Latest news with #JapanEconomy
Free Malaysia Today
an hour ago
- Business
- Free Malaysia Today
BOJ's Ueda says economy can withstand hit from US tariffs
The Bank of Japan said there is no change in its view that consumer inflation will gradually rise toward its 2% target. (Reuters pic) TOKYO : Bank of Japan governor Kazuo Ueda said today the country's economy can withstand the hit from US tariffs and sustain a cycle of rising inflation accompanied by wage growth, signalling the bank's readiness to raise interest rates further. 'Uncertainty over US trade policy and the range of tariffs imposed by President Donald Trump's administration could hurt Japan's exports, prod firms to delay capital expenditure plans, and discourage them from raising wages,' Ueda said. 'While an agreement between the US and China to scale back reciprocal tariff rates is perceived by markets as a positive development, uncertainty over the outlook remains high,' he said. 'Recent tariff policies will exert downward pressure on Japan's economy through several different channels,' Ueda said in a speech. 'That said, we expect that Japan's economy can withstand such downward pressure, as historically high corporate profits serve as a buffer,' he said. He also said Japan's tight labour market means the economy will likely sustain a trend in which wages and prices rise in tandem – a key prerequisite for further rate hikes. 'While underlying consumer inflation will stagnate temporarily, there is no change to the BOJ's view that it will gradually rise toward its 2% target,' Ueda said. 'Although developments in trade policies since early spring have had a larger impact on Japan's economy than we had expected, progress towards achieving our price target continues to gain momentum,' he added.
Japan Times
7 hours ago
- Business
- Japan Times
'Zombie company' apocalypse might be the point of Japan's minimum wage push
Efforts to push the minimum wage up by about 40% in just a few years could wreck a lot of smaller companies in Japan. And that just may be the point of the exercise. 'I think the significance of raising minimum wages faster than organic growth is to drive companies with low-productivity that are unable to raise wages out of business,' Shunsuke Kobayashi, chief economist at Mizuho Securities. Prime Minister Shigeru Ishiba announced last month that the government will work to increase the average minimum hourly wage to ¥1,500 ($10.50) by the end of the decade. That's about a 7% increase every year, a pace widely seen as overly ambitious. 'Realistically speaking, the prime minister's target will be quite difficult,' said Hisashi Yamada, a professor at Hosei Business School of Innovation Management. To a certain extent, the campaign may be unnecessary, Kobayashi said, since wages are expected to increase at a solid pace even without government intervention as companies need to attract workers amid serious labor shortages. Analysts say that rapid minimum-wage increases might accelerate the restructuring of small and midsize companies in Japan, many of which are referred to as "zombie companies." These companies cannot cover interest on debt with their profits. The number of zombie companies in Japan were estimated at 228,000 in fiscal 2023, according to Teikoku Databank, one of the highest levels in a decade. Because it would draw immense criticism, Ishiba will not openly say the government wants to slash the number of zombie companies, but his Cabinet probably has this goal in mind, Kobayashi said. Yamada echoed the point, saying, 'I believe there is such an intention.' He said a policy that reduces the number of zombie companies may be the right thing to do, but the effort could drive even relatively healthy companies out of business. Some small and medium-size enterprises are actually doing quite well, but they're struggling because their business clients won't agree to price increases as inflation pushes up operating costs. 'I think the government can pursue various approaches to foster wage growth, but pushing too aggressively could jeopardize public confidence in the government,' Yamada said. Ishiba's Cabinet is planning to support smaller companies in their efforts to increase productivity over the next five years and offer subsidies to prefectures that are keen to raise their minimum wages. According to a survey in March by the Japan Chamber of Commerce and Industry, a lobby group for smaller enterprises, 19.7% of small businesses said it would be 'impossible' to keep up with Ishiba's minimum wage target, while 54.5% said it would be 'difficult.' While the survey indicates that many small and medium-size companies are worried about keeping up with Ishiba's target, some business leaders have indicated they are on board. Takeshi Niinami, chairman of the Japan Association of Corporate Executives, is an advocate of accelerating minimum wage increases. He has said managers unable to keep up with the pace of minimum-wage increases 'are unfit for their positions' and their companies 'should exit.' The association he runs wants the ¥1,500 minimum to be achieved in three years. Under the administration of former Prime Minister Fumio Kishida, the government set a mid-2030s deadline to achieve the ¥1,500 goal, but Ishiba has brought this forward. Japan's current average minimum wage is ¥1,055 an hour. It was increased by 5.1% last year. Prior to the COVID-19 pandemic, the increase was 3% annually for several years, which was considered high at the time. The government is expected to compile its annual economic and fiscal management guideline — the honebuto no hōshin ― this month, and Ishiba's minimum wage goal will be a focus of discussion. Komeito, the coalition partner of Ishiba's Liberal Democratic Party, has requested the prime minister to include the minimum-wage target in the honebuto.
13 hours ago
- Business
May Sales Drop at 3 Major Japanese Dept. Store Operators
News from Japan Economy Jun 3, 2025 11:39 (JST) Tokyo, June 3 (Jiji Press)--Three major Japanese department store operators posted year-on-year declines in same-store sales in May, because of a plunge in sales of luxury brand goods to foreign visitors, according to their reports released Monday. Sales fell 6.2 pct at Takashimaya Co., 3.4 pct at Isetan Mitsukoshi Holdings Ltd. and 2.1 pct at Daimaru Matsuzakaya Department Stores Co. It was the third consecutive month that sales declined at all three companies. Food purchases by domestic customers were good, but their purchases of clothing for men and women were sluggish. Sales of tax-free items, an indicator of purchases by visitors to Japan, plummeted 41.7 pct at Takashimaya, 40.1 pct at Daimaru Matsuzakaya and 33.0 pct at Isetan Mitsukoshi, reflecting weak demand for luxury goods, such as bags and watches from famous foreign brands. 'Sales to visitors from South Korea and China, which had accounted for a large portion (of tax-free sales), logged a decline,' an industry official said. [Copyright The Jiji Press, Ltd.] Jiji Press
Reuters
a day ago
- Business
- Reuters
Japan factory declines slow in May but tariff worries persist, PMI shows
TOKYO, June 2 (Reuters) - Japan's factory activity shrank at the slowest pace in five months in May as the decline in new orders eased, but worries over U.S. tariffs have dampened the recovery from an almost year-long contraction, a private-sector survey showed on Monday. The final au Jibun Bank Japan Manufacturing Purchasing Managers' Index (PMI) rose to 49.4 in May from 48.7 in April, marking the 11th consecutive month of staying below the 50.0-line that indicates contraction. Still, the reading was higher than the flash figure of 49.0 and the highest so far this year. "Manufacturing conditions in Japan moved closer to stabilisation in May, according to latest PMI data, with companies signalling a softer decline in sales and improved jobs growth," said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, which compiled the survey. Among sub-indexes, new orders fell for the 24th straight month, with manufacturers citing U.S. tariffs and increased client hesitancy as factors behind subdued demand conditions. Factory output also contracted for a ninth consecutive month, at a quicker pace than in April, the survey showed. To mitigate the impact of the U.S. tariffs on cars and other manufacturing sectors, which are the backbone of the Japanese economy, Tokyo has held four rounds of trade talks with Washington and plans a fiscal package to support households and businesses. In a positive sign, input cost inflation eased to a 14-month low in May, while output price inflation slowed to the softest in nearly four years. Employment increased for the sixth month in a row as firms filled vacancies and prepared for anticipated production increases, according to the survey. Business confidence on future output strengthened from April's near five-year low, with firms citing expectations of stronger market demand particularly in the semiconductor industry. However, some expressed concerns over U.S. tariffs, inflation and Japan's declining population as potential headwinds to growth, the survey showed.
Yahoo
2 days ago
- Business
- Yahoo
Japan Q1 capital spending hits record but some export sectors weak
By Makiko Yamazaki TOKYO (Reuters) -Investment by Japanese companies in plants and equipment surged to a record in the first quarter led by industries focused on domestic demand, but key export sectors reduced spending in a sign that U.S. tariffs are undermining business confidence. Capital spending in January-March grew 6.4% to 18.8 trillion yen ($130 billion), according to finance ministry data on Monday. The previous record had been set in 2007. But business investment has been patchy, dipping 0.2% in the previous quarter to mark the first fall in nearly four years. On a seasonally adjusted basis, capital spending rose 1.6% during the quarter. "Capital expenditure has been driven by those sectors benefiting from strong domestic sales thanks to price hikes or inbound tourism such as hotel construction," said Takeshi Minami, chief economist at Norinchukin Research Institute. Spending for the food sector climbed 13% while the real estate sector increased spending by 11%. Tellingly, however, spending by the auto sector fell 1.4% and spending by makers of factory equipment dropped 4.1%. "After Trump's election victory in November, the tariff threat has turned some of those companies cautious about fresh investment," Minami said. The data is unlikely to have a significant impact on revised gross domestic product figures due on June 9, he added. Preliminary GDP data last month showed Japan's economy shrank by an annualised 0.7% in the first quarter, contracting for the first time in a year due to stagnant consumer spending and falling exports. Capital expenditure, a key gauge of domestic demand-led economic growth, has been generally strong in recent years as companies spent on information technology to offset a chronic labour crunch arising from the country's fast-ageing population. The brisk spending has been backed by rising corporate profits. Monday's data showed corporate sales rose 4.3% in the first quarter from a year earlier, and recurring profits increased 3.8%. U.S. tariffs, however, threaten car makers and other export-oriented Japanese firms which form the backbone of the economy. Trump imposed 10% tariffs on most imports into the United States and has also imposed 25% levies on cars, steel and aluminium. Japan also faces a 24% tariff rate starting in July unless it can negotiate a deal with Trump. According to an estimate by the Japan Research Institute, if all the threatened tariff measures against Japan were take effect, U.S.-bound exports will fall by up to 6 trillion yen a year, squeezing corporate profits by up to 25%. That would slow wage growth at manufacturers to 2-2.4% in 2026 from an increase of around 3% currently, the institute said in a report last week. That would in turn weaken the Bank of Japan's working assumption that sustained wage gains will spur domestic demand and justify raising interest rates further. ($1 = 143.68 yen)
