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Japan’s Economy Grew in Last Quarter of 2012

March 8, 2013 by Leave a Comment

TOKYO (AP) — Japan’s economy did better than first thought in the last quarter of 2012, eking out a slight expansion instead of shrinking in a boost for Prime Minister’s Shinzo Abe’s policies to end two decades of deflationary stagnation.

The government Friday upgraded its annualized growth figure for the fourth quarter to 0.2 percent, suggesting the world’s No. 3 economy is emerging from recession.

The change raises growth for full-year 2012 to 2 percent from the originally recorded 1.9 percent. Growth was flat in October-December from the previous quarter.

Preliminary data had reported a 0.4 percent contraction from a year earlier, and a 0.1 percent contraction from the previous quarter.

The revision reflected higher than originally reported corporate spending and private consumption.

Meanwhile, the Finance Ministry said Japan logged a deficit in its current account of 364.8 billion yen ($3.8 billion) in January, the third straight month of deficit.

A sharp weakening in Japan’s currency in recent months is seen as a boost for the country’s export manufacturers — especially big names such as Toyota Motor Corp. and Sony Corp., but it also has raised costs for imports of fuel and other commodities, sapping the country’s usually hefty trade surpluses.

The yen rose to a more than three-and-a-half-year high against the U.S. dollar on Friday, as traders sold dollars in reaction to positive U.S. data and to perceived risks from North Korean threats of retaliation for imposition of sanctions over its nuclear weapons program.

Meanwhile, share prices in Japan also surged, to their highest level in over four years as investors bought export-related shares. The benchmark Nikkei-225 stock index gained 2.6 percent, or 315.54, to 12,283.62, its seventh straight session of gains.

While rallies in overseas markets have helped boost the Nikkei, share prices have also risen in anticipation that an easing of monetary policy and robust government spending under Abe, who took office in late December, would help Japan escape years of deflationary stagnation.

The nomination of Haruhiko Kuroda, a Finance Ministry veteran who is president of the Asian Development Bank, to become Japan’s next central bank governor has further lifted sentiment. Kuroda has expressed strong support for Abe’s economic strategy and for quickly achieving a 2 percent inflation target set by the central bank and government in January.

So far, prices have shown no signs of rising.

“It is a near certainty that policy will be eased further in April,” Julian Jessop, chief economist for London-based Capital Economics, said in a commentary late Thursday. However, he said Kuroda’s policies would be unlikely to differ much from the current Bank of Japan governor, Masaaki Shirakawa, despite perceptions that Shirakawa favors a less aggressive policy approach.

The bank may increase the size of asset purchases meant to stimulate the economy, and lengthen their maturity, he said.

But “most of the more radical options, including purchases of foreign bonds and setting a two-year horizon for the inflation target, are unlikely to gain sufficient support, all of which is setting up the markets for some major disappointment,” Jessop said.

Article source: http://www.nytimes.com/aponline/2013/03/08/business/ap-as-japan-economy.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Chinese Economy Shows Signs Its Growth Is Slowing

September 24, 2011 by Leave a Comment

As the American economy appears to teeter on the edge of another recession, Europe struggles with a financial crisis and emerging markets like Brazil and India show new weaknesses, China may appear to be in better shape than most countries, economists say. But “better” is relative.

On the surface, economists at the International Monetary Fund and most banks are still estimating China’s growth rate to be over 9 percent this year. China continues to run very large trade surpluses. New construction starts have soared with a government campaign to provide more affordable housing.

And yet, the country’s huge manufacturing sector is starting to slow and orders are weakening, especially for exports. The real estate bubble is starting to spring leaks, even as inflation remains stubbornly high for consumers — despite a series of interest rate increases and ever-tighter limits on bank lending.

Because China’s mighty growth engine has been one of the few drivers of the global economy since the financial crisis of 2008, signs of deceleration could add to worries about the global outlook.

A survey of Chinese purchasing managers, just completed by HSBC and Markit Economics, shows a third consecutive month of contraction in the manufacturing sector. The release of the survey results on Thursday contributed to a global slide in stock markets that day.

Meanwhile, huge loans that Chinese banks have made to state-owned enterprises and local governments over the last three years could cause trouble if the economy does slow.

What’s more, there are further signs of trade hostilities from Washington, where the impulse is to blame China’s cheap exports, at least partly, for America’s continued high unemployment.

On Thursday, a bipartisan group of senators announced that they would pursue legislation requiring the Obama administration to confront China more directly on currency policy. They want the White House to push harder for China to allow its currency, the renminbi, to appreciate.

If China does allow its currency to rise more quickly and if its trade surplus narrows, that could help economies elsewhere. But too much of a slowdown in China could simply add to the world’s financial gloom.

Chinese exporters are particularly worried.

Nicole Huang, the sales manager at the Dongguan Lianyi Sport Goods Company, a maker of beer coolers, diving suits and other products in the industrial hub city of Dongguan, said the number of orders had dropped 5 percent so far this year, and the average size of each order had also begun to shrink.

And instead of the labor shortages that plagued many manufacturers last year as workers sought better jobs elsewhere, more people now seem willing to accept assembly-line tedium. Short term, that could help exporters. But it could be an early sign of looming unemployment problems.

“At least it is easier now for us to hire workers who come into our factory looking for work, after seeing our job notices posted outside,” Mr. Huang said. “Before, no one would respond to these notices.”

The sentiments of investors and economists inside and outside China have taken a bearish turn in recent weeks. As global stock markets have tumbled, the Shanghai A-share stock market has fallen 14.7 percent since July 15. That includes a further decline of 0.4 percent on Friday.

The most worried economists are those who follow China’s manic monetary policy. The central bank oversaw a huge stimulus effort in 2009 and 2010 in response to the global economic slowdown, rapidly expanding its issuance of money and then encouraging banks to lend and relend it. Broadly measured, the money supply surged 53 percent in two years.

The extra cash has sent inflation at the consumer level surging to more than 6 percent even by official measures, which tend to understate true inflation for methodological reasons.

With inflation now running at more than twice the regulated interest rate paid by banks for deposits, millions of Chinese have been betting their savings on real estate. That frenzy had been sending property prices through the roof, at least until the last couple of months.

Hilda Wang contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=20f8f8d490a4e71d98bf387318e96fe8

Filed Under: Business News Tagged With: , ,

As China Invests, U.S. Could Lose

May 4, 2011 by Leave a Comment

Now, China is poised to return the investment favor. The question is whether the United States will be willing and able to fully participate, according to a new study to be released Thursday.

Flush with capital from its enormous trade surpluses and armed with the world’s largest foreign exchange reserves, China has begun spreading its newfound riches to every corner of the world — whether copper mines in Africa, iron ore facilities in Australia or even a gas shale project in the heart of Texas.

The study, commissioned by the Asia Society in New York and the Woodrow Wilson Center for International Scholars in Washington, forecasts that over the next decade China could invest as much as $2 trillion in overseas companies, plants or property, money that could help reinvigorate growth in the United States and Europe.

But the report, to be released at a Washington news conference that Commerce Secretary Gary Locke plans to attend, also warns that the United States risks missing out on a large share of the Chinese investment boom because of politics, a growing rivalry between the two nations and deep-seated perceptions that Chinese investments are unwelcome in America.

“If political interference is not tempered,” the study warns, some of the benefits of Chinese investment — “such as job creation, consumer welfare and even contributions to U.S. infrastructure renewal — risk being diverted to our competitors.” While Wall Street banks have lobbied for more Chinese investments in the United States, hoping that will bring bigger deals for the banks, Washington has remained wary — even though the Obama administration says it welcomes Chinese money.

But anti-China rhetoric is hot in Washington and among many state and local officials. One frequently cited worry is that Chinese companies, many of them owned partly or entirely by the government, will use their purchases to gain military secrets. Another concern is that Chinese companies will buy American companies with manufacturing operations in the United States, close those factories and move production to China.

China, of course, is already a force in global markets. Over the last few years, it has made multibillion-dollar loans to developing nations and let its state-owned companies acquire minority stakes in global powerhouses like Rio Tinto, Morgan Stanley and the Blackstone Group.

China is also a major player in the global debt markets, holding about $1.6 trillion in United States Treasury bonds, an investment that helps keep American interest rates low and finances America’s enormous debt.

But China is still a relatively small player in overseas direct investments, which include purchases of large, voting stakes in foreign companies and plants. That also includes investments in new construction projects on previously undeveloped land — so-called greenfield facilities.

Last year, China’s overseas direct investments amounted to about $59 billion. By comparison, the United States’ figure was over $300 billion.

But with Beijing pushing its big companies to go overseas and invest in resources and technology, China’s investments could soon reach $100 billion to $200 billion a year, according to the Asia Society study.

The potential problem for Beijing is that Chinese companies are not always welcomed overseas — not only because China wields enormous economic clout but because state-owned giants are believed to be subsidized by the state and possibly working in the interest of the government.

Congressional critics of China’s investment aspirations including Senator Jack Reed, Democrat of Rhode Island. “Many of these companies are so closely intertwined with the government of China that it is hard to see where the company stops and the country begins, and vice versa,” Mr. Reed recently told Reuters.

A series of proposed Chinese deals in the United States have been blocked by regulators or attacked by local politicians, who say they are worried China could gain access to sensitive military technology or take control of valuable natural resources.

In 2005, one of China’s giant oil companies, Cnooc, dropped its bid to acquire the American oil giant Unocal after a Congressional investigation into the purchase. And in recent years, the Chinese telecommunications giant, Huawei, has repeatedly been rebuffed from making deals in the United States, over national security concerns.

Keith Bradsher contributed reporting from Hong Kong.

Article source: http://www.nytimes.com/2011/05/04/business/global/04yuan.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,