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.”


UN chief proposes options to protect Palestinians, Israel says ‘no’

Updated 10 min 43 sec ago
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UN chief proposes options to protect Palestinians, Israel says ‘no’

  • Israel rejects report saying the protection should be against Palestinian leaders
  • The UN chief stressed that for each of the options, cooperation by Israel and the Palestinians would be necessary

UNITED NATIONS: UN Secretary-General Antonio Guterres on Friday presented four options aimed at boosting the protection of Palestinians in Israeli-occupied territories, from sending UN rights monitors and unarmed observers to deploying a military or police force under UN mandate.

But the report has been rejected by the Israelis.

Israel’s UN Ambassador Danny Danon said in a statement late Friday that “the only protection the Palestinian people need is from their own leadership.”
“Instead of suggesting ways to protect the Palestinian people from Israel, the UN should instead hold the Palestinian leadership accountable for continually endangering its own people,” Danon said.
“The report’s suggestions will only enable the Palestinians’ continued rejectionism.”
The proposals were contained in a report requested by the General Assembly in response to a surge of violence in Gaza, where 171 Palestinians have been killed by Israeli fire since late March.
The UN chief stressed that for each of the options, cooperation by Israel and the Palestinians would be necessary. It remained unlikely however that Israel would agree to the proposals.
In the 14-page report, Guterres proposed:
• Providing a “more robust UN presence on the ground” with rights monitors and political officers to report on the situation.
• Pouring in more UN humanitarian and development aid to “ensure the well-being of the population.”
• Creating a civilian observer mission that would be present in sensitive areas such as checkpoints and near Israeli settlements, with a mandate to report on protection issues.
• Deploying an armed military or police force, under a UN mandate, to provide physical protection to Palestinian civilians.
A UN mandate for a protection force would require a decision from the Security Council, where the United States could use its veto power to block a measure opposed by Israel.
A small European-staffed observer mission was deployed in the West Bank city of Hebron in 1994, but Israel has since rejected calls for an international presence in flashpoint areas.
In the report, Guterres said the United Nations was already undertaking many protection initiatives but that “these measures fall short” of the concerns raised in a General Assembly resolution adopted in June.
In that measure, the 193-nation assembly condemned Israel for Palestinian deaths in Gaza and tasked Guterres with the drafting of proposals for “an international protection mechanism” for the Palestinians.
Guterres argued that a political solution to the conflict was needed to address the safety of Palestinians but that “until such a solution is achieved, member-states may further explore all practical and feasible measures that will significantly improve the protection of the Palestinian civilian population.”
“Such measures would also improve the security of Israeli civilians.”
On Friday, Israeli troops shot dead two Palestinians taking part in protests along the Gaza border and 270 other Palestinians were wounded.
Israel has defended its use of live ammunition in Gaza by invoking its right to self-defense. One Israeli soldier was shot dead by a Palestinian sniper in July.
“The targeting of civilians, particularly children, is unacceptable,” Guterres said in the report, adding that “those responsible for violations of international humanitarian law must be held accountable.”
UN efforts to ensure the well-being of Palestinians must strengthened, he added, singling out the funding crisis at the UN’s Palestinian refugee agency UNRWA as being “of particular concern.”
UNRWA is facing a major budget shortfall after President Donald Trump’s administration decided to withhold its contribution to the agency.
The report released to all UN member-states comes amid a vacuum in Middle East peace efforts as European and other big powers await a peace plan from the Trump administration that has been under discussion for months.
UN diplomats have recently begun questioning whether the US peace plan will ever materialize.
The United Nations has warned that a new war could explode in Gaza.
Israel and Palestinian militants in Gaza, including its Hamas rulers, have fought three wars since 2008.