TOKYO (Reuters) – The Bank of Japan is expected to offer a brighter view next week on the economy, output and exports than in July to signal that they are starting to recover from the devastating impact of the coronavirus pandemic, sources familiar with its thinking said.
The optimism would back up the government’s view that its massive stimulus has helped cushion the blow from COVID-19, at a time when its top spokesman Yoshihide Suga is eyeing a landslide victory in a ruling party election to become next prime minister.
But the BOJ will warn at its policy review that any recovery will be modest and bound with uncertainty, as fears over a renewed spike in infections and fragile global demand weigh on household and corporate spending, the sources said.
“It’s clear the economy is bouncing back from a severe downturn in April-June, which was blamed largely on lock-down measures to contain the pandemic,” one of the sources said, a view echoed by two other sources.
“But it’s hard to judge at this stage how strong the recovery will be, with risks skewed toward the downside,” the source said, a view echoed by two other sources.
The BOJ is set to keep monetary policy steady at the rate review, after having ramped up stimulus twice this year to cushion the economic blow from the pandemic.
On the current state of the economy, the central bank is likely to say that while conditions remain severe, there are some signs of a pick-up, according to the sources.
The view would be more upbeat than the assessment made in the BOJ’s previous meeting in July, when it said the economy remained in an “extremely severe state.”
The central bank is also expected to describe exports and output as recovering, compared with the July assessment that they were “falling sharply,” the sources said.
But the BOJ will point to various risks clouding the outlook, notably the chance a prolonged battle with COVID-19 could prod companies to slash capital expenditure, they said.
Pessimists in the bank also fret that consumption could take a hit later this year if companies start to shed jobs and cut bonus payments to make up for weak sales, the sources said.
BOJ Deputy Governor Masazumi Wakatabe warned of such risks in a speech last week, saying that households and firms may become more cautious about spending if the pandemic persists.
“There’s a chance such temporary external shocks could lead to persistent economic stagnation,” he said.
Japan suffered its worst postwar economic contraction in the second quarter as COVID-19 hit businesses, highlighting the challenges the new premier faces in averting a deeper recession.
Analysts expect growth to rebound modestly in the current quarter thanks to a pick-up in global auto demand that helped lift exports and output.
But prospects for consumption remain patchy with robust spending on durable goods offset by soft demand for services such as tourism, entertainment and dine-outs.
Analysts polled by Reuters in August said they expect the world’s third-largest economy to shrink 5.6% in the current fiscal year to next March, and grow just 3.3% the following year.[ECILT/JP]
Economy Minister Yasutoshi Nishimura said last month that activity may not return to pre-crisis levels until early 2022.
As the pandemic ravaged the economy, the BOJ boosted buying of corporate debt and created a lending facility to channel money to smaller firms in a string of measures taken from March through May.
While those moves were described as temporary steps, many BOJ officials say they are ready to extend the current March 2021 deadline if the pain from the health crisis persists.
(Reporting by Leika Kihara and Takahiko Wada; Editing by Kim Coghill)
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
