government has been attempting to
keep in check with qualitative easing methods. With Japan’s economy heavily
reliant on its exports, a slowdown in growth for the sector can have a hugely
negative effect on the financial landscape.
Not only that, but it is apparent that a
weakened export business will cause consumer demand to drop.
Wednesday, October 14, 2009
Japan defies forecasts with solid growth
Attempting to extend a recovery from their worst recession in decades,
Japan’s economy gained at its fastest rate for two years in the last
quarter.
The eight year downturn in Japan’s fortunes was reversed in the previous quarter and the trend has continued, assisted by excellent export figures and no little stimulus from the government.
The economy has been growing at double the rate experts predicted, with a 1.3 percent gain in Q2 from the previous quarter, translating to a 4.9 percent annualised figure.
“It’s nice to see Japan’s economy moving forward, it’s a good sign for the whole region,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management on his blog. “We believe Japan will avoid any second dip in its economy this year. It’s important that international trade remains steady and the monetary easing brought in by the government continues to have a positive effect. We should see growth push on into Q4,” he added.
Third quarter exports leaped 6.5 percent with a significant rise also seen in household and corporate expenditure.
The recovery comes on the heels of Japan’s worst contraction in recent years, with the export-focused economy suffering double digit annualised contractions in the previous two quarters before the upswing.
Other analysts say we should not be getting carried away with the figures as much of the performance can be attributed to unsustainable corporate inventory restocking.
The data remains upbeat, however, and follows reports that the European financial bloc has finally dragged itself out of recession in Q3.
Japan became embroiled in the worldwide recession as demand for its major exports, cars and electronics, was substantially reduced in the middle of 2008. The government will be hoping its stimulus package will keep current growth expanding after the economy returned to positive figures this year.
One major issue has been the ageing population which is shrinking rapidly. The future hardly looks bright for consumer spending, even though the government has promised to stimulate domestic spending with incentives, leaving the country primarily focused on its foreign trade to drive growth.
The Bank of Japan recently forecast 2 straight years of deflation, which may threaten the recent recovery. Falling consumer prices will only put more of a burden on Japan’s exports.
Poulson added, “The nation’s GDP is strong and that’s a great indicator. There are one or two things that need to be adjusted for healthy continued growth and I’m sure the economic authorities are well aware of the weak spots and have a plan in mind.”
The eight year downturn in Japan’s fortunes was reversed in the previous quarter and the trend has continued, assisted by excellent export figures and no little stimulus from the government.
The economy has been growing at double the rate experts predicted, with a 1.3 percent gain in Q2 from the previous quarter, translating to a 4.9 percent annualised figure.
“It’s nice to see Japan’s economy moving forward, it’s a good sign for the whole region,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management on his blog. “We believe Japan will avoid any second dip in its economy this year. It’s important that international trade remains steady and the monetary easing brought in by the government continues to have a positive effect. We should see growth push on into Q4,” he added.
Third quarter exports leaped 6.5 percent with a significant rise also seen in household and corporate expenditure.
The recovery comes on the heels of Japan’s worst contraction in recent years, with the export-focused economy suffering double digit annualised contractions in the previous two quarters before the upswing.
Other analysts say we should not be getting carried away with the figures as much of the performance can be attributed to unsustainable corporate inventory restocking.
The data remains upbeat, however, and follows reports that the European financial bloc has finally dragged itself out of recession in Q3.
Japan became embroiled in the worldwide recession as demand for its major exports, cars and electronics, was substantially reduced in the middle of 2008. The government will be hoping its stimulus package will keep current growth expanding after the economy returned to positive figures this year.
One major issue has been the ageing population which is shrinking rapidly. The future hardly looks bright for consumer spending, even though the government has promised to stimulate domestic spending with incentives, leaving the country primarily focused on its foreign trade to drive growth.
The Bank of Japan recently forecast 2 straight years of deflation, which may threaten the recent recovery. Falling consumer prices will only put more of a burden on Japan’s exports.
Poulson added, “The nation’s GDP is strong and that’s a great indicator. There are one or two things that need to be adjusted for healthy continued growth and I’m sure the economic authorities are well aware of the weak spots and have a plan in mind.”
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