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Ongoing concern over trade tensions

April 2018

Confidence amongst large Japanese manufacturers deteriorated during the first quarter of 2018, according to the Bank of Japan’s (BoJ’s) quarterly Tankan survey. Meanwhile, Japan’s Foreign Minister warned that both China and Japan are concerned about the possible impact of trade wars upon the global economy.


  • Japan’s economic growth is expected to pick up
  • HKMA intervened to support the Hong Kong dollar
  • Australia’s key interest rate remained unchanged at 1.5%

Confidence amongst large Japanese manufacturers deteriorated during the first quarter of 2018, according to the Bank of Japan’s (BoJ’s) quarterly Tankan survey. On a brighter note, Japanese companies generally said that current production capacity is not enough to meet demand, which should provide a boost for future investment. Having contracted by 1.6% during the final quarter of 2017, the Government expects growth in Japan’s economy to pick up during the first quarter of 2018. The Cabinet Office continues to predict a gradual recovery in economic growth and consumer spending.

“Growth in exports was weaker than anticipated”

The Nikkei 225 Index rose by 4.7%, while the Topix Index climbed by 3.6%. Medium-sized companies performed poorly in comparison, and the TSE Second Section Index fell by 2.3% during April.

Growth in exports was weaker than anticipated during March: sales to the US rose by only 0.2%, while exports to the EU increased by 0.3%. Overall, the value of exports grew at an annualised rate of only 2.1% during the month, while imports fell by 0.6%. Meanwhile, Japan’s Foreign Minister warned that both China and Japan are concerned about the possible impact of trade wars upon the global economy. Following talks between the countries, Japan’s Foreign Minister Taro Kono said that a trade war would “have an extremely large impact on the prosperity of the international economy”. 

The Hong Kong Monetary Authority (HKMA) had to step in during April to support the Hong Kong dollar after an excessive drop against the US dollar. The Hong Kong dollar has a trading band pegged to the US dollar and the HKMA will intervene if the HK dollar falls below the lower end of the trading band. The benchmark Hang Seng Index rose by 2.4% over April as a whole. 

The Reserve Bank of Australia (RBA) opted to maintain its key interest rate at 1.5% for another month. The cash rate has remained unchanged since August 2016. A backdrop of low interest rates is providing support for the country’s economy, according to RBA Governor Philip Lowe, who said, “Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual”. Looking ahead, when the central bank next changes its interest rate, the movement is likely to be upward rather than downward. The ASX All Ordinaries Index rose by 3.5% during April. 


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