February 26, 2021

Japanese Economy Signals Rebound From Earthquake

Gross domestic product shrank at an annualized 1.3 percent rate in the three months ending June 30, posting three consecutive quarters of declines, the Cabinet office said Monday in Tokyo. The median forecast of 25 economists surveyed by Bloomberg News was for a 2.5 percent drop. Capital investment rose 0.2 percent, compared with a revised 1.4 percent decline in the first quarter.

The outlook for growth is at risk from the yen’s climb to near a postwar high, which threatens to hurt exporters like Toyota Motor and Sony at a time when a global slowdown may also cut demand for the nation’s products. The finance minister, Yoshihiko Noda, said he was ready to take “bold action” in currency markets if necessary.

“The headline number is better than expected, but it’s not like this is a strong number,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management in Tokyo. “The strengthening yen will start to weigh on exports and capital spending. We can expect positive growth in the third quarter, but the yen may damp that momentum.”

Toyota, the world’s biggest carmaker, expects to begin making up for lost output from the earthquake in September, one month earlier than previously announced, it said on Aug. 2. The company is hiring up to 4,000 temporary workers to help that effort.

A 15-yen change in the dollar-yen rate over the last year has “blown off” 300,000 yen, or $3,900, in profit on a $20,000 car, and a stronger yen has cut Toyota’s fiscal first-quarter operating profit by 50 billion yen, Takahiko Ijichi, the carmaker’s senior managing officer, said on Aug. 2.

A stronger currency makes Japanese products less competitive abroad and erodes overseas profits repatriated into yen.

“The exchange rate is at a level that has an extremely damaging effect on the Japanese economy,” Osamu Masuko, president of Mitsubishi Motors, said Aug. 4 after authorities intervened in the foreign-exchange market for the first time since March. “The resulting exchange rate still isn’t acceptable.”

Slower overseas growth may also weigh on demand for Japanese products. Tokyo Electron, the large maker of semiconductor equipment, cut its net income forecast for the year ending in March by 49 percent, to 34 billion yen ($442 million), citing lower-than-expected sales.

Consumer spending fell 0.1 percent in the April-June period from the previous three months, compared with a 0.6 percent drop in the first quarter, the report on Monday showed.

Most indicators from the quarter starting July 1 point to an economic rebound, with industrial production rising for three straight months since plunging in March. Companies are also forecasting they will raise output this month to make up for lost capacity resulting from the natural disaster, and sentiment among merchants exceeded levels from before the earthquake.

Japan and other Asia-Pacific markets were up in midday trading on Monday, helped partly by a short-selling ban on financial stocks in Europe.

The Nikkei 225 benchmark index in Tokyo rose 0.9 percent at midday. The Hang Seng index in Hong Kong was up 1.7 percent. The SP/ASX 200 index in Australia was up 1.7 percent.

In addition, United States stock futures were up about half a percent late Sunday night.

Article source: http://feeds.nytimes.com/click.phdo?i=561a6d3e220cafc01e6ff5bd9e3431bd

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