Tagged: Japan Economy

Japan PM Naoto Kan warns of ‘collapse’ under debt pile

BBC News | Friday, 11 June 2010 | 09:42 GMT

Japan is at "risk of collapse" under its huge debt mountain, the country’s new prime minister has said. Naoto Kan, in his first major speech since taking over, said Japan needed a financial restructuring to avert a Greece-style crisis. "Our country’s outstanding public debt is huge… our public finances have become the worst of any developed country," he said. After years of borrowing, Japan’s debt is twice its gross domestic product. "It is difficult to continue our fiscal policies by heavily relying on the issuance of government bonds," said Mr Kan, Japan’s former finance minister. "Like the confusion in the eurozone triggered by Greece, there is a risk of collapse if we leave the increase of the public debt untouched and then lose the trust of the bond markets," he said.

Tax reform

Mr Kan did not detail the fiscal changes he may impose to revive Japan’s economy after years to stagnation. But in the past he has advocated increasing Japan’s sales tax, a move that would be unpopular. He said: "It is unavoidable to launch a full reform of the tax system. If we maintain the current level of issuance of new bonds, outstanding debt will surpass 200% of GDP in a few years. "It’s been 20 years since the collapse of the bubble economy in the early 1990s. Because the Japanese economy had been in the doldrums, people have lost the trust they had and fear the uncertainty of the future," he said.

Roland Buerk, BBC News, Tokyo

Pessimists have long warned that rising debt and a falling population mean Japan is headed for a point of no return. For 20 years the government has been borrowing to spend, hoping to revive the stagnant economy, 

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Japan factory output jumps, momentum in doubt

Reuters | TOKYO | Mon Dec 28, 2009 | 12:38pm IST

Japan’s industrial output rose for the ninth consecutive month in November, driven by strong exports and domestic subsidies, but swelling inventories and falling wages threaten to end the longest climb in more than 12 years. Demand from the United States and Asia contributed much to last month’s 2.6 percent rise, government data showed on Monday, supporting the Bank of Japan’s view that the world’s second-largest economy will continue its moderate recovery next year. Economists say overseas demand should prevent a return to recession next year. However, declining wages and weak labour market may outweigh the effect of government subsidies on energy efficient goods, forcing manufacturers to curb output and start selling down inventories built up in anticipation of better sales.

“The latest data shows that Japanese makers of automobiles and home electrical appliances are still hiking their output thanks to the continuing effect of government stimulus as well as strong exports to Asia,” said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo. “But a slowdown is still expected early next year as the effect of stimulus will likely fade.” Japan’s wages fell for the 18th consecutive month in November from a year earlier, in a sign that deflation, or persistently falling prices and incomes, was entrenched. This exposes the central bank to more pressure from the government to ease monetary policy further.     Continue reading

Japan to cut spending plan may prompt BOJ response

Reuters | TOKYO | Thu Dec 24, 2009 | 4:33pm IST

Japan’s government is likely to cut spending plans pledged in its election campaign as it scrambles to keep next year’s budget under control, putting more burden on the central bank to avert a deflation-led downturn next year. Bank of Japan Governor Masaaki Shirakawa offered few clues on Thursday on his policy options, although he promised that the central bank would act promptly and decisively if financial markets were to become unstable. The government and the BOJ have clashed over how to deal with deflation, which the central bank forecasts will last at least three years, as policymakers fret it could drag down the economy just as it is emerging from the global financial crisis.

The BOJ buckled earlier this month, calling an emergency meeting to announce a new short-term funding facility and last week underlined its deflation-fighting credentials by declaring it would tolerate nothing but price growth. Now, with the government cutting its spending plans to appease worried investors and keep a ratings downgrade at bay, the onus may swing once again to the BOJ. “The BOJ will most likely face      Continue reading

Japan’s economic growth lowered

BBC NEWS | 2009/12/09 | 10:14:50 GMT

Japan’s economy expanded by much less than first estimated in the July to September period, revised official figures have shown. The economy only grew at an annualised rate of 1.3% during the third quarter, down from the previous estimate of 4.8%, said the Cabinet Office. The main reason for the change was a sharp downward revision in the amount companies had invested in new assets. The figures come a day after the government agreed a new stimulus deal. The recently elected government of Prime Minister Yukio Hatoyama said it would spend 7.2 trillion yen ($81bn; £48bn) on measures to bolster employment, extend incentives for energy efficient products and provide loan guarantees to help small and medium-sized businesses. The previous government had unveiled a similar 15.4tn yen economic stimulus package in April.

Deflation worries

Compared with the preceding quarter, the Japanese economy expanded by just 0.3% between July and September, down from an initial estimate of 1.2%. The Cabinet Office said the main reason for the economy-wide fall was capital investment by companies – the amount they spend on new assets – being revised down for the quarter to a contraction of 2.8%, from the original estimate of 1.6% growth, in the face of the stronger yen. The yen recently hit a 14-year high against the dollar, making Japanese exports more expensive in the US. Japan is also      Continue reading

Japan unveils $81 billion stimulus, limited impact seen

Reuters | Tokyo | Tue Dec8, 2009 | 3:58pm IST

(Clic to enlarge)

Japan’s government agreed on an $81 billion stimulus package on Tuesday, aimed at preventing the economy from tipping back into recession as deflation persists and a strong yen threatens exports. Economists said the 7.2 trillion yen plan, equal to about 1.5 percent of gross domestic product, would not provide a significant lift to an economy dependent on overseas demand for machinery, electronics and cars. While several other economies are already debating phasing out economic stimulus deployed to fight the financial crisis, Japan continues to struggle amid chronically weak consumer demand and falling prices. The budget underscores the balancing act faced by Prime Minister Yukio Hatoyama and his Democratic Party. The Democrats are keen to avoid a recession ahead of an upper-house election next year but are also under pressure to make good on their pledge of fiscal discipline as the country’s public debt nears 200 percent of GDP, by far the worst among G7 nations.

“This may help the economy somewhat,” said Yasunari Ueno, chief market economist at Mizuho Securities. “But it doesn’t even begin to address the more fundamental issues facing Japan, such as weaknesses in the global economy and deflation.” Japan pulled out of recession in April-June thanks to a recovery in exports but figures due on Wednesday are expected to show third-quarter growth was much slower than an initial estimate. Growth is seen slowing further in the first half of next year as the effect of nearly 27 trillion yen stimulus agreed by the previous Liberal Democratic Party government, wears off.    Continue reading

Japan’s economy continues growing

BBC NEWS |2009/11/16 | 06:48:02 GMT

Figures released by the Japanese government show that the country’s economy has grown for a second successive quarter. The world’s second biggest economy grew by 1.2% in the three months from July to September – faster than economists had predicted. However, analysts say overall growth is likely to be sluggish for years. The global downturn had plunged Japan into its worst recession since World War II. Japan’s Trade Minister, Masayuki Naoshima, apologised for disclosing the market sensitive third-quarter GDP figures to oil industry executives ahead of its official release. It was the first GDP data released after Prime Minister Yukio Hatoyama’s new government took power in mid-September.

Stimulating

Most economists say there is little chance of Japan’s economy returning to recession, given the latest figures. Stimulus measures were credited with lifting consumer spending and capital spending rose, but analysts say growth will slow as wages stay low. Even though subsidies and tax breaks enacted by the previous government will remain in place until next year, an expected fall in year-end bonuses and a scarcity of jobs mean households will have less to spend. “With weakness ahead in private consumption or public spending, a slowdown is unavoidable in the January-March and April-June quarters,” Kyohei Morita, chief economist at Barclays Capital in Tokyo, told Reuters. “The one bright spot is that capital spending turned positive. However, while this signals that capital spending is starting to rise from the bottom, the size is still not enough to promise the kind of speed that would be required to prevent a slowdown in the first half of 2010,” the economist added.       Continue reading