TOKYO: Japan’s economy saw output exceed full capacity by the most in nine years in the April-June quarter, a Bank of Japan estimate showed, a positive sign for the central bank as it seeks to accelerate inflation to its elusive 2 percent target.
The output gap, which measures the difference between an economy’s actual and potential output, stood at plus 1.22 percent in April-June, staying in positive territory for the third straight quarter, the BOJ estimate showed on Wednesday.
The positive output gap exceeded 1 percent for the first time since January-March 2008 — months before the collapse of Lehman Brothers triggered a global financial crisis.
The outcome backs up the BOJ’s view that Japan’s economy is gathering enough momentum for inflation to accelerate toward its 2 percent target, and justifies it from keeping policy steady.
But some studies show there can be a lag between achieving a sustained positive output gap and an actual business response, such as a boost in investment and a pick-up in inflation.
“We’ve seen a dramatic improvement in Japan’s economy,” BOJ Deputy Governor Hiroshi Nakaso told Asahi newspaper in an interview.
“Corporate profits are at record-high levels, the job market is near full employment and wages are rising, albeit moderately. Monetary policy has made huge contributions,” he said.
A positive output gap occurs when actual output is more than full capacity. This happens when factories and workers operate above their most efficient capacity to meet strong demand.
When a positive output gap expands, it is a sign that inflationary pressure is building.
Japan’s economy expanded at an annualized 2.5 percent in the second quarter as consumer and company spending picked up, with steady growth likely to be sustained in coming quarters.
Demand for labor remained at the strongest level since 1974 in August, while business confidence hit a decade-high in the third quarter thanks to robust global growth.
But price and wage growth remain weak with firms still wary of passing more of their profits to employees, forcing the BOJ to push back the timing for reaching its price target six times since deploying a massive stimulus program in 2013.
Core consumer prices rose 0.7 percent in August from a year earlier, well below the BOJ’s target, heightening the chance the central bank will cut its price forecasts again at a rate review on October 30-31.
Japan’s economy sees output exceed capacity the most in 9 years
Japan’s economy sees output exceed capacity the most in 9 years
Closing Bell: Saudi main index closes in red at 10,818
RIYADH: Saudi Arabia’s Tadawul All Share Index dipped on Thursday, losing 126.83 points, or 1.16 percent, to close at 10,818.32.
The total trading turnover of the benchmark index was SR4.5 billion ($1.2 billion), as 26 of the listed stocks advanced, while 233 retreated.
The MSCI Tadawul Index decreased, down 15.78 points, or 1.07 percent, to close at 1,457.04.
The Kingdom’s parallel market Nomu lost 137.69 points, or 0.58 percent, to close at 23,413.78. This comes as 26 of the listed stocks advanced, while 40 retreated.
The best-performing stock was Alistithmar AREIC Diversified REIT Fund, with its share price surging by 3.81 percent to SR7.36.
Other top performers included Etihad GO Telecom Co., which saw its share price rise by 3.08 percent to SR91.90, and Consolidated Grunenfelder Saady Holding Co., which saw a 2.55 percent increase to SR9.65.
On the downside, Thimar Development Holding Co. was among the weaker performers, with its share price falling 6.52 percent to SR33.
Baazeem Trading Co. fell 4.94 percent to SR6.35, while Fawaz Abdulaziz Alhokair Co. slipped 4.05 percent to SR18.02.
On the announcements front, Saudi Electricity Co. has officially commenced the offering of a US dollar-denominated senior unsecured sukuk, following its earlier announcement.
The two-day offering, running from Jan. 15 to Jan. 16, will be carried out through a special purpose vehicle and is open to eligible local and international investors.
According to a Tadawul statement, the final amount, pricing, and maturity terms of the sukuk will be determined based on prevailing market conditions, with a minimum subscription set at $200,000.
SEC has mandated a consortium of sixteen global and regional financial institutions, including J.P. Morgan, HSBC, and Standard Chartered Bank, as Joint Lead Managers for the issuance. Upon completion, the sukuk are expected to be listed on the London Stock Exchange’s International Securities Market.
This issuance falls under SEC’s international sukuk program and is being offered in reliance on Regulation S, meaning it will be sold exclusively outside the US to non-US persons.
SEC’s shares traded 0.07 percent higher on the main market to reach SR14.08.
