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Natural disasters dampen Japan’s growth

November 2018

Japan’s economy shrank during the three months to September, contracting at an annualised rate of 1.2%. Spending and export activity were hampered over the summer by a series of natural disasters. Elsewhere, disruptions to trade resulting from the acrimonious trade war between US and China could have a particularly adverse effect on Japan, which holds a key position in the global supply chain. 

  • Australia’s benchmark interest rate remained unchanged at 1.5%
  • Nissan was at the centre of a corporate scandal
  • Low interest rates have fuelled household debt in South Korea


Japan’s economy shrank during the three months to September, contracting at an annualised rate of 1.2%. Spending and export activity were hampered over the summer by a series of natural disasters, and exports fell by 1.8% year on year during the period. On a more encouraging note, however, industrial production picked up sharply in October, rising at an annualised rate of 2.9%. Nevertheless, looking ahead, it is feared that disruptions to trade resulting from the acrimonious trade war between US and China could have a particularly adverse effect on Japan, which holds a key position in the global supply chain. 

“The Bank of Korea voted to raise its key interest rate for the first time since November 2017”

A corporate scandal at Nikkei 225 Index constituent Nissan led to a sharp decline in the car manufacturer’s share price during November, and also affected sentiment towards Mitsubishi Motors. Over the month as a whole, the Nikkei 225 Index rose by 2% and the Topix Index climbed by 1.3%. The TSE Second Section Index – representing medium-sized Japanese companies – rose by 1.1%. 

The Reserve Bank of Australia (RBA) maintained its key interest rate at 1.5% for yet another month in November. RBA Governor Philip Lowe cited low borrowing costs as a major factor in supporting the country’s economic growth and helping to reach the inflation target level of 2-3% “over time”. At present, inflation remains “low and stable”; consumer price inflation rose at an annualised rate of 1.9% during the third quarter. Although prospects for the labour market are generally positive, growth in average earnings remain subdued, and conditions in the housing markets of Sydney and Melbourne have continued to moderate. Later in the month, RBA Deputy Governor Guy Debelle acknowledged that curbs on mortgage lending could have a negative effect on economic growth, saying: “The effect of a tightening in lending to developers seems … a higher risk to the economic outlook than the direct effect of the tighter lending standards on households, which has ameliorated risk”. The ASX All Ordinaries Index fell by 2.8% during November. 

In a bid to combat the effects of high household debt and help stabilise the housing market, policymakers at the Bank of Korea (BoK) voted to raise its key interest rate for the first time since November 2017 at their November 2018 meeting. The BoK’s benchmark rate was increased from 1.5% to 1.75%. The Kospi Index rose by 3.3% over the month. 


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