Latest news with #YoshikiShinke
CNA
16-05-2025
- Business
- CNA
Japan's economy shrinks more than expected as US tariff hit looms
TOKYO: Japan's economy shrank for the first time in a year in the March quarter at a faster pace than expected, data showed on Friday (May 16), underscoring the fragile nature of its recovery now under threat from United States President Donald Trump's trade policies. the mainstay automobile sector. Real gross domestic product (GDP) contracted an annualised 0.7 per cent in January to March, preliminary government data showed, much bigger than a median market forecast for a 0.2 per cent drop. It followed a revised 2.4 per cent increase in the previous quarter. The decline was due to stagnant private consumption and falling exports, suggesting the economy was losing support from overseas demand even before Trump's announcement on Apr 2 of sweeping "reciprocal" tariffs. "Japan's economy lacks a driver of growth, given weakness in exports and consumption. It's very vulnerable to shocks such as one from Trump tariffs," said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute. "The data may lead to growing calls for bigger fiscal spending," he said, adding the economy could contract again in the second quarter depending on when the hit from tariffs intensifies. On a quarter-on-quarter basis, the economy shrank 0.2 per cent compared with market forecasts for a 0.1 per cent contraction. Private consumption, which accounts for more than half of Japan's economic output, was flat in the first quarter, compared with market forecasts for a 0.1 per cent gain. Capital expenditure increased 1.4 per cent compared with market forecasts for a 0.8 per cent gain, the data showed. External demand shaved 0.8 percentage point off GDP growth as exports fell 0.6 per cent, while imports rose 2.9 per cent. Domestic demand, by contrast, added 0.7 point to growth. "Capital expenditure rose probably due to front-loading ahead of Trump tariffs. The economy may avert negative growth in April to June, but will lack momentum," said Takeshi Minami, chief economist at Norinchukin Research Institute. "If the impact of Trump tariffs is fairly light, the Bank of Japan (BOJ) could raise interest rates again in September or October. But if the tariffs deal a severe blow to capital spending and exports, rate hikes could be put on hold," he said. A global trade war touched off by US tariffs has jolted financial markets and complicated the BOJ's decision on when and how far it can push up interest rates. Having exited a decade-long stimulus last year, the BOJ hiked rates to 0.5 per cent in January and has signalled its readiness to keep hiking borrowing costs if a moderate economic recovery keeps Japan on track to durably hit its 2 per cent inflation target. But fears of a Trump-induced global slowdown forced the BOJ to sharply cut its growth forecasts at its Apr 30 to May 1 policy meeting, and cast doubt on its view that sustained wage hikes will underpin consumption and the broader economy. While a de-escalation of US-China trade tensions offered markets and policymakers some relief, there is uncertainty on whether Japan can win exemptions from US tariffs in bilateral trade talks with Washington.
Zawya
31-01-2025
- Business
- Zawya
Core inflation in Japan's capital hits 1-year high, keeps BOJ rate-hike bets alive
TOKYO - Core inflation in Japan's capital hit 2.5%, marking the fastest annual pace in nearly a year, well exceeding the central bank's 2% target and keeping alive market expectations for further interest rate hikes. The data released on Friday follows the Bank of Japan's decision last week to raise interest rates to 0.5%, the highest since the 2008 global financial crisis but still far below that of other major economies. The increase in the Tokyo core consumer price index (CPI), which excludes volatile fresh food costs, matched a median market forecast and followed a 2.4% gain in December. The Tokyo index, considered a leading indicator of nationwide trends, accelerated for the third straight month with the year-on-year rise matching a high hit in February last year. Some analysts expect inflation to accelerate towards 3% in coming months as a stubbornly weak yen continues to push up import costs, keeping the BOJ under pressure to hike rates. "Price pressures from rising raw material costs are proving stickier than expected, which may prevent real wages from turning positive and hurt consumption," said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute, adding that nationwide core inflation may approach 3% in May. "Just looking at inflation, the BOJ might see scope to raise interest rates once or twice this year. But much depends on whether consumption and the broader the economy hold up." A separate index for Tokyo that strips away both fresh food and fuel costs and is closely watched by the BOJ rose 1.9% in January from a year earlier after increasing 1.8% in December, the data showed. Prices increased for food, fuel and a broad range of goods in a sign of the hit households face from rising living costs, the data showed. The overall Tokyo CPI, which includes fresh food, rose 3.4% in January from a year earlier, marking the fastest pace in nearly two years on soaring prices of vegetables and rice. The BOJ exited a decade-long, radical stimulus programme last year and embarked on a rate-hike cycle analysts say may eventually push up short-term rates to around 1% from 0.5% currently. Governor Kazuo Ueda has said the BOJ will continue to push up borrowing costs if continued wage gains underpin consumption and allow firms to raise prices, thereby keeping inflation stably around its 2% target. In fresh quarterly forecasts released last week, the BOJ sharply revised up its fiscal 2025 inflation forecast citing longer-than-expected pressure from rising raw material costs. Ueda said such cost-push pressure will likely dissipate in the latter half of fiscal 2025, providing households some relief. While many firms are signalling readiness to keep boosting pay amid intensifying labour shortages, there is uncertainty on whether wages will rise fast enough to compensate households for rising living costs. Services inflation in Tokyo hit 0.6% in January, slowing from 1.0% in December, suggesting price rises continue to be driven more by rising raw material costs than wage gains. Underscoring the fragile nature of Japan's economy, separate data showed factory output rose just 0.3% in December from the previous month. Manufacturers surveyed by the government expect output to rise 1.0% in January and 1.2% in February.
