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Japan economy at critical juncture as virus risks growth, Olympics – The Mainichi

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People are reflected on the electronic board of a securities firm in Tokyo, Wednesday, March 18, 2020. (AP Photo/Koji Sasahara)

TOKYO (Kyodo) — Hit hard by the coronavirus outbreak, Japan’s economy faces its biggest challenge in more than a decade, with analysts warning of a technical recession and even the worse if this summer’s Tokyo Olympics is cancelled.

The epidemic has also hurt the credibility of Abenomics, a policy mix adopted by Prime Minister Shinzo Abe after he took office in 2012, which the government says has helped, together with a robust stock market, expand the economy.

But as the Bank of Japan is widely seen as running short of policy tools to further boost the economy after years of massive monetary easing, Abe is now forced to turn to state coffers for budgetary stimulus as large as the one offered in the 2008-2009 global financial crisis, even though it could deteriorate the country’s fiscal health.

“It’s possible Japan will slip into its worst recession since the 2008 crisis,” said Toshihiro Nagahama, chief economist at the Dai-ichi Life Research Institute.

Nagahama is one of those calling on the government to reduce consumption tax from 10 percent back to 8 percent on all products — not just food and daily items — as a provisional measure until the economy returns to normal.

Ahead of the tax hike, Abe and other ruling party lawmakers repeatedly said the increase would be nixed if the economy faced a situation as serious as the financial turmoil.

The Japanese economy shrank an annualized real 7.1 percent in the October-December period as the higher tax dented consumer spending. And it could further contract in the current quarter through this month, entering a technical recession, defined as at least two consecutive quarters of declining gross domestic product.

First-quarter GDP is expected to contract 2.9 percent, according to the average estimate of 34 economists surveyed by the Japan Center for Economic Research, as the viral outbreak has disrupted production and exports and cast a shadow over the global economic outlook.

The government’s policy of restricting public events to prevent infections “is causing great damage” to the economy, Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities Inc., said.

The worldwide spread of the virus has also threatened the Tokyo Olympics, slated to begin on July 24. Abe still hopes the games will help sustain a tourism boom in Japan and support growth.

Amid growing speculation that the event could be postponed for a year or two, or even be cancelled, analysts have started simulating tremendous losses to the economy.

“If it’s cancelled, the damage would be unmeasurable. This could also deteriorate public sentiment significantly,” said Nagahama.

The focus is on how large the next fiscal stimulus by the government will be.

Following the financial crisis, the government unleashed an emergency policy package worth 57 trillion yen ($513 billion) in April 2009 to shield the economy from negative fallouts under then Prime Minister Taro Aso, who is now finance minister.

The upcoming package, which Abe aims to put together early next month, could match the 2009 stimulus in size, some analysts said.

To buoy household spending, the emergency steps are likely to include cash handouts, extension of a government reward points program for cashless payments, as well as lowering the just-hiked consumption tax rate, sources close to the matter said.

Austerity is also in focus, however.

Abe has already introduced policy packages worth more than 1 trillion yen to fight the coronavirus, in addition to the 26 trillion yen stimulus launched in December to address shocks from the Oct. 1 tax hike.

The latest measures will likely be financed under a supplementary budget for fiscal 2020 with the government issuing new debt, adding to pressure on Japan’s fiscal health, the worst among major developed countries.

But Maruyama said, “Now is the time to temporarily shelve the viewpoint of fiscal discipline, and to give priority to putting the economy back on a growth path.”

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Minimum wage to hire higher-paid temporary foreign workers set to increase

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OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

The Canadian Press. All rights reserved.

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PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

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OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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Statistics Canada says levels of food insecurity rose in 2022

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OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

The Canadian Press. All rights reserved.

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