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Gulf Today
02-04-2025
- Business
- Gulf Today
Japan business mood slumps to 1-year low on Trump tariff fears
Big Japanese manufacturers' business sentiment worsened to a one-year low in the three months to March, a central bank survey showed on Tuesday, a sign escalating trade tensions were already taking a toll on the export-reliant economy. The gloom contrasted with big non-manufacturers' mood, which improved to levels unseen since 1991 on booming profits from inbound tourism and the pass-through of costs via price hikes. However, both manufacturers and service-sector firms expect business conditions to stagnate or worsen three months ahead as soft global demand, rising costs and uncertainty over US tariffs cloud the outlook, the quarterly 'tankan' survey showed. The survey, compiled before US President Donald Trump's announcement last week of a plan to impose tariffs on auto imports, highlights how external headwinds are complicating the BOJ's decision around the timing of further interest rate hikes. 'Companies haven't fully priced in the impact of US tariffs, which is causing a sense of alarm but not directly hitting their profits yet,' said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute. 'With firms offering solid wage hikes and no major surprises coming out from the tankan, the BOJ likely won't change its stance of steadily raising interest rates,' he said. The headline index measuring big manufacturers' business confidence stood at plus 12 in March, down from plus 14 in December and matching a median market forecast, the tankan survey showed. It worsened for the first time in four quarters and hit the lowest level since March 2024 with sentiment among steel and machinery makers deteriorating amid weak overseas demand, rising raw material costs and uncertainty over US tariffs. Aside from the external headwinds, the tankan painted a not-so-gloomy picture in some key areas, with capital expenditure holding up and price hikes underpinning corporate profits. An index gauging big non-manufacturers' sentiment increased to plus 35, the highest level since 1991 when Japan's economy was experiencing an asset-inflation bubble. This compared with plus 33 in December and a median market forecast of plus 33. Big companies expect to increase capital expenditure by 3.1 per cent in the current fiscal year ending in March 2026, above a market forecast for a 2.9 per cent rise. More firms saw output prices rise while they expect inflation to hit an average 2.4 per cent three years from now, the highest on record, underscoring mounting inflationary pressure that may justify further rate hikes. Marcel Thieliant, head of Asia-Pacific at Capital Economics, said the survey suggested that 'an increasingly overheating economy is creating strong price pressures.' 'With inflation set to overshoot the BOJ's forecasts and the tankan suggesting that price pressures will remain strong, we think there's a strong case for a rate hike at the bank's next meeting in May.' The tankan will be among key factors the BOJ will scrutinise at its next policy-setting meeting on May 1, when it will also release fresh quarterly growth and price forecasts. Companies surveyed likely took into account Trump's decision in February to raise tariffs on imports of steel and aluminium to a flat 25 per cent. But most of them likely replied before Trump's announcement last week of a plan to impose tariffs on auto imports. He has also pledged to announce reciprocal tariffs on Wednesday targeting all countries. The tankan was compiled in a period between Feb. 26 and March 31 with 70 per cent of firms sending replies by March 12. Reuters
Reuters
12-03-2025
- Business
- Reuters
Japan firms set to offer large wage hikes for a third straight year
TOKYO, March 12 (Reuters) - Many of Japan's biggest companies are expected to offer substantial wage hikes for a third consecutive year when they conclude talks with unions on Wednesday, seeking to help workers cope with inflation and retain staff amid labour shortages. Last year's "shunto" or "spring labour offensive" negotiations resulted in the sharpest increase in 33 years, enabling the central bank to exit its decade-long super-loose monetary policy. Record corporate profits, helped by a weak yen, also support the case for lifting pay and this year economists expect increases to be similar to last year's average hike of 5.1%. That hike followed a rise of 3.58% in 2023. Before that, annual pay increases for the preceding two decades were between 1-2% and as a result, Japan's wage levels remain well behind the average for the OECD grouping of rich countries. Rengo, Japan's largest labour union umbrella group with 7 million members, said last week its unions were seeking an average hike of 6.09%, up from 5.85% last year and marking the first time in 32 years that more than 6% has been sought. Some firms wrapped up their wage negotiations early, responding to union requests in full. Toyota's (7203.T), opens new tab top supplier Denso (6902.T), opens new tab, for instance, agreed on February 17 to record pay hikes, meeting union demands of 23,500 yen ($160) per person a month and a bonus equivalent to 6.3 months of wages. Much of the focus on this year's "shunto" talks is whether there will also be strong pay gains at small and medium-sized firms which employ around 70% of Japan's workforce. Toyota, the bellwether for many Japanese manufacturers, has said it plans to pay more for domestic components to help suppliers fund pay rises. Broad-based pay increases are seen as a prerequisite for the Bank of Japan to continue to hike its policy rate from a still very low level of 0.5%. Prime Minister Shigeru Ishiba's government also wants robust wage hikes to boost consumer spending as the rising cost of food and other necessities have contained inflation-adjusted real wages growth to around zero. The consumer inflation rate used to calculate real wages, which includes fresh food items but not rent costs, rose to 4.7% year-on-year in January - the highest reading in two years. Even a pay raise of 5-5.5% this year would "just offset inflation and not drive consumer spending," said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute. The annual pay talks are one of the defining features of Japanese business, where relations between labour and management tend to be more collaborative than in some other countries. ($1 = 147.13 yen)
Reuters
28-02-2025
- Business
- Reuters
Core inflation in Japan's capital slows but stays above BOJ target
TOKYO, Feb 28 (Reuters) - Core consumer prices in Japan's capital rose 2.2% in February from a year earlier, data showed on Friday, slowing for the first time in four months due to revived energy subsidies but remaining well above the central bank's 2% target. The persistently high inflation will likely support the case for the central bank to continue its monetary policy tightening campaign. "The slowdown mainly reflect reinstated subsidies to curb electricity and gas bills, but the underlying trend hasn't changed with food prices remaining high," said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute. "This underlying trend will justify further rate hikes by the BOJ," he added. The increase in the core consumer price index (CPI), which excludes volatile fresh food costs, was slower than a median market forecast of 2.3% and a 2.5% gain in January. A separate index that strips away the effects of both fresh food and fuel costs, closely watched by the BOJ as a broader price trend indicator, rose 1.9% in February from a year earlier, advancing at the same pace as the previous month. The Tokyo inflation figures are considered a leading indicator of nationwide trends. The government in January reinstated electricity and gas subsidies, which was reflected in bills this month. Upward price pressure could pick up again in a few months as the government plans to phase out the subsidies by the end of March. Prices of food have also soared in recent months, prompting the government to order a release of stockpiled rice to farm cooperatives to bring down costs. The yen's recent strength may help push down import costs, but it usually takes a few months for foreign exchange rate movements to be reflected in prices. Meanwhile, Tomoyuki Ota, chief economist at Mizuho Research & Technologies, noted that non-public service prices have been slow to rise. "This shows that higher labour and energy costs have not been fully passed onto prices," he said. Services prices in non-public sectors rose 0.8% year-on-year in February, slower than a 0.9% gain in January. Separate data from the Ministry of Economy, Trade and Industry showed Japan's factory output fell 1.1% in January from the previous month, roughly in line with a median market forecast for a 1.2% decline. Manufacturers surveyed by the ministry expect seasonally adjusted output to increase 5.0% in February and fall 2.0% in March. The BOJ ended a decade of massive monetary stimulus last year and raised its short-term interest rate to 0.5% from 0.25% in January on the view that Japan was on the cusp of sustainably hitting its 2% inflation target. BOJ Governor Kazuo Ueda has said the central bank will keep raising interest rates if Japan makes continued progress in durably achieving 2% inflation, solid wage growth and domestic demand.
Khaleej Times
17-02-2025
- Business
- Khaleej Times
Japan's GDP beats forecasts as consumption, business spending perk up
TOKYO, Feb 17 (Reuters) - Japan's economy grew faster than expected in the fourth quarter, on improved business spending and a surprise increase in consumption and shoring up the central bank's case for more interest rate hikes. Gross domestic product expanded 2.8% annualised in the October-December quarter, preliminary data showed on Monday, beating a median market estimate of a 1.0% gain in a Reuters poll. The upbeat data helped lift Tokyo's Nikkei stock benchmark and the yen. But while the data showed some bright spots for the world's fourth-largest economy, analysts said that the headline figure was flattered partly by a fall in imports, which improved net trade, as well as year-end bonuses. "Details of the results indicate that the economy was not as strong as the headline number suggests," Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, said. The annualised increase in GDP follows a revised 1.7% growth in the previous quarter and translates into a quarterly rise of 0.7%, also better than the median estimate for a 0.3% uptick. Private consumption, which accounts for more than half of economic output, rose 0.1%, beating a market estimate of a 0.3% fall but cooling from the 0.7% rise of the previous quarter. Meiji Yasuda's Maeda said consumption was boosted by high year-end bonuses, but it may slip again in January onwards when the bonus impact dissipates. "The underlying trend remains weak amid rising prices of food," he said. Capital spending, a key driver of private demand-led growth, rose 0.5% in the fourth quarter, missing a market estimate for a rise of 1.0% but reversing a decline in the previous quarter. Capex remains a volatile component of the GDP series and has in the past been subject to large revisions that can affect headline numbers. The government releases revised December quarter GDP data on March 11. Net external demand, or exports minus imports, contributed 0.7 of a percentage point to growth, reversing a negative contribution in the July-September period. The decline in imports may have reflected lacklustre domestic demand, analysts said. Japan's Economy Minister Ryosei Akazawa said in a statement that a gradual recovery in the economy is expected to continue. "But it is necessary to be mindful of the impact of continued price rises for food and other daily items on consumer spending through the downward pressure on consumer sentiment," he added. Analysts also cited concerns that U.S. President Donald Trump's tariffs could threaten global trade and pressure Japan's export-reliant economy. The United States is Japan's largest export destination, accounting for a fifth of its total exports. "There are some uncertainties on President Trump's tariff policies that there is still a possibility that there will be some restraint on American exports," said Uichiro Nozaki, economist at Nomura Securities. All the same, the GDP data supports the Bank of Japan's view that demand, inflation and growth are at least firm enough to keep raising interest rates this year. "The GDP result is not something that shows signs of a bad situation in which the BOJ would have to stop the interest rate hike, although it does not have to rush it," Nozaki said. Japan's nominal GDP in 2024 stood at 609.29 trillion yen ($4 trillion), the data showed, topping the 600 trillion threshold for the first time but staying below Germany to rank as the world's fourth-largest economy.
Ammon
17-02-2025
- Business
- Ammon
Japan's GDP beats forecasts as consumption, business spending perk up
Ammon News - Japan's economy grew faster than expected in the fourth quarter, on improved business spending and a surprise increase in consumption and shoring up the central bank's case for more interest rate hikes. Gross domestic product expanded 2.8% annualised in the October-December quarter, preliminary data showed on Monday, beating a median market estimate of a 1.0% gain in a Reuters poll. The upbeat data helped lift Tokyo's Nikkei stock benchmark (.N225), opens new tab and the yen . But while the data showed some bright spots for the world's fourth-largest economy, analysts said that the headline figure was flattered partly by a fall in imports, which improved net trade, as well as year-end bonuses. "Details of the results indicate that the economy was not as strong as the headline number suggests," Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, said. The annualised increase in GDP follows a revised 1.7% growth in the previous quarter and translates into a quarterly rise of 0.7%, also better than the median estimate for a 0.3% uptick. Reuters
