The Asia Pacific region is set to benefit from a stronger global recovery, according to S&P Global Ratings. Despite a somewhat uneven rollout of the Covid-19 vaccine, the programme is expected to make sufficient progress to provide a boost for consumer spending and domestic demand this year.
- Japan’s economy grew by 11.7% YoY in Q4 2020
- Japanese trade data proved lacklustre in February
- Australian interest rates are unlikely to rise before 2024
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The Asia Pacific region is set to benefit from a stronger global recovery, according to S&P Global Ratings. Despite a somewhat uneven rollout of the Covid-19 vaccine, the programme is expected to make sufficient progress to provide a boost for consumer spending and domestic demand this year. S&P Global upgraded its forecast for economic growth in Asia Pacific in 2021 from 6.8% to 7.3%. Looking ahead, downside risks include the ongoing coronavirus pandemic and higher real bond yields, while upside risks include an uptick in external demand, stronger domestic consumption, and productivity gains.
“The BoJ believes that growth is starting to pick up”
Japan’s economic growth proved weaker than initially calculated during the final three months of 2020. The country’s economy grew at an annualised rate of 11.7% compared with an earlier estimate of 12.7%. Trade proved lacklustre for Japan in February as exports fell at an annualised rate of 4.5%: shipments to China slowed down sharply, while shipments to the US dropped by 14%. Nevertheless, investors drew encouragement from Japan’s expanding vaccine programme alongside the news that the American Rescue Plan had been approved and signed into law. The package is widely expected to deliver a significant boost for the US economy, and the Organisation for Economic Cooperation & Development (OECD) believes that it will also stimulate demand in other economies. During March, the Nikkei Index rose by 0.7%, while the Topix Index increased by 4.8% and the TSE Second Section Index climbed by 2.3%.
Governor of the Bank of Japan (BoJ) Haruhiko Kuroda delivered a relatively upbeat assessment of the country’s economic prospects at the end of March. The BoJ believes that growth is starting to pick up, and policymakers expect it to be “clearly positive” in the fiscal year beginning in April, underpinned by recovering external demand, accommodative financial conditions, and the government’s economic measures.
Although Australia’s economy posted stronger-than-expected quarterly growth of 3.1% during the final three months of 2020, Governor of the Reserve Bank of Australia (RBA) Philip Lowe maintained that interest rates are unlikely to increase until at least 2024. He said: “There is still a long way to go and … the Australian economy is operating well short of full capacity”. The central bank is seeking a return to full employment; in February, Australia’s rate of unemployment declined from 6.3% to 5.8%. The ASX All Ordinaries Index rose by 1.1% during March.
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