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Japan unexpectedly slips into recession, Germany now world’s third-biggest economy

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Japan unexpectedly slipped into a recession at the end of last year, losing its title as the world’s third-biggest economy to Germany and raising doubts about when the central bank would begin to exit its decade-long ultra-loose monetary policy.

Some analysts are warning of another contraction in the current quarter as weak demand in China, sluggish consumption and production halts at a unit of Toyota Motor Corp (7203.T), opens new tab all point to a challenging path to an economic recovery.

“What’s particularly striking is the sluggishness in consumption and capital expenditure that are key pillars of domestic demand,” said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute.

“The economy will continue to lack momentum for the time being with no key drivers of growth.”

Japan’s gross domestic product (GDP) fell an annualised 0.4% in the October-December period after a 3.3% slump in the previous quarter, government data showed on Thursday, confounding market forecasts for a 1.4% increase.

Two consecutive quarters of contraction are typically considered the definition of a technical recession.

While many analysts still expect the Bank of Japan to phase out its massive monetary stimulus this year, the weak data may cast doubt on its forecast that rising wages will underpin consumption and keep inflation durably around its 2% target.

“Two consecutive declines in GDP and three consecutive declines in domestic demand are bad news, even if revisions may change the final numbers at the margin,” said Stephan Angrick, senior economist at Moody’s Analytics.

“This makes it harder for the central bank to justify a rate hike, let alone a series of hikes.”

Economy minister Yoshitaka Shindo stressed the need to achieve solid wage growth to underpin consumption, which he described as “lacking momentum” due to rising prices.

“Our understanding is that the BOJ looks comprehensively at various data, including consumption, and risks to the economy in guiding monetary policy,” he told a news conference after the data’s release, when asked about the impact on BOJ policy.

The yen was steady following the release of the data and last stood at 150.22 per dollar, pinned near a three-month low hit earlier in the week.

The Nikkei (.N225), opens new tab rose 0.8%, reversing some of its losses made from the previous session, possibly on expectations the BOJ may continue with its massive easing programme for longer than expected.

On a quarterly basis, GDP slid 0.1% against median forecasts of a 0.3% gain, and compared with a 0.8% contraction in the previous quarter.

CONSUMPTION, CAPEX WEAK

Private consumption, which makes up more than half of economic activity, fell 0.2%, weaker than a market forecast for a 0.1% gain, as rising living costs and warm weather discouraged households from dining out and buying winter clothes.

Capital expenditure, another key private-sector growth engine, fell 0.1%, compared with forecasts of a 0.3% gain, as supply constraints delayed construction projects.

External demand, or exports minus imports, contributed 0.2 percentage point to GDP as exports rose 2.6% from the previous quarter, the data showed.

The BOJ has been laying the groundwork to end negative rates by April and overhaul other parts of its ultra-loose monetary framework, but is likely to go slow on any subsequent policy tightening amid lingering risks, sources have told Reuters.

While BOJ officials have not offered clues on when exactly they could end negative rates, many market players expect such an action to happen either in March or April. A Reuters poll taken in January showed April as the top choice among economists for the negative rate policy to be abandoned.

Some analysts say Japan’s tight labour market and robust corporate spending plans are keeping alive the chance of an early exit from ultra-loose policy.

“While the second consecutive contraction in GDP in Q4 would suggest that Japan’s economy is now in recession, business surveys and the labour market tell a different story. Either way, growth is set to remain sluggish this year as the household savings rate has turned negative,” said Marcel Thieliant, head of Asia-Pacific at Capital Economics.

“The (BOJ) has been arguing that private consumption has ‘continued to increase moderately’ and we suspect that it will continue to strike an optimistic tone at its upcoming meeting in March,” Thieliant said, sticking to his projection the bank will end its negative interest rate policy in April.

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Asian markets track Wall St records after Powell hints at rate cut

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Asian stocks on Thursday tagged along with a Wall Street rally that saw another round of record highs as bets on a September interest rate hike surged following comments by Federal Reserve boss Jerome Powell.

The advances also saw Hong Kong and Shanghai push higher after struggling in recent weeks over worries about the Chinese economy, with investors awaiting a key Communist Party meeting next week.

On a second day of testimony to lawmakers, Powell said decision-makers would not wait until inflation had hit the bank’s two percent target before loosening monetary policy, adding: “If you waited that long, you’ve probably waited too long.”

His remarks came before the release of the latest consumer price index reading on Thursday, which is expected to show a further slowdown.

Traders ramped up bets on the Fed reducing borrowing costs in two months’ time, with analysts saying Powell was telegraphing to markets that the decision had been made.
The comments soothed recent fears among investors that officials might keep rates at their two-decade high for some time owing to a still strong labour market and inflation staying stubbornly above two percent.

The S&P 500 ended with a sixth straight record, while the Nasdaq also finished at an all-time peak.

And the upbeat mood filtered through to Asia, where Hong Kong jumped more than one percent, while Tokyo, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Wellington also rose.

Eyes are also turning to the start of China’s Third Plenum gathering on Monday, where top officials including President Xi Jinping are expected to discuss ways to kickstart the world’s number two economy in the face of an ongoing property crisis and geopolitical issues.

However, while there is hope for some sort of major policy announcement, commentators remain cautious.

Andrew Batson, of Beijing-based consultancy Gavekal Dragonomics, told AFP he did not expect a “fundamental departure from the course Xi has already laid out”, in which technological self-sufficiency and national security outweigh economic growth.

Nomura’s Ting Lu added that the meeting was “intended to generate and discuss big, long-term ideas and structural reforms instead of making short-term policy adjustments”.

Economic growth in the first quarter of the year came in above forecasts and is tipped to top the government’s five percent goal for April-June, but the meeting comes amid ongoing concerns that officials are not providing enough support.

Taylor Nugent at National Australia Bank warned: “Further monetary policy easing is constrained by a reluctance to allow further depreciation in the renminbi, and expectations are low for any big policy shift at the Third Plenum.”

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.8 percent at 42,179.84 (break)

Hong Kong – Hang Seng Index: UP 1.3 percent at 17,697.76

Shanghai – Composite: UP 0.8 percent at 2,962.89

Euro/dollar: UP at $1.0840 from $1.0833 on Wednesday

Pound/dollar: UP at $1.2862 from $1.2848

Dollar/yen: DOWN at 161.58 yen from 161.71 yen

Euro/pound: DOWN at 84.27 pence from 84.29 pence

West Texas Intermediate: UP 0.8 percent at $82.79 per barrel

Brent North Sea Crude: UP 0.9 percent at $85.81 per barrel

New York – Dow: UP 1.1 percent at 39,721.36 (close)

London – FTSE 100: UP 0.7 percent at 8,193.51 (close)

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Bangladesh, China Sign 21 Instruments, Announce 7 Projects to Strengthen Ties on Diverse Fronts

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7 projects announced:

  • China-Bangladesh Free Trade Agreement
  • China-Bangladesh Bilateral Investment Treaty
  • Digital Connectivity project
  • Double Pipe Line project
  • Rajshahi WASA Surface Water Treatment Plant
  • MoU between Shandong Agricultural University and Bangabandhu Sheikh Mujibur Rahman Agricultural University, Gazipur.
  • Luban Workshop in Bangladesh

Bangladesh and China signed 21 instruments today (10 July), including three renewed Memorandums of Understanding (MoUs), and announced seven additional projects to elevate their relationship from a “strategic partnership” to a “comprehensive strategic cooperative partnership.”

The instruments were inked in the presence of Bangladesh Prime Minister Sheikh Hasina and her Chinese counterpart Li Qiang after the delegation-level talks between the two countries at the Great Hall of the People, Beijing.

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Earlier, the Bangladesh prime minister was accorded a red-carpet reception as she reached the Great Hall of the People to have a bilateral meeting with her Chinese counterpart Li Qiang.

On her arrival at the premises of the Great Hall of the People, the prime minister was received by the Chinese premier.

The bilateral talks mainly featured Rohingya issue, business, trade and commerce, investments, and bilateral relations alongside various regional and international matters.

After the delegation-level meeting, the Bangladesh prime minister along with her Chinese counterpart witnessed the exchange of the documents.

The instruments on cooperation in the economic and banking sector, trade and investment, digital economy, infrastructure development, assistance in disaster management, construction of 6th and 9th Bangladesh-China friendship bridges, export of agricultural products from Bangladesh and people to people connectivity were signed.

Among the instruments, Bangladesh Sangbad Sangstha (BSS) Managing Director and Chief Editor Abul Kalam Azad signed a MoU with the China Media Group (CMG) and an Agreement with the Xinhua News Agency.

The signed instruments are:

1. The MoU on Strengthening Investment Cooperation in the Digital Economy.

2. The MoU on Banking and Insurance Regulatory between China National Financial Regulatory Administration (NFRA) and Bangladesh Bank.

3. A Protocol of Phytosanitary Requirements Export of Fresh Mangoes from Bangladesh to China.

4. The MoU on Exchange and Cooperation in the field of Economic Development Policy.

5. The MoU on Trade and Investment Cooperation.

6. The MoU on Strengthening Digital Economy Cooperation.

7. Signing of Minutes of Discussions on the Feasibility Study of the China-aid National Emergency Operation Center in Bangladesh Project.

8. Exchange the Letter on the China-aid 6th Bangladesh-China Friendship Bridge Renovation Project.

9. Exchange the Letters on the Feasibility Study of China-aid Construction of Nateshwar Archaeological Site Park in Bangladesh Project.

10. Exchange the Letters on the China-aid 9th Bangladesh-China Friendship Bridge Project.

11. The MoU on Strengthening the Cooperation in Medical Care and Public Health.

12. The MoU on Strengthening the Infrastructure Cooperation.

13. The MoU on Cooperation on Green and Low-Carbon Development.

14. Renewing the MoU on Provision of Hydrological Information of the Yaluzangbu/ Brahmaputra River in Flood Season by China to Bangladesh.

15. The MoU between National Radio and Television Administration and the Ministry of Information and Broadcasting of Bangladesh.

16. The MoU between the China Media Group (CMG) and Bangladesh Sangbad Sangstha (BSS).

17. The MoU between the China Media Group (CMG) and BTV.

18. An Agreement between the Xinhua News Agency and BSS.

19. An Agreement between the Xinhua News Agency and BTV.

20. Renewing the MoU between the Ministry of Education of China and the Ministry of Education of Bangladesh.

21. The MoU Regarding Public-Private Partnership for Sustainable Infrastructure Development.

7 announced projects are:

1. Announcement of the Conclusion of Joint Feasibility Study on China-Bangladesh Free Trade Agreement.

2. Announcing the commencement of negotiation on the Optimization of China-Bangladesh Bilateral Investment Treaty.

3. Announcing the completion of the Modernization of Telecommunication Network for Digital Connectivity project.

4. Announcing the completion of trial run of the Single Point Mooring with Double Pipe Line project.

5. Announcing the commencement of Rajshahi WASA Surface Water Treatment Plant.

6. Signing the MoU between Shandong Agricultural University and Bangabandhu Sheikh Mujibur Rahman Agricultural University, Gazipur.

7. Announcing the construction of Luban Workshop in Bangladesh.

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Terror, ‘chaos’ as India stampede kills 121

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Survivors of India’s deadliest stampede in over a decade on Wednesday recalled the horror of being crushed at a vastly overcrowded Hindu religious gathering that left 121 people dead.

A police report said more than 250,000 people attended the event in northern India’s Uttar Pradesh state, more than triple the 80,000 organisers had permission for.

On Wednesday morning, hours after the event, discarded clothing and lost shoes were scattered across the muddy site, an open field alongside a highway.

People fell on top of each other as they tumbled down a slope into a water-logged ditch, witnesses said.

“Everyone — the entire crowd, including women and children — all left from the event site at once,” said police officer Sheela Maurya, 50, who had been on duty Tuesday as a popular Hindu preacher delivered a sermon.

“There wasn’t enough space, and everyone just fell on top of each other.”

Almost all of the dead were women, along with seven children killed and one man.

Officials suggested the stampede was triggered when worshippers tried to gather soil from the footsteps of the preacher, while others blamed a dust storm for sparking panic.

Some fainted from the force of the crowd, before falling and being trampled upon, unable to move.

The Uttar Pradesh’s state disaster management centre, the Office of the Relief Commissioner, released a list of the dead on Wednesday morning.

It said 121 people had been killed.

– ‘Crushed’ –

Maurya, who had been on duty since early morning on Tuesday in the sweltering humid heat at the preacher’s ceremony, was among the injured.

“I tried to help some women, but even I fainted and was crushed under the crowd,” she told AFP.

“I don’t know, but someone pulled me out, and I don’t remember much.”

Deadly incidents are common at places of worship during major religious festivals in India, the biggest of which prompt millions of devotees to make pilgrimages to holy sites.

“The main highway next to the field was packed with people and vehicles for kilometres, there were far too many people here,” said Hori Lal, 45, who lives in Phulrai Mughalgadi village, near the site of the stampede.

“Once people started falling to the side and getting crushed, there was just chaos.”

Chaitra V., divisional commissioner of Aligarh city in Uttar Pradesh state, initially said panic began when “attendees were exiting the venue when a dust storm blinded their vision, leading to a melee”.

But Uttar Pradesh Chief Secretary Manoj Kumar Singh told reporters after visiting the site that worshippers had scrambled to get close to the preacher.

“I am told that people rushed to touch his feet and tried to collect soil, and a stampede took place,” Singh said, according to the Indian Express daily.

“Many people fell in a nearby drain”.

Maurya said she had worked at several political rallies and large events in the past but had “never seen such huge numbers”.

“It was very hot, even I fell there and I survived with great difficulty”, she added.

– ‘Heart-rending’ –

At dawn on Wednesday, four unidentified bodies lay on the floor of a makeshift morgue at the hospital in the nearby town of Hathras.

Ram Nivas, 35, a farmer, said he was searching for his sister-in-law Rumla, 54, who was missing after the crush.

“We haven’t been able to find her anywhere,” Nivas said, adding he had visited all the nearby hospitals throughout the night.

“We just hope she’s still alive,” he said quietly. “Maybe just lost.”

In the hospital’s emergency ward, Sandeep Kumar, 29, sat next to his injured sister, Shikha Kumar, 22.

“After the event ended, everyone wanted to exit quickly, and that is what led to the stampede,” Sandeep said.

“She saw people fainting, getting crushed.”

Prime Minister Narendra Modi announced compensation of $2,400 to the next of kin of those who died and $600 to those injured in the “tragic incident”.

President Droupadi Murmu said the deaths were “heart-rending” and offered her “deepest condolences”.

Uttar Pradesh Chief Minister Yogi Adityanath, who is also a Hindu monk, expressed his condolences to the relatives of those killed and ordered an investigation into the deaths, his office said.

Religious gatherings in India have a grim track record of deadly incidents caused by poor crowd management and safety lapses.

In 2008, 224 pilgrims were killed and more than 400 were injured in a stampede at a hilltop temple in the northern city of Jodhpur.

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