Japan announces longest growth streak since 1980s boom

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 announces longest growth streak since 1980s boom

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.”


Titans of tech ‘crushing local media’

Updated 50 sec ago
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Titans of tech ‘crushing local media’

  • No restrictions and no taxation give advantage to Facebook and Google, fintech CEO says
LONDON: The GCC must tackle the issue of global tech giants such as Facebook and Google making it impossible for media publishers in the Middle East to compete, according to an industry veteran.
While regional media outlets have to sell advertising simply to survive, mega-companies can afford to charge only rock-bottom rates, said analyst and publisher Julien Hawari, formerly joint CEO of Mediaquest and now CEO of Infak First Islamic FinTech Ecosystem.
The problem was not the rates charged for advertising but rather “dumping” in the region, he added.
“Global tech players have already covered their infrastructure costs in their home countries. At that point, any extra revenue becomes profit. Therefore they sell (advertising) in the region at the cheapest possible price (which) local players cannot compete with as they have to cover their own infrastructure costs.”
On a scale of one to 10, the costs to global firms would be “close to zero” and for local firms “closer to 10.”
Unlike publishers based in the Middle East, global companies were not constrained by local regulations or taxation and faced “no red lines or consequences,” Hawari told Arab News. “That policy by itself is pushing readers to global brands instead of staying with local media.”
The unfair advantage enjoyed by global tech companies “is adding insult to injury.”
Hawari first spoke out against the disparity between global and local media at the Top CEO conference in Jeddah last April, when he called for more government regulation and taxation on social media giants. This week he told Arab News “not much” had happened since then.
But the problem was ever more pressing.” “The GCC should address the issues and allow its local media to prosper instead of putting (in place) all those hurdles that will ultimately devastate the industry,” said Hawari.
Google said that it returns an average of 70 percent of income from digital advertising to its “publisher partners” worldwide and claims this helps to keep smaller publishers in business. In 2017, that “shared” advertising income amounted to $12.6 billion. However, the company offered no region-by-region breakdown.
Internet giants are invariably blamed for causing the slow demise of “traditional” news by taking content from publishers without paying for it and re-publishing it online. They also stand accused of disseminating inaccurate or “fake” news because they do not check facts and sources, and of giving prominence to more trivial, “clickbait” stories at the expense of serious news.
“Media organizations choose to post their own content themselves,” said Fares Akkad, Facebook’s head of media partnerships in the Middle East, Africa and Turkey. “It’s up to them how to place their content on Facebook and how they boost it.”
Both Google and Facebook have initiated training programs for journalists in Middle Eastern countries aimed at teaching them how to improve news gathering and production through the use of technology.
Facebook is investing $300 million over three years in grants to local news programs and content — “more on local than we ever spent before,” according to Akkad. However, data shared with Arab News shows that none of the money is going to the Middle East.
Google announced its training program for Saudi Arabia, the UAE, Egypt, Lebanon, Jordan and Tunisia last May in partnership with the International Center for Journalists (ICFJ) and recruited trainers from both journalism and tech. The courses in data journalism, immersive storytelling, safety and security and verification began in December with the aim of training 4,000 journalists by the summer.
The Google Digital News Initiative was set up to “support quality journalism” and “empower” news organizations to use new technology such as artificial intelligence (AI).
A spokesperson for Google said: “Google has long been committed to helping local news publishers and media companies to grow, from driving traffic to publishers’ websites for free and paying the majority revenue share back to them, to committing to training journalists on digital tools.”
Facebook has also teamed up with the ICFJ to train 2,500 journalists from Saudi Arabia, the UAE, Qatar, Jordan, Lebanon, Morocco and Tunisia in how to verify facts and online content, how to protect online information, how to use social media and “how to build a rapport with audiences and establish a loyal following.”
The first webinar is today.