Richard, you may be right after all, inflation anyone 6-12 months?
Japan's GDP Likely Shrank in April-June Qtr, Survey Shows; Report Today
(Repeating story published last week.)
Tokyo, Sept. 11 (Bloomberg) -- Japan's economy likely shrank in the April-June period, the fourth contraction in the past five quarters, and began a rebound in the July-September quarter as the government's stimulus package kicked in, economists said.
The government will release figures on Japan's gross domestic product for the April-June quarter today at 3:30 p.m. JST, the Economic Planning Agency said.
The nation's gross domestic product likely contracted 0.3 percent in the April-June period from the previous quarter, a 0.8 percent slide at an annualized rate, squeezed by slumping capital and consumer spending and falling exports to Asia, a Bloomberg News survey of 17 economists showed. The economy will grow 0.5 percent between July and September, they said.
The 16.65 trillion yen ($119 billion) the government set aside for extra public works spending, tax cuts and other measures will boost spending on construction, yet will only temporarily drive the economy. That's because consumer spending and corporate capital investment, which together make up three- quarters of growth, remain weak, economists said. ''The government's stimulus measures will, at the margins, prevent conditions from getting worse, but unfortunately, they're no prescription for a recovery,'' said Cameron Umetsu, senior foreign exchange and rates strategist at Warburg Dillon Read.
Worse-than-expected declines in production, capital spending, home starts, new jobs and wages have quelled government optimism that the economy would be back on its feet by the second half of 1998.
The director general of the Economic Planning Agency, Taichi Sakaiya, said the economy will grow no more than 0.5 percent in the year to March 1999, and may contract as much as 0.5 percent.
That's in line with private economists, who see the world's second-largest economy shrinking 0.4 percent, worse than the 0.1 percent contraction the economists forecast in June. The economy turned in its worst postwar performance last year, shrinking 0.7 percent.
Japanese companies will also take a hit from faltering exports of machinery, trucks and cranes to recession-hit Asia, weakening one of the strongest outlets for sales.
Deregulation of the financial industry also means banks will continue to cut lending as they aim to strengthen their balance sheets, economists said.
Consumer Spending
Even after two temporary income tax cuts worth a total of about 136,000 yen for an average family of four, consumers continue to save more than spend. That's because they fear that with unemployment and bankruptcies rising and wages falling, the recession will continue through next year.
The current economic slump reached 17 months in August, the third longest in postwar history. Only the recessions of 1980- 1983 and 1991-1993 were longer.
This recession, however, is the deepest. The unemployment rate reached a postwar high 4.3 percent in June, and bankruptcies are set to reach record levels in 1998. Production has dipped to its lowest levels in more than two decades, and that's forcing companies to scale back hiring and wage increases.
The slump has hurt spending on everything from home electronics to automobiles to dinners at restaurants.
In all, consumer spending makes up 60 percent of economic growth and likely fell 0.3 percent in April-June quarter from the previous three months, economists said. Spending probably rose 0.6 percent in the July-September period. ''The same number of customers are spending less,'' said Masato Sugita, a spokesman for Takashimaya Co., the nation's largest department store chain.
Figures released last month showed department store sales nationally dipped 3.8 percent in July from a year earlier, the 15th slide in the past 16 months. Supermarket sales dipped 1.4 percent in July.
Capital Spending
With sales weak, a strong recovery unlikely and exports to Asia slumping, Japanese companies are cutting plans to build and upgrade factories and offices.
That, in turn, is hurting construction companies and makers of machinery, electronics and telecommunications equipment that benefit when companies expand production capacity.
Economists polled forecast capital spending, which makes up 15 percent of the economy, to slide 2.2 percent in the April-June quarter from the previous three months, and dip another 0.5 percent in the third quarter.
Household names like NEC Corp., Fujitsu Ltd. and Mitsubishi Motors Corp. all cut spending plans. Electric utility and telephone makers including Tokyo Electric Power Co. and NTT Corp. will also spend less.
There's also uncertainty about Japan's largest banks, which are being inspected by the government and will be closed if they are insolvent.
Banks have not increased lending since September 1996, and that's hurt smaller companies, which are more dependent on bank loans for funding. ''Banking problems are also eating away at consumer confidence,'' said Koichi Ono, an economist at Daiwa Institute of Research Ltd. ''Even if the government can ease the banking crisis, it will only delay the deterioration of the economy. It's difficult to see the economy hitting bottom even next year.''
Individual economists' forecasts follow. Consumer spending and capital investment are measured quarter on quarter. Japan's fiscal year begins April 1.
April-June GDP Forecasts
Annual Consumer Corp. Company Q-O-Q Pace Y-O-Y Spending Invest ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ABN AMRO Securities 0.2% 0.9% -0.7% -0.5% -3.4% Chiyoda Mutual Life 0.3% 1.2% 0.6% 0.3% -3.3% Credit Suisse Asset 0.2% 0.8% -0.9% 0.3% -2.0% Daiwa Inst. of Rsrch -1.2% -4.7% -2.1% -0.5% -5.0% Deutsche Securities -0.5% -1.8% -1.2% -0.1% -2.0% Dresdner Kleinwort -- -- -0.3% -- -- Fuji Research Inst. -0.3% -- -- -0.3% -1.7% HSBC Securities Jpn. -0.3% -1.2% -1.1% -0.3% -1.9% Japan Research Inst. -0.2% -0.9% -1.0% -0.3% -3.0% Lehman Brothers -1.2% -4.6% -2.1% -1.5% -2.5% Merrill Lynch Japan 0.8% 3.7% 0.1% 0.6% 1.2% Nikko Research Cent. -0.5% -1.9% -1.4% -0.4% -2.5% Nippon Credit Rsrch -0.2% -0.9% -1.2% -0.3% -2.7% Nomura Research Inst.-0.1% -0.4% -1.0% 0.0% -1.0% Societe Generale Sec. 0.3% 1.2% -0.6% -0.3% -2.2% Thomson Global Mrkts.-0.1% -- -1.0% -0.7% -2.1% Warburg Dillon Read -1.2% -- -2.0% -1.4% -4.7% ************************************************************** Average -0.3% -0.7% -1.0% -0.3% -2.4%
July-September GDP Forecasts
Annual Consumer Corp. Company Q-O-Q Pace Spending Invest +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ABN AMRO Securities 1.2% 4.7% 2.2% 0.9% Chiyoda Mutual Life 0.3% 1.1% 0.5% 1.1% Credit Suisse Asset Mgmt. 0.7% 2.7% 1.2% -1.2% Daiwa Institute of Research 0.8% 3.1% 0.5% -1.9% Deutsche Securities 0.0% -0.1% 0.5% -1.5% HSBC Securities Japan 0.3% 1.2% 1.1% -0.7% Japan Research Institute 0.0% 0.2% 0.3% -1.7% Lehman Brothers Japan 0.8% 3.1% -- -- Merrill Lynch Japan -0.1% -0.3% -0.3% -2.0% Nikko Research Center 0.0% 0.0% 0.1% -1.3% Nomura Research Institute 0.4% 1.7% 0.2% -2.1% Societe Generale Securities 0.7% 2.9% 0.4% -0.4% Thomson Global Markets 1.7% -- 0.5% 3.3% Warburg Dillon Read 0.5% -- 0.0% 0.8% ************************************************************* Average 0.5% 1.7% 0.6% -0.5%
Calendar Calendar Company FY 98 '98 FY 99 '99 ************************************************************** ABN AMRO Securities -0.6% -1.4% 0.1% -0.2% Chiyoda Mutual Life -0.3% -1.4% -- -- Credit Suisse Asset Mgmt. -0.1% -1.4% -- -- Dai-Ichi Kangyo Bank -0.7% -- -- -- Dai-Ichi Research Inst. -0.4% -- -- -- Daiwa Institute of Rsrch -1.5% -2.5% 0.1% 0.4% Deutsche Securities -1.0% -2.0% 1.5% 1.4% Dresdner Kleinwort Benson 1.2% -0.5% 1.7% 2.2% Fuji Research Institute 0.2% -- -- -- HSBC Securities Japan -0.8% -1.7% 0.4% 0.4% Japan Research Institute -1.0% -2.0% 0.2% 0.3% Lehman Brothers Japan -1.2% -2.3% -- 1.7% Merrill Lynch Japan 0.3% -1.2% 1.2% 1.2% Nikko Research Center -1.3% -2.0% -0.5% -0.7% Sanwa Bank -0.3% -- 0.8% -- Shoko Chukin Bank -0.1% -- 0.7% -- Societe Generale Securities 0.4% -0.9% 1.1% 1.2% Thomson Global Markets 0.5% -1.0% 1.8% 2.0% Toyo Trust & Banking 0.1% -- -0.8% -- Warburg Dillon Read -1.7% -2.2% -0.8% -0.8% ************************************************************** Average -0.4% -1.6% 0.5% 0.8% |
