TOKYO (Reuters) – Japan’s economy will suffer a smaller contraction this year than initially forecast but won’t return to pre-coronavirus pandemic levels until at least early 2022, economists in a Reuters poll said.
Analysts polled were split on the Bank of Japan’s next policy move even as the economy continues to suffer from the pandemic’s fallout, underscoring a widening view that the central bank may have exhausted its ammunition to prop up growth.
The world’s third-largest economy will likely shrink 5.3% in the current fiscal year ending in March, the December poll of 27 analysts showed, revised up from a 5.6% contraction projected in November.
The upgrade was largely due to revised gross domestic product (GDP) data that showed the economy grew an annualised 22.9% in July-September, better than an initial estimate, as consumption and capital expenditure recovered.
Japan’s fresh $708 billion economic stimulus package, which follows two massive spending plans to combat the pandemic, is also set to underpin a fragile recovery.
“The recovery may speed up if a pick-up in foreign demand accelerates” and the government’s stimulus package encourages companies to spend more, said Harumi Taguchi, principal economist at IHS Markit.
Analysts expected the economy to rebound 3.4% next fiscal year, unchanged from the November survey, but a recent resurgence in coronavirus cases could slow the recovery.
Six of the 40 analysts polled expected Japan’s economy to return to pre-pandemic levels in the fiscal year starting in April 2021, 15 expected this to happen in the 2022 fiscal year and 19 said this would take place in the 2023 fiscal year or beyond.
“The pace of Japan’s economic recovery is weak compared with other industrialized nations,” said Hiroaki Mutou, economist at Sumitomo Life Insurance Company, adding that the country had a “low potential growth rate”.
“Japan’s capital spending is on the decline and the timing for the economy to return to the recovery track will likely be slower than that of overseas.”
Core consumer prices, which exclude volatile fresh food prices, will fall 0.5% this fiscal year and rise 0.2% next fiscal year, the poll taken in Dec.3-11 showed, unchanged from the previous month’s poll.
Analysts were divided on what the BOJ’s next policy move would be if it decided to change course after holding monetary policy steady since May. Some 21 out of 41 analysts expected the central bank to ease monetary policy further, while 20 expected the BOJ to start unwinding ultra-loose policy.
“The BOJ could extend or expand its credit easing measures but the central bank will unlikely adopt steps aiming to achieve its price target for the time being,” said Izuru Kato, chief economist at Totan Research.
The BOJ is widely expected to keep monetary policy unchanged at a two-day rate review ending on Friday, but may extend a range of steps aimed at easing corporate funding strains beyond their March deadline.
(Reporting by Kaori Kaneko; Polling by Shaloo Shrivastava, Editing by Leika Kihara and Ana Nicolaci da Costa)
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
