Although the Bank of Japan raised its forecast for economic growth in the fiscal year 2020 from 0.7% to 0.9%, policymakers are not yet ready to scale back their current stimulus programme, citing continued risks posed by overseas developments and the longer-term impact of the recently increased consumption tax.
- The IMF raised its forecast for Japan’s economic growth
- Japanese exports declined for a 13th straight month
- South Korea’s slowdown continued
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Although the Bank of Japan (BoJ) raised its forecast for economic growth in the fiscal year 2020 from 0.7% to 0.9%, policymakers are not yet ready to scale back their current stimulus programme, citing continued risks posed by overseas developments and the longer-term impact of the recently increased consumption tax. The BoJ expects domestic demand to help offset weak exports and industrial output.
“Australia’s Government announced a bushfire relief fund totalling US$2 billion”
The International Monetary Fund (IMF) upgraded its forecast for Japan’s economic growth this year from 0.5% to 0.7%, highlighting the impact of December’s stimulus measures. Looking further ahead, Japan’s rate of growth is predicted to slow to 0.5% as the impact of fiscal stimulus dies away. The Nikkei 225 Index fell by 1.9% during January, while the Topix Index dropped by 2.1%. The TSE Second Section Index – which represents medium-sized companies – fell by 2.6%.
Exports posted their 13th consecutive monthly decline in December as weak demand for Japanese products took its toll. Exports fell at an annualised rate of 6.3% during December; the rate of contraction slowed as the “Phase One” trade agreement between the US and China raised hopes of an improvement in demand. White shipments to Asia fell by 3.6%, exports to China posted a small increase of 0.8%; meanwhile, exports to the US posted an annualised drop of 14.9%.
Australia’s Government announced a bushfire relief fund totalling US$2 billion amid intensifying concerns over the economic impact of the fires as businesses and tourism continued to suffer. Consumer sentiment in Australia declined at an annualised rate of 6.2% in January, according to a survey undertaken by the Melbourne Institute and Westpac Bank. Nevertheless, after a dismal December, Australian share prices moved higher during January, boosted by hopes surrounding the US/China trade deal, but gave up some of their gains towards the end of the month amid fears over the Coronavirus. Over January as a whole, the ASX All Ordinaries Index rose by 4.7%.
South Korea’s economic growth continued to lose momentum over 2019, dampened by the US/China trade conflict and a decline in demand for semiconductors. Having expanded by 3.2% in 2017 and 2.7% in 2018, the country’s economy grew by 2% in 2019. Although exports rose by 1.5% overall in 2019, this was significantly lower than 2018’s rate of 3.5%. The Kospi Index fell by 3.6% during January.
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