Japan economy grows for longest period since 1980s bubble boom days

Japan’s economy is on its longest growth streak since the boom years of the1980s. (Reuters)
Updated 14 February 2018
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Japan economy grows for longest period since 1980s bubble boom days

TOKYO: Japan’s economy posted its longest continuous expansion since the 1980s boom as fourth-quarter growth was boosted by consumer spending, moving Prime Minister Shinzo Abe’s revival plan a step closer to vanquishing decades of stagnation.
The long run of growth is an encouraging sign for the Bank of Japan, hinting that the economy may at last be building up momentum to lift consumer prices toward its 2 percent inflation target.
The economy expanded at a 0.5 percent annualized rate in October-December, less than the median estimate for annualized growth of 0.9 percent, Cabinet Office data showed on Wednesday. That followed a revised 2.2 percent annualized increase in July-September.
Japan’s economy grew a real 1.6 percent in calendar 2017, the fastest increase since a 2 percent expansion in 2013.
An extended run of growth could lead to some speculation that the Bank of Japan can afford to scale back quantitative easing, but economists say it is unlikely as long as the yen is rising and Japan’s consumer prices remain subdued.
Financial markets are already on edge from worries that central banks in the US and Europe will raise interest rates faster than expected to stay ahead of inflation, but the BOJ is expected to lag well behind those peers.
“Economic fundamentals look good and growth this year is likely to be above the economy’s potential,” said Hiroaki Muto, economist at Tokai Tokyo Research Center.
“However, I don’t see any talk of an exit for the BOJ when the yen is rising like this. When financial markets are volatile this hurts Japan’s animal spirits,” he said, referring to investor and consumer confidence.
The dollar slid to a 15-month low against the yen on Wednesday, as investors remained on edge ahead of US inflation numbers later in the day, underscoring fragile sentiment following a recent shakeout in global equity markets.
A rising yen, which tends to push down Japan’s import prices and depress exporters’ earnings, took the gloss off an otherwise respectable report on the world’s third-largest economy.
The GDP data comes after news that Abe’s government has decided to nominate Haruhiko Kuroda for a rare second term as Bank of Japan governor, a sign his ultra-loose monetary policy will remain in place. Investors, however, still have questions about who the deputy governors will be and what policies they are likely to favor.
Japan’s economy has now posted the longest continuous expansion since a 12-quarter stretch of growth between April-June 1986 and January-March 1989 around the height of Japan’s notorious economic bubble.
“The headline figures are somewhat weaker than expected, but that’s not something to worry too much about,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
“Capital expenditure and consumption are picking up. Exports are also strong. Other recent data are also strong. It’s safe to say the economy is in pretty good shape.”
Compared with the previous quarter, gross domestic product (GDP) grew 0.1 percent, less than the median estimate of 0.2 percent growth and following a 0.6 percent quarter-on-quarter expansion in July-September, Cabinet Office data showed on Wednesday.
A Cabinet Office official said increased spending on mobile phones, cars, and dining out drove gains in private consumption, which accounts for about two-thirds of GDP.
To be sure, some economists are cautious about domestic demand because they believe any further declines in global stocks could hurt sentiment and returns on investors’ portfolios.
Real wages fell 0.4 percent in the fourth quarter, the first decline in three quarters, which is another risk to domestic demand, although the tightest labor market in about 40 years may give unions more bargaining power in impending wage talks.
“I’m a little worried about sluggish wage growth,” said Daiju Aoki, regional chief investment officer at UBS Securities.
“I’m also worried about a negative wealth effect from a falling stock market.”
Capital expenditure rose 0.7 percent in October-December from the previous quarter, less than the median estimate for a 1.1 percent increase but up for the fifth straight quarter and a sign of sustainable gains in business investment.
Overseas demand subtracted fractionally from GDP in October-December. Exports rose 2.4 percent, but this gain was offset by a 2.9 percent jump in imports thanks to robust domestic demand.
Since taking office in late 2012, Abe has enacted reforms to draw more women and elderly people into the workforce, raise wages for part-time workers, liberalize the labor market, and encourage business investment.
“Domestic demand is strong enough that it can stand on its own two feet, so you can say Abenomics has matured,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.
“Financial market moves pose risks, but I still expect consumption and business investment to drive future growth.”


Pacific Rim trade bloc meets in Tokyo, prepping for growth

Updated 7 min 17 sec ago
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Pacific Rim trade bloc meets in Tokyo, prepping for growth

TOKYO: Representatives from a Pacific Rim trade bloc geared up to roll out and expand the market-opening initiative as they met Saturday in Tokyo, reaffirming their commitment to open and free trade and inviting new membership.
The Pacific Rim free trade agreement, rejected by President Donald Trump after he took office in 2017, took effect at the end of last year after Australia became the sixth nation to ratify it. So far, seven of the 11 member countries have done so, and the others are expected to follow through soon.
Known as the Comprehensive and Progressive Trans-Pacific Partnership, the agreement aims to streamline trade and slash tariffs to facilitate more business among member nations with a combined population of nearly 500 million and GDP of $13.5 trillion.
The trade officials at the meeting in Japan’s capital reaffirmed the importance to promote free trade and economic integration in the Asia-Pacific region and beyond, said Japanese Economy Minister Toshimitsu Motegi, who chaired the gathering.
The 11 nations remaining after the US withdrawal amended the pact to enable it to take effect even without Washington’s participation. Vietnam, Canada, Mexico and Singapore also have ratified it. Peru, Chile, Brunei and Malaysia have not yet done so and were encouraged at the meeting to push forward the process.
“Amid growing concerns over recent trends toward protectionism, the ministers shared the view that it is of paramount importance to maintain and further strengthen the principles of an effective, open, inclusive and rules-based trading system,” Motegi said, reading from a joint statement.
In his opening statement earlier at the meeting, Japanese Prime Minister Shinzo Abe praised the 11 ministers for achieving the trade bloc at a difficult time for supporters of the free trade system amid rapid change in the increasingly globalized economy, causing concerns and frustration about the existing system and triggering trade disputes.
“We should not turn the clock backward. ... We need to squarely face any worries and anxieties and achieve fair regulation so as to further develop free trade. TPP is at the forefront of that movement,” Abe said. “The door is always open to those who share our vision, and those who accept TPP’s high standards.”
The US departure was a huge loss given the size of the American market. But others, including Taiwan, are reportedly interested in joining the trade deal, seen as a first step toward a pan-Pacific free trade zone.
Trump said he was putting “America first” in seeking bilateral deals rather than broader ones like the Trans-Pacific Partnership — the trading group’s original name. Members are still hopeful the US might eventually rejoin.
“We welcome new participation of as many countries and regions as possible, including the United States,” Motegi said.
For now, nearly two dozen stipulations sought by the US in the original deal reportedly have been shelved after Washington withdrew, watering down the plan proclaimed by the previous administration of President Barack Obama as being the “gold standard” for 21st century trade rules.
Separate efforts are underway to forge a free trade arrangement within Asia called the Regional Comprehensive Economic Partnership, which encompasses the 10 members of the Association of Southeast Asian Nations plus Japan, South Korea, Australia, New Zealand, India and China, but not the United States.