Big Japanese manufacturers’ mood hits 11-year high

Big firms expect to increase capital expenditure for the current fiscal year to March 2018 by 7.4 percent, roughly in line with forecasts, the tankan showed. (Reuters)
Updated 15 December 2017
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Big Japanese manufacturers’ mood hits 11-year high

TOKYO: Japanese business confidence improved for a fifth straight quarter in the three months to December to hit an 11-year high, a central bank survey showed, a sign the economy is gathering momentum from robust exports and booming corporate profits.
But big manufacturers and non-manufacturers expect business conditions to worsen in the next three months, highlighting their reluctance to embrace the improved operating environment via increases in wages and investment.
Nudging cash-rich firms into spending more on wages has been a priority for premier Shinzo Abe’s efforts to vanquish the deflation that has plagued Japan for nearly two decades.
As part of those efforts, Abe’s ruling coalition approved a plan on Thursday to slash the corporate tax rate — but only for companies that increase spending — a move that could brighten business sentiment in coming months.
The closely watched “tankan” survey also showed capacity constraints and staff shortages were increasing price pressures, which would help the Bank of Japan achieve its elusive 2 percent target but could squeeze corporate margins ahead.
Still, many analysts doubt wages will rise much and therefore expect any interest rate hikes to be some time away.
“The tankan results support the BOJ’s bullish economic view backed by global economic recovery,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
“But prices remain weak and far below the BOJ’s price target. There’s no way it can move to tighten policy anytime soon,” he said.
The headline index for big manufacturers’ sentiment stood at plus 25 in December, the tankan showed on Friday, up from plus 22 in September and slightly higher than a median market forecast for plus 24.
It matched the high reached in December 2006, when a booming economy allowed the BOJ to end a previous spell of quantitative easing and zero interest rates.
An index measuring big non-manufacturers’ sentiment was unchanged from September at plus 23, matching forecasts.
Big firms expect to increase capital expenditure for the current fiscal year to March 2018 by 7.4 percent, roughly in line with forecasts, the tankan showed.
The tankan showed that conditions for price and wage gains were gradually falling into place.
An index measuring employment conditions showed firms were faced with the most severe staff shortages since 1992, while their capacity to meet demand was at its tightest since 1991.
An index gauging output prices hit a nine-year high for big manufacturers, a sign that more large companies were in a position to raise prices — reflecting strong demand.
But analysts doubt whether the outlook for consumer prices will change much.
“Even looking at these figures, it doesn’t provide enough energy for the BOJ to change its policy, such as, for example, changing its yield curve target or negative rates,” said Hiroaki Muto, an economist at Tokai Tokyo Research Center.
The tankan will be among key data the BOJ will scrutinize at its next rate review on December 20-21.
Japan’s economy expanded an annualized 2.5 percent in the July-September period to mark a seventh straight quarter of expansion, supporting the central bank’s recent signals that it could move away from crisis-era monetary policy.
But many analysts expect core consumer inflation, now at 0.8 percent, to slow next year unless firms pay heed to Abe’s calls to hike wages by 3 percent.


At Jordan border, Damascus seeks to revive trade

Updated 21 October 2018
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At Jordan border, Damascus seeks to revive trade

  • The government of President Bashar Assad took back control of the Nassib border post in July
  • By reopening a key land crossing with Jordan this month, the Syrian regime is inching toward a return to trade with the wider region

BEIRUT: By reopening a key land crossing with Jordan this month, the Syrian regime is inching toward a return to trade with the wider region as it looks to boost its war-ravaged economy.
The government of President Bashar Assad took back control of the Nassib border post in July from rebels as part of a military offensive that reclaimed swathes of the south of the country.
Syria’s international trade has plummeted during the seven-year civil war, and its foreign reserves have been almost depleted.
The reopening of Nassib after a three-year hiatus, on Oct. 15, is a political victory for the Damascus regime, said Sam Heller of the International Crisis Group.
It is “a step toward reintegrating with Syria’s surroundings economically and recapturing the country’s traditional role as a conduit for regional trade,” he said.
The Nassib crossing reopens a direct land route between Syria and Jordan, but also a passage via its southern neighbor to Iraq to the east, and the Gulf to the south.
“For the Syrian government, reopening Nassib is a step toward normalization with Jordan and the broader region, and a blow to US-led attempts to isolate Damascus,” Heller said.
International pressure and numerous rounds of peace talks have failed to stem the fighting in Syria, and seven years in the regime has gained the military upper hand in the conflict.
Assad’s forces now control nearly two-thirds of the country, after a series of Russia-backed offensives against rebels.

 

Syria faces a mammoth task to revive its battered economy.
The country’s exports plummeted by more than 90 percent in the first four years of the conflict alone, from $7.9 billion to $631 million, according to a World Bank report last year.
The Syria Report, an economic weekly, said Nassib’s reopening would reconnect Syria with an “important market” in the Gulf.
But, it warned, “it is unlikely Syrian exports will recover anywhere close to the 2011 levels in the short and medium terms because the country’s production capacity has been largely destroyed.”
For now, at least, Nassib’s reopening is good news for Syrian tradesmen forced into costlier, lengthier maritime shipping since 2015.
Among them, Syrian businessman Farouk Joud was looking forward to being able to finally import goods from Jordan and the UAE via land.
Before 2015, “it would take a maximum of three days for us to receive goods, but via the sea it takes a whole month,” he told AFP.
Importing goods until recently has involved a circuitous maritime route from the Jordanian port of Aqaba via the Suez Canal, and up to a regime-held port in the northwest of the country.
“It costs twice as much as land transport via Nassib,” Joud said.
Syrian parliament member Hadi Sharaf was equally enthusiastic about fresh opportunities for Syrian exports.
“Exporting (fruit and) vegetables will have a positive economic impact, especially for much-demanded citrus fruit to Iraq,” he told AFP.
Before Syria’s war broke out in 2011, neighboring Iraq was the first destination of Syria’s non-oil exports.
The parliamentarian also hoped the revived trade route on Syria’s southern border would swell state coffers with much-needed dollars.
Before the conflict, the Nassib crossing raked in $2 million in customs fees, Sharaf said.
Last month, Syria’s Prime Minister Imad Khamis said fees at Nassib for a four-ton truck had been increased from $10 to $62.
Syria’s foreign reserves have been almost depleted due to the drop in oil exports, loss of tourism revenues and sanctions, the World Bank said.
And the local currency has lost around 90 percent of its value since the start of the war.
Lebanese businessmen are also delighted, as they can now reach other countries in the region by sending lorries through Syria and its southern border crossing.
Lebanon’s farmers “used to export more than 70 percent of their produce to Arab countries via this strategic crossing,” said Bechara Al-Asmar, head of Lebanon’s labor union.
Despite recent victories, Damascus still controls only half of the 19 crossings along Syria’s lengthy borders with Lebanon, Jordan, Iraq and Turkey.
Damascus and Baghdad have said the Albukamal crossing with Iraq in eastern Syria will open soon, but did not give a specific date.
Beyond trade, there is even hope that the Nassib crossing reopening might bring some tourists back to Syria.
A Jordanian travel agency recently posted on Facebook that it was organizing daily trips to the Syrian capital by “safe and air-conditioned” bus from Monday.
“Who among us doesn’t miss the good old days in Syria?” it said.

FACTOID

BACKGROUND

Syria’s foreign reserves have been almost depleted owing to the drop in oil exports, loss of tourism revenues and sanctions, while the local currency has lost around 90 percent of its value since the start of the war in 2011.