World Biz
Japan unexpectedly slips into recession, Germany now world’s third-biggest economy
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.
Russian President Vladimir Putin aims to bolster the count of foreign students in the nation’s universities to at least 500,000 by 2030, as outlined in a decree setting forth national development objectives.
The decree stipulates, “The number of foreign students pursuing higher education in Russian higher learning institutions and scientific organizations should rise to at least 500,000 by 2030.”
As per the Russian Education and Science Ministry, the current tally exceeds 355,000 foreign students studying in Russian universities. Acting Minister Valery Falkov previously highlighted Russia’s position as the world’s sixth-largest host of foreign students.
TASS calculations reveal a notable surge of over 20% in foreign student enrollment across Russian universities over the past five years. Predominantly, foreign applicants admitted to Russian universities hail from China, Vietnam, former Soviet republics, as well as various Asian and Middle Eastern countries.
Prime Minister Sheikh Hasina today (25 April) called for speaking out against all forms of aggression and atrocities, and say ‘no’ to wars.
“We must speak out against all forms of aggression and atrocities, and say ‘no’ to wars,” she said adding that Bangladesh supports the UN Secretary General’s ‘New Agenda for Peace.
The prime minister was addressing the 80th Session of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) held at the ESCAP Hall (2nd floor), United Nations Conference Center (UNCC) here.
She arrived in Bangkok on Wednesday on a six-day official visit to Thailand.
The PM said the pre-condition for sustainable development is lasting peace and security.
“We must settle regional disputes and tension through dialogue. Our mutual respect for national sovereignty and territorial integrity must remain paramount,” she said.
Hasina called upon the Asia-Pacific region, especially ASEAN, to redouble their efforts to end Rohingya crisis as all efforts at regional connectivity, integration, and prosperity will continue to be marked by a missing puzzle without it.
“The origin of their crisis has been in Myanmar, and its solution also lies in Myanmar,” she declared.
“As long as that solution remains out of reach, all our efforts at regional connectivity, integration, and prosperity will continue to be marked by a missing puzzle. Let us redouble our efforts to put that puzzle back in place,” she said.
She said that in August 2017, when thousands of Rohingya men, women, and children from Myanmar fled to Bangladesh, Bangladesh offered them temporary shelter.
“With an ever growing population, this has now become one of the largest humanitarian situations in the world,” she said.
Sheikh Hasina said that In the backdrop of ongoing armed conflicts in Myanmar, the Rohingya repatriation process is also getting delayed.
“This is creating serious security risks within and beyond our territories,” she said.
She called upon the Asia-Pacific region, especially ASEAN, to play a proactive role in resolving the volatile situation in Myanmar.
“We must ensure that the Rohingya can go back home in safety and dignity at the earliest possible,” she said.
The prime minister said that the Asia-Pacific region must stand united against its common enemies of poverty and hunger.
She said Bangladesh has reduced poverty from 41.51 percent to 18.7 percent between 2006 and 2022.
It also reduced extreme poverty from 25.1 to 5.6 percent during the same period.
“We remain confident about eradicating extreme poverty by 2030,” she said.
She mentioned that Bangladesh has made notable progress on food security, with focused interventions on maternal and child nutrition.
“Our current priority is to address inequalities through income distribution, asset ownership, and social protection,” she said.
The prime minister said that Asia-Pacific region must put up a united front in tackling the climate crisis, biodiversity loss, and transboundary pollution.
“We need to push for ambitious climate financing goals beyond 2025 at COP-29. We need to cooperate on cross-border water management and air quality improvement. We must all prepare for growing extreme weather events,” she said.
In this connection, she suggested looking into Bangladesh’s experience in disaster risk reduction.
“We appreciate UN-ESCAP’s support in improving our early warning capabilities,” she added.
Briefly describing various development programmes and achievements of her govebrment, the prime minister said that much of the development gains are affected by climate impacts.
“As a low-lying delta, Bangladesh has no option but to invest heavily in climate resilience,” she said.
She mentioned that Bangladesh is already recognised as a global leader in climate adaptation.
“We are happy to share our traditional and innovative solutions with other vulnerable countries,” she said.
She said that Bangladesh has urged developed and emerging economies in the region to raise their time-bound emission reduction targets.
“For economies in transition, it is important to have a just energy transition.”
In Bangladesh, she said, “we are working on long-term energy security with a sound mix of clean and renewable energy.”
“We shall continue to do our part in pursuing a circular and low-carbon economic growth pathway.”
She underscored the need for increased and easy access to financing and technology from both the public and private sectors.
“I invite UN-ESCAP to help build the capacity of climate-vulnerable countries to mobilise adequate international climate financing.”
PM Hasina said that Bangladesh now provides critical links to the Trans-Asian Highway and Railway networks.
“Our physical and digital infrastructures are being developed to foster regional trade and connectivity.”
She said Bangladesh offers access to the Bay of Bengal for land-locked territories in its neighbourhood.
“We stand ready to work together with all regional partners through mutual understanding and cooperation,” said the prime minister.
The ongoing internet disruption, which began last night due to a cut in the country’s second submarine cable near Singapore, is expected to persist for at least 4-5 days, according to Mirza Kamal Ahmed, managing director (additional charge) of the Bangladesh Submarine Cables PLC.
Ahmed, the official of the state-owned bandwidth provider, informed The Business Standard that the international consortium is in search of a special purpose ship necessary for restoring the undersea cable.
“The exact duration cannot be specified,” he stated, adding, “Based on past instances, it is likely to take a minimum of 4-5 days.”
Internet users are experiencing significant disruption as the accidental cut in Bangladesh’s second submarine cable, South East Asia–Middle East–Western Europe 5 (SEA-ME-WE 5), is blocking Singapore-Kuakata traffic, the source of 1700 GBPS bandwidth.
“We are serving all our users with the help of other sources of bandwidth – the international terrestrial cable (ITC) and the first submarine cable,” informed Nazmul Karim Bhuiyan, secretary general of the ISP Association of Bangladesh.
However, he mentioned that users are encountering some lag on Saturday afternoon.
“As the main broadband usage peaks during the night, we could learn about the full extent of the disruption and any resulting delays tonight,” he added.
The Bangladesh Submarine Cables PLC (BSCPLC) has issued sincere apologies for the temporary inconvenience to its customers.
Efforts are underway to repair the cable through the SEA-ME-WE 5 and restore connectivity promptly, stated the BSCPLC in a statement released today (April 19).
Currently, Bangladesh requires around 5,200 GBPS of internet bandwidth, with half of the demand being met by ITC companies importing bandwidth from India.
For the remaining half of the demand, the country relies on the state-owned Bangladesh Submarine Cable Company.
The first submarine cable SEA-ME-WE 4, located in Cox’s Bazar, is presently supplying approximately 850 GBPS bandwidth.
