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Japan's economy shrank more than expected in fourth quarter – Aljazeera.com

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Japan’s economy shrank faster than initially estimated in the fourth quarter to mark the biggest drop in more than five years as corporate spending on factories, equipment and land slumped, casting a deeper shadow over the outlook as the coronavirus outbreak heightened the risks of a recession.

The economy is under growing pressure as the outbreak disrupts supply chains and damages tourism, which follows the hit to consumption after October’s sales tax hike.

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The bleak data piles renewed pressure on the government and the central bank to deploy stronger fiscal and monetary support to underpin a fragile economic recovery.

“Unfortunately, any recovery in [the first quarter] has been nipped in the bud by the global spread of the coronavirus,” said Tom Learmouth, Japan economist at Capital Economics, adding that he was expecting the economy to contract 0.5 percent quarter-on-quarter in the current quarter.

“That’s likely to be primarily driven by plunging export volumes. And from late-February, until the virus spread shows signs of dissipating, we expect consumer spending to be hit hard as many people self-isolate by staying at home.”

The world’s third-largest economy shrank an annualised 7.1 percent in the quarter to December, revised data showed on Monday, weaker than a preliminary reading of a 6.3 percent contraction and a bigger decline than a median market forecast for a 6.6 percent drop.

The decline, which was the fastest pace since April-June 2014, was blamed largely on a bigger-than-expected fall in capital expenditure – which had been considered the lone bright spot in an otherwise weakening economy.

The deeper contraction and the virus have fuelled fears Japan could see growth contract for two straight quarters in the current quarter – the definition of a recession – piling pressure on policymakers to deploy further stimulus steps.

Capital spending dropped 4.6 percent from the previous quarter, worse than a preliminary 3.7 percent decline and the biggest drop since 2009, in a sign soft global demand and the Sino-US trade war took a toll on investment appetite.

Private consumption fell 2.8 percent from the third quarter, roughly in line with the preliminary 2.9 percent decline, as households withheld spending after a sales tax hike last October.

The weakness in domestic demand casts doubt on the Bank of Japan’s (BOJ) argument that robust capital expenditure will offset some of the pain from soft exports.

The BOJ may take steps next week to ease the financial strain of firms hit by slumping sales from the virus outbreak, sources have told Reuters.

Adding to the pain for the export-reliant economy, Tokyo’s Nikkei stock average fell 4 percent and the yen spiked as investors flocked to the safety of the Japanese currency.

A senior Japanese finance ministry official told reporters on Monday “nervous moves” were seen in the currency market and that he would watch moves with a greater sense of urgency.

If the yen’s spike continues, the BOJ may be pressured to take bolder steps beyond financial assistance to small firms, some analysts say.

The government, for its part, plans to compile a second package of emergency measures to deal with the virus on Tuesday, though any spending will be modest in size and funded by reserves set aside for emergency purposes.

Prime Minister Shinzo Abe has come under fire for his handling of the crisis as the number of coronavirus cases in Japan reached more than 1,100, just as the nation prepares to host the summer Olympic Games in July and August.

SOURCE:
Reuters news agency

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Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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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.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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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.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

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