Fears that Japan’s recovery is heading for further slowdown deepened yesterday as data showed the nation’s trade with the world rose only slightly and a corporate spending indicator fell in October.
The health of the trade-reliant economy continues to draw concern as exports, its main engine for growth, slow because of a strong yen and waning overseas demand while domestic demand remains soft.
Japan’s economic fiscal policy minister Banri Kaieda told reporters yesterday that he expected growth to be “substantially lower” in the fourth quarter.
The current account surplus — the broadest measure of trade with the rest of the world — widened 2.9 percent in October from a year earlier to ￥1.44 trillion (US$17.20 billion), missing expectations of a 7 percent rise.
In September the surplus rose 24.3 percent.
Other data from the finance ministry showed core private-sector machinery orders, a leading indicator of corporate capital spending, fell 1.4 percent in October from the previous month, the second consecutive decline after a 10.3 percent fall in September.
The data also missed expectations of a 0.1 percent decline.
Yesterday’s data illustrated that the double whammy of the expiration of government subsides for automobiles and other goods and slowing US, European and Chinese demand continued to threaten Japan’s economy, analysts said.
“The next couple of quarters are likely to be tough for Japan, as expiring incentives for purchases of consumer durables hurt demand,” Richard Jerram of Macquarie Bank said. “Stalling exports and a soft industrial cycle will erode corporate profitability and damage the manufacturing investment cycle.”
However, Jerram said that robust Japanese machinery export orders indicated an acceleration of economic activity in the region and may help soften the blow for Japan.
“If exports can show some modest growth then Japan should be able to avoid recession,” he said.
Recent data showed October exports grew at their slowest pace of the year after the yen traded at 15-year highs against the dollar, hammering the competitiveness of the crucial sector.
Separately, a Chinese government think tank has warned inflationary pressures are building in the economy and consumer prices will remain “relatively high” next year, amid growing expectations of a rate hike.
The Chinese Academy of Social Sciences (CASS) also cautioned that the world’s second-largest economy was at risk of overheating next year “if the growth speed is not controlled properly,” Xinhua news agency said yesterday.
The report came as Beijing brought forward the release of key economic data for last month to Saturday from Monday, fueling speculation that policymakers were planning to raise interest rates in the coming days.
“The inflationary pressure is building up and excess liquidity would be the major factor driving the CPI [consumer price index] up in the next several years,” CASS said in its 2011 Economic Blue Paper.
The think tank forecast consumer prices to rise 3.2 percent over the entire year this year — above the government’s full-year target for three percent — and 3.3 percent next year.
“Surging grain prices in the international market and the rising cost of growing grains in China would keep the prices of consumer goods at a relatively high level,” the report said.
Prices for manufactured goods were also expected to rise next year.
China’s consumer price index rose 4.4 percent year-on-year in October — the fastest pace in more than two years — with the prices of 18 types of vegetable increasing more than 60 percent.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
ALL ABOUT STRATEGY: The company is optimistic, saying that its gross margin should increase year-on-year, but it is scaling back on its plans to expand capacity Quang Viet Enterprise Co (QVE, 廣越), which makes down jackets and garments for sportswear and outdoor brands including Adidas AG, yesterday said that revenue might drop 5 to 10 percent annually this year as some customers trimmed orders in response to the COVID-19 pandemic. That would mark its first revenue decline since 2016. Quang Viet posted record-high revenue of NT$16.26 billion (US$537.45 million) last year, up 22 percent from 2018. Down jackets made up 40 percent of it revenue last year. North Face Inc and Patagonia Inc are this year likely to reduce orders by 20 to 30 percent from a
ELECTRONICS Lite-On delays sale of unit Lite-On Technology Corp (光寶科技) yesterday said it would postpone the sale of its solid-state drives (SSD) business to Kioxia Holdings Corp, formerly known as Toshiba Memory Holdings Corp, due to disruptions amid the COVID-19 pandemic. Last year, the Taiwan-based electronics components supplier struck the deal with the Japanese firm, agreeing to sell the unit for US$165 million. Citing unfinished integration work due to the pandemic, Lite-On has deferred today’s closing date until further notice, adding that the delay would not have a negative effect on the unit’s operations. AUTO PARTS Hiroca approves dividend Automotive interior parts supplier Hiroca
The output of the global smartphone industry this year is to contract by 7.8 percent on an annual basis as the COVID-19 pandemic ushers in a global recession, Taipei-based market researcher TrendForce Corp (集邦科技) said in a report on Monday. The global production of smartphones is expected to fall to 1.29 billion units, as the pandemic dampens demand for consumer electronics, leading to a decline in shipments across Europe and North America, TrendForce said. With consumers delaying smartphone purchases and thereby lengthening the device replacement cycle, overall prices would suffer a setback that is expected to negatively affect the profitability of smartphone