TOKYO (Reuters) – Japan was hit by its biggest economic contraction on record in the second quarter as the coronavirus pandemic crushed consumption and exports, keeping policymakers under pressure for bolder action to prevent a deeper recession.
The third straight quarter of declines knocked the size of real gross domestic product (GDP) to decade-low levels, wiping out the benefits brought by Prime Minister Shinzo Abe’s “Abenomics” stimulus policies deployed in late 2012.
While the economy is emerging from the doldrums after lockdowns were lifted in late May, many analysts expect any rebound in the current quarter to be modest as a renewed rise in infections keep consumers’ purse-strings tight.
“The big decline can be explained by the decrease in consumption and exports,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“I expect growth to turn positive in the July-September quarter. But globally, the rebound is sluggish everywhere except for China.”
The world’s third-largest economy shrank an annualised 27.8% in April-June, government data showed on Monday, marking the biggest decline since comparable data became available in 1980 and slightly bigger than a median market forecast for a 27.2% drop.
While the contraction was smaller than a 32.9% decrease in the United States, it was much bigger than a 17.8% fall Japan suffered in the first quarter of 2009, when the collapse of Lehman Brothers jolted global financial markets.
The size of Japan’s real GDP shrank to 485 trillion yen, the lowest since April-June 2011, when Japan was still suffering from two decades of deflation and economic stagnation.
(Click here for an interactive graphic of real and nominal GDP since 2011: https://tmsnrt.rs/2Fwq2JK)
For a graphic on Japan’s economy posted a record drop in second quarter:
The main culprit behind the dismal reading was private consumption, which plunged a record 8.2% as lock-down measures to prevent the spread of the virus kept consumers at home.
External demand – or exports minus imports – shaved a record 3.0 percentage point off GDP, as overseas shipments plunged 18.5%, with auto exports hit particularly hard.
Falling global vehicle sales have hurt automakers like Mazda Motor Corp 7261.T> and Nissan Motor Co 7201.T>, among the biggest drivers of Japan’s economy, and their parts suppliers.
Capital expenditure declined 1.5% in the second quarter, less than a median market forecast for a 4.2% fall, as solid software investment made up for weak spending in other sectors.
Economy Minister Yasutoshi Nishimura conceded the GDP readings were “pretty severe,” but pointed to some bright spots such as a recent pickup in consumption.
“We hope to do our utmost to push Japan’s economy, which likely bottomed out in April and May, back to a recovery path driven by domestic demand,” he told a news conference.
Japan has deployed massive fiscal and monetary stimulus to cushion the blow from the pandemic, which hit an economy already reeling from last year’s sales tax hike and the U.S.-China trade war.
While the economy has re-opened after the government lifted state of emergency measures in late May, a worrying resurgence in infections cloud the outlook for business and household spending.
(Reporting by Leika Kihara and Tetsushi Kajimoto, additional reporting by Kaori Kaneko and Daniel Leussink; Editing by Sam Holmes)
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.
