Japan’s GDP growth shows domestic resilience in face of global slowdown

Pedestrians walk past a shoe store in Tokyo on Friday. Japan’s economy grew at a faster than expected clip in the second quarter. (AFP)
Updated 09 August 2019

Japan’s GDP growth shows domestic resilience in face of global slowdown

  • Latest figures ease pressure on Bank of Japan to follow other central banks and ramp up stimulus

BEIJING: Japan’s economy grew much faster than expected in April-June to mark the third straight quarter of expansion, as robust private consumption and business investment offset the hit to exports from cooling global demand.

The data offers some relief for the Bank of Japan, which is under pressure to follow other central banks and ramp up stimulus to head off heightening global risks.

Gross domestic product (GDP) grew at an annualized 1.8 percent in the second quarter, the Cabinet Office’s preliminary data showed on Friday, far exceeding a median market forecast for a 0.4 percent increase. It followed a revised 2.8 percent gain in January-March.

“There are no signs that the uncertainty from the trade war has prompted firms to rein in investment spending,” said Marcel Thieliant, senior Japan economist at Capital Economics.

“Today’s data will assuage some of the concerns among Bank of Japan Board members about the impact of the global slowdown on Japan’s economy.”

Private consumption, which accounts for about 60 percent of the economy, rose 0.6 percent from the previous quarter to mark the third straight quarter of increase, thanks to brisk demand for cars and air conditioners, a government official told reporters.

Capital expenditure increased 1.5 percent, accelerating from a 0.4 percent rise in January-March and beating a median market forecast for a 0.7 percent gain, as companies invested in streamlining operations in the face of labor shortages.

Office building construction and public works projects drove the strength in capital expenditure, analysts said, a sign the economy’s resilience was underpinned by those sectors less affected by slowing global trade.

Even exports, which were expected to be weak due to the broadening fallout from the US-China trade war, fell just 0.1 percent after a much bigger 2 percent drop in January-March.

Domestic demand added 0.7 percentage point to GDP growth, more than offsetting the 0.3 point negative contribution from external demand, the data showed.

On a quarter-on-quarter basis, GDP expanded 0.4 percent, compared with a median estimate of a 0.1 percent gain, the data showed.

The upbeat data underscores the BOJ’s view the world’s third-largest economy will continue to expand moderately, as solid household and corporate spending ease the pain from soft global demand.

But some analysts warn that Japan may lose support from domestic demand after a scheduled sales tax hike in October hits households, many of whom are sensitive to rising prices due to slow wage growth.

“Private consumption was supported by pent-up demand of durable goods ahead of the tax hike,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

“It’s likely that domestic demand will weaken quite substantially from the October-December quarter onwards because of the sales tax hike.”


Saudi Arabia promotes investment opportunities with Japan’s business leaders  

Updated 23 October 2019

Saudi Arabia promotes investment opportunities with Japan’s business leaders  

  • Saudi Arabia and Japan exchanged 12 MoUs in the fields of education, science, technology, and banking and finance

DUBAI: Saudi Arabia opened its doors for Japanese investment during a Saudi-Japan business forum held in Tokyo on Wednesday amid growing economic ties between the two nations.  

The Saudi Arabian General Investment Authority (SAGIA) discussed tourism and entertainment investment opportunities in Saudi Arabia with Japan’s business leaders and government officials during the Saudi-Japan Vision 2030 Business Forum, hosted in partnership with the Japan External Trade Organization (JETRO).

During the forum, 12 Memoranda of Understanding (MoU) were exchanged in fields of education, science, technology, and banking and finance.

The MoUs include Toyobo and Saline Water Conversion Corporation and Arabian Japanese Membrane Company which will aim to manage disposed brine water generated from seawater desalination plants for environmental sustainability.

Two Saudi and Japanese universities signed MoUs for academic exchange on research. While SAGIA signed MoU with Sumitomo Mitsui Banking Corporation to enhance investment opportunities.

“Japan is one of Saudi Arabia’s most important economic partners, and businesses from across our countries have a strong track record of working together,” Saudi Arabia’s Minister of Commerce and Investment, Majid Al-Qasabi said at the Forum.

“Today’s Forum reflects the success and strength of this enduring partnership. We established the Saudi-Japanese Vision 2030 two years ago, which seeks to drive and facilitate continued private sector involvement by establishing joint-ventures between entities across our respective countries,” he added.

These investments come alongside a broad series of economic reforms, which are enabling rapid growth in foreign investment in Saudi Arabia. This is part of the Kingdom’s efforts to diversify its economy as outlined in Vision 2030.

Saudi Arabia has moved up three positions to the 36th place, globally, through its efforts to diversify the Kingdom’s economy, according to the 2019 Global Competitiveness Report published by the World Economic Forum.

The total number of foreign investor licenses issued in the first half of 2019 was more than double the number issued the same period a year before.

“We believe that the future prosperity of the Kingdom depends on fostering even closer ties with our strategic partners across the globe, and we look forward to welcoming these companies as they take part in the historic transformation of our economy,” Al-Qasabi said. 

Memoranda of Understanding exchanged at the Forum include:

  • University of Tokyo and King Fahd University of Petroleum and Minerals (KFUPM) – the academic exchange for research in renewable energy and petrochemicals
  • Kyoto University Institute for Advance Study (KUIAS) and King Abdullah University for Science and Technology (KAUST)– to promote the exchange of scientific materials, publications, and information and exchange of faculty members and researchers, students and joint research
  • University of Tokyo and King Abdullah University for Science and Technology (KAUST) – to collaborate on the research and the next generation of organic and soft electronics and efficient generation of hydrogen
  • Japan Patent Office (JPO) and Saudi Authority for Intellectual Property (SAIP) – to promote the exchange of data and best practices in the field of intellectual property protection including trademarks and patents
  • Sumitomo Mitsui Banking Corporation and Saudi Arabian General Investment Authority (SAGIA) – to enhance investment opportunities between Japan and Saudi Arabia
  • Mitsubishi UFJ Financial Group and Saudi Arabian General Investment Authority (SAGIA) – a framework for cooperation to enhance investment from Japan to the Kingdom of Saudi Arabia
  • Toyobo and Saline Water Conversion Corporation and Arabian Japanese Membrane Company – to develop innovative membrane technologies and manage disposed brine water generated from seawater desalination plants for environmental sustainability
  • Sojitz Corporation and AIZAWA Concrete Corporation and Al Saedan for Development – to explore opportunities and utilize 3D printing technology and local materials for housing construction
  • Cyberdyne Group and Abdul Latif Jameel Investments – to collaborate and enhance Cybernic treatment and contribute to the social development of the Kingdom.
  • Saudi-Japan Vision Office Riyadh (VRO) and National Industrial Development and Logistics Program (NIDLP) – to expand collaboration and enable investments in the field of industry, mining, energy and logistics
  • TBM and SABIC – to build a circular economy using LIMEX
  • Ministry of Economy, Trade and Industry (METI) and the National Industrial Clusters Development Program (NICDP) and the Technical and Vocational Training Corporation and Saudi-Japanese Automobile High Institute – to provide support and training for human capacity development for Saudi youth in the automotive sector