Despite a surge in Covid-19 infections that led to a state of emergency being declared in the four prefectures of Tokyo, Chiba, Saitama, and Kanagawa, Japan’s benchmark Nikkei 225 Index reached a three-decade high during January.
To view the series of market updates through January, click here
- The IMF upgraded its economist growth forecast for Japan
- Doubts continued over Tokyo’s Olympic Games
- Inflation in Australia remained subdued
Despite a surge in Covid-19 infections that led to a state of emergency being declared in the four prefectures of Tokyo, Chiba, Saitama, and Kanagawa, Japan’s benchmark Nikkei 225 Index reached a three-decade high during January. Japanese financial stocks were boosted by hopes of substantial financial stimulus measures in the US following confirmation that the Democrats had taken control of the Senate after runoff elections in the state of Georgia.
“The IMF expects Japan’s economic activity to return to pre-pandemic levels later this year”
Over January as a whole, the Nikkei 225 Index rose by 0.8%, while the Topix Index increased by 0.2% and the TSE Second Section Index climbed by 6.8%. Sentiment was dampened slightly by speculation that Tokyo’s Olympic Games – already rescheduled from last year – might not be able to go ahead if the authorities fail to gain control over coronavirus infection rates. The Bank of Japan (BoJ) warned that the risk of “downward pressure stemming from … the resurgence of Covid-19 is likely to remain strong for the time being, particularly in face-to-face consumption”. The International Monetary Fund (IMF) upgraded its forecast for economic growth in Japan during 2021 from 2.3% to 3.1% and expects the country’s economic activity to return to pre-pandemic levels later this year.
Core CPI continued its decline in December, falling at an annualised rate of 0.4%, and consumer sentiment weakened in January. The average unemployment rate rose to 2.8% over 2020, and the ratio of available jobs to applicant fell from 1.60 in 2019 to 1.18 in 2020. Factory output declined by 1.6% during December as a drop in the production of machinery and cars offset an increase in the manufacture of inorganic and organic chemicals. Japan’s manufacturers expect output to improve by 8.9% during January, but to weaken by 0.3% over February.
Having risen by 1.6% in the third quarter of 2020, Australia’s rate of consumer price inflation (CPI) eased to 0.9% during the final quarter, although prices for food and non-alcoholic beverages climbed by 2.3%. Over 2020 as a whole, CPI rose by 0.9%, compared with 1.8% in 2019. Inflation weakened sharply earlier in 2020 as the country’s government scrapped childcare fees between April and July to help alleviate the economic impact of lockdown measures on families; subsequently, however, inflation rebounded strongly in the final quarter of 2020 as the subsidy was unwound. The ASX All Ordinaries Index rose by 0.3% during January.
A version of this and other market briefings are available to use in our newsletter builder feature. Click here