Japan’s economy expanded by 3% year on year during the final quarter of 2020, having grown by 5.3% in the previous quarter. Private consumption posted growth of 2.2% in the fourth quarter following a 5.1% increase in the third quarter, while exports were buoyed by rallying overseas demand.
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- Japanese exports continue to strengthen
- Fitch affirms Australia’s top “AAA” rating
- Australia focuses on labour market
Japan’s economy expanded by 3% year on year during the final quarter of 2020, having grown by 5.3% in the previous quarter. Private consumption posted growth of 2.2% in the fourth quarter following a 5.1% increase in the third quarter, while exports were buoyed by rallying overseas demand. Over 2020 as a whole, the country’s economy contracted by 4.8%, representing its first calendar-year contraction since 2009.
“The Nikkei 225 Index closed above 30,000 points for the first time in more than 30 years”
Exports continued to strengthen, rising at an annualised rate of 6.4% in January after a 2% increase in December. Activity was boosted by a 37.5% annualised surge in shipments to China, although this rise is likely to have been flattered by disruption caused by the Lunar New Year. Meanwhile, imports fell at an annualised rate of 9.5%. Core machinery orders picked up during December, rising by 5.2% month on month. However, a survey undertaken by the Cabinet Office found that manufacturers expect core machinery orders to decline by 8.5% over the first three months of 2021.
During February, the Nikkei 225 Index rose by 4.7% and closed above 30,000 points for the first time in more than 30 years. The broader-based Topix Index increased by 3.1%, and the TSE Second Section Index climbed by 4.4%.
Credit ratings agency Fitch affirmed Australia’s credit rating at its highest “AAA”, citing the country’s strong institutions and effective policy framework. Fitch believes that Australia’s economy has withstood the effects of the coronavirus pandemic well compared with its peers, enacting an effective fiscal and monetary strategy. Fitch also maintained its “negative” outlook, however, highlighting “uncertainty” surrounding Australia’s medium-term debt trajectory following a significant increase in public debt in response to the pandemic.
Governor of the Reserve Bank of Australia (RBA) Philip Lowe said that the recovery was “well under way” and had proved stronger than previously expected. Nevertheless, the central bank intends to purchase an additional A$100 billion-worth of Australian Government bonds as part of its extended programme of quantitative easing. Policymakers do not expect to raise interest rates until wage growth is “materially higher”; this will require a tighter labour market and is unlikely to be achievable until at least 2024. Although the rate of unemployment has eased to 6.6%, this still represents a 20-year high. The ASX All Ordinaries Index rose by 1% over the month.
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