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Japan's economy shrinks faster than first estimated on growing virus, recession risks – TheChronicleHerald.ca

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By Kaori Kaneko and Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s economy shrank more than initially estimated in the fourth quarter – by the most since the 2014 sales tax hike – exacerbating economic fears at a time when the impact of the coronavirus outbreak is increasing recession risks.

A spike in the yen and drop in Tokyo stocks – against a backdrop of oil price cuts that are playing havoc with financial markets – add to woes for an economy which is contending with an October sales tax hike to 10% from 8%, as well as slumping tourism and supply chain disruption caused by the health crisis.

The bleak data piles renewed pressure on the government and central bank to deploy stronger fiscal and monetary support.

“Japan’s economy is already in recession and there are emerging signals that the worst has yet to come,” said Mizuho Securities senior market economist Toru Suehiro.

“There’s not much the Bank of Japan (BOJ) can do as monetary easing cannot cure the disease. The least the government and the BOJ can do is to prevent the negative psychological effects of the epidemic from spiralling further.”

The world’s third-largest economy shrank an annualized 7.1% in the three months through December, revised data showed on Monday, more than a preliminary reading of 6.3% and a median market forecast of 6.6%.

The figure represents the steepest decline since April-June 2014, when a sales tax hike to 8% from 5% in April of that year pushed the economy into recession.

The deeper contraction and the virus impact have fueled fears of another decline in January-March to mark two consecutive quarters – the definition of a recession.

“Unfortunately, any recovery in Q1 has been nipped in the bud by the global spread of the coronavirus,” said Capital Economics’ Japan economist Tom Learmouth. The economy is likely to contract 0.5% in the current quarter from the last, he said.

CAPEX WEAKNESS

Analysts largely blamed slower October-December growth on weakness in capital spending – previously considered the lone bright spot in an otherwise weak economy.

Capital spending fell 4.6% from the previous quarter, worse than a preliminary 3.7% estimate and the biggest drop since 2009, in a sign of soft global demand and Sino-U.S. trade war impacting investment appetite.

Private consumption fell 2.8%, in line with the preliminary 2.9% decline, as households withheld spending after the sales tax hike.

The weakness in domestic demand threatens the central bank’s argument that robust capital expenditure will offset some of the pain from soft exports.

The Bank of Japan may take steps next week to ease the financial strain of firms suffering slumping sales due to the virus outbreak.

Adding to the pain for the export-reliant economy, the Nikkei stock average fell 5% to below 20,000 and the yen spiked as investors flocked to the safety of the Japanese currency.

Japan’s finance minister warned on Monday against investors pushing up the yen, saying the government would closely watch market moves which he described as “nervous” amid the global spread of the coronavirus.

If the yen continues to rise, the BOJ may be pressured to take bolder steps beyond financial assistance for small firms, analysts said.

“There were market rumours the BOJ could hold an emergency meeting before its scheduled interest rate review on March 18-19, to ease policy. The trigger could be the Nikkei’s slide below 20,000,” said Dai-ichi Life Research Institute economist Koichi Fujishiro.

“If that happens, the BOJ could ramp up its purchases of exchange-traded funds (ETF) to around 9 trillion to 10 trillion yen” from the current 6 trillion yen ($58.62 billion), he said.

Other data on Monday showed confidence in Japan’s service sector sentiment dropped to its lowest in nine years.

The survey of workers such as taxi drivers, hotel workers and restaurant staff – called “economy watchers” – showed their confidence about current conditions in February at its weakest since April 2011 after the devastating earthquake and tsunami.

The government, for its part, plans to compile a second package of emergency measures to deal with the virus on Tuesday, though analysts said any spending will likely 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 surpassed 1,100, just as the nation prepares to host the summer Olympic Games in July and August.

(Reporting by Kaori Kaneko and Tetsushi Kajimoto; Writing by Leika Kihara; Editing by Sam Holmes and Christopher Cushing)

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A timeline of events in the bread price-fixing scandal

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Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 250 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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