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 companies display latest technologies at Dubai Airshow

Updated 17 November 2019

Saudi companies display latest technologies at Dubai Airshow

DUBAI: Over 25 Saudi companies and government institutions are taking part in the Dubai Airshow hoping to snag deals for their latest defense and aviation technologies being showcased at the biennial event.

The Middle East’s biggest aviation gathering opened on Sunday sans major announcements for big-ticket aircraft purchases from Gulf flagship carriers, maybe also due to dozens of deals already been previously signed and the planes just waiting to be delivered.

Among the major Saudi companies in the event include the Saudi Arabian Military Industries (SAMI), fully owned by the Public Investment Fund, which has operations from aeronautics, land systems, naval systems, weapons and missiles and defense electronics.

SAMI aims to become among the top 25 companies globally by 2030 and to localize military spending, in line with the Kingdom’s vision.

Among other notable Saudi companies and institutions with a presence at the airshow are Saudi Airlines, flynas, The General Authority of Civil Aviation and the King Abdulaziz City for Science and Technology.

Meanwhile, Saudi INTRA Defense Technologies signed a Memorandum of Agreement with multinational defense company Hensoldt for the co-development and co-production of advanced electro-optic systems, as well as a joint venture agreement with EM&E for the transfer of technology and localization of the precision mechanical industries in the Kingdom.

ESEN Saudi, a hi-tech defense and aerospace engineering and production company, was also launched at the Dubai Airshow’s opening day.

Middle East Propulsion Company, which specializes in maintenance, repair and operations (MRO) for the Middle East, was also one of the Saudi companies on site. The company, which boasts of a workforce comprised of Saudi nationals of about 80 percent, aims to expand their services across the GCC and wider Middle East region.

Al-Salam Aerospace Industries meanwhile has on display latest advancements in the manufacture of key components for the F-15 fighter jet.