Japan
Heads for GDP Contraction as South Korea Weakens: Economy
Japanese
and South Korean industrial production fell more than economists
estimated last month as slowdowns in China and Europe weighed on
exports, building the case for more monetary easing
26
April, 2012
Japan’s
output fell 1.3 percent from July, the biggest decline in three
months, a Trade Ministry report showed in Tokyo today. South Korean
production slid 0.7 percent, partly on a strike at Hyundai Motor Co.
An
increasing risk that Japan’s economy will shrink this quarter and
the failure of central bank loosening to dislodge deflation may
increase pressure for officials to ease at either of two meetings
next month. Today’s data add to China’s weakest industrial
production growth in more than two years in highlighting the failure
of policy support to reverse a slowdown across Asia.
“I’m
convinced we’ll see a contraction in Japan’s GDP this quarter
because consumption, exports and private investment are falling,”
said Masamichi Adachi, a senior economist at JPMorgan Securities in
Tokyo and a former central bank official. “Prices in Japan are
falling because the economy is weak.”
The
Nikkei 225 Index fell 0.7 percent as of 1:20 p.m. in Tokyo. The MSCI
Asia Pacific Index of stocks was up 0.2 percent as investors weighed
threats to the region’s growth against prospects for more stimulus.
A
report due tomorrow from HSBC Holdings Plc and Markit Economics may
indicate that Chinese manufacturing contracted for an 11th month in
September. Baoshan Iron & Steel Co., China’s largest listed
steelmaker, said this week it suspended production at a plant after
demand fell for slabs used in ships and bridges.
Cutting
Rates
Economists
had expected declines of 0.5 percent in Japan’s output and 0.4
percent in South Korea’s, according to the median forecasts in
surveys by Bloomberg News.
South
Korea will need to cut interest rates again next month to avoid rapid
gains in the won as a result of easing elsewhere, said Kim Hyeon
Wook, an economist at SK Research Institute and a former adviser to
the Bank of Korea’s monetary policy committee. Kim said the Hyundai
strike affected output and a slowdown in car exports will be “bad
for Korea.”
Japan’s
consumer prices excluding fresh food fell 0.3 percent in August from
a year earlier, matching the steepest decline in 16 months, another
report showed today. The nation’s jobless rate slid 0.1 percentage
point to 4.2 percent as more people stopped seeking jobs. Retail
sales rose 1.8 percent from a year earlier.
China,
Europe
“Asian
exports and production are weakening due to slowdowns in China and
Europe,” said Glenn Levine, a senior economist at Moody’s
Analytics in Sydney. “Today’s data make it more likely that
Japan’s economy will contract this quarter.”
JPMorgan,
Barclays Securities Japan and BNP Paribas SA expect a contraction in
Japan after growth slowed to a 0.7 percent annual pace in the second
quarter. Challenges span political tensions with China, the fading
effects of car subsidies and strength in the yen. The Japanese
currency traded at 77.55 per dollar as of 1:17 p.m. in Tokyo, near
the seven- month high of 77.13 touched on Sept. 13.
Toyota
Motor Corp. (7203), Nissan Motor Co. (7201) and Honda Motor Co.
(7267) reported this week that August production fell in China after
anti-Japanese protests flared in the world’s largest vehicle
market. Toyota also said this week it will adjust production at a
plant in Kyushu, southwestern Japan.
Japan’s
trade ministry today cut its assessment of industrial output for the
first time since June and said that it was in a weakening trend.
Finance Minister Jun Azumi said that export demand is very unstable.
Carbon
Tax
The
Japan Business Federation, known as Keidanren, says that a planned
carbon tax will add to energy costs and further slow economic growth.
The levy, aimed at curbing greenhouse gases, will start Oct. 1 at 289
yen ($3.73) a metric ton of emissions.
Signs
that a global slowdown is undermining a Japanese recovery prompted
the central bank to unexpectedly expand its asset-purchase fund last
week. Bank of Japan (8301) Governor Masaaki Shirakawa and his
colleagues gather to set policy twice next month, on Oct. 4-5 and
Oct. 30, with Deputy Governor Hirohide Yamaguchi saying this week
that the bank will take “bold steps” if necessary.
Around
the world, France will today give a final reading for second-quarter
GDP, while Germany will report on retail sales. Inflation data will
be released for the euro region and Italy. In Canada, a report may
show the nation’s economy grew 0.1 percent in July from the
previous month.
U.S.
data may show that personal spending climbed in August after a pickup
in automobile purchases and increased in gasoline prices, according
to a Bloomberg survey. The Commerce Department’s report also may
show the slowest gain in incomes in four months as the labor market
struggled.
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