Key Japan economic index falls, government changes view to ‘worsening’

Japanese Prime Minister Shinzo earlier said he was ready to take ‘all possible steps’ if risks to the economy intensified following a sales tax hike and rising global uncertainty. (Reuters)
Updated 07 October 2019

Key Japan economic index falls, government changes view to ‘worsening’

  • Concerns have risen as the US-China trade dispute and slowing external demand dent Japan’s economic recovery
  • The last time the government gave a “worsening” assessment was for April data

TOKYO: A key Japanese economic index fell in August and the government on Monday downgraded its view to “worsening,” indicating the export-reliant economy might face slipping into recession.
Concerns have risen as the US-China trade dispute and slowing external demand dent Japan’s economic recovery.
The index of coincident economic indicators, which consists of a range of data including factory output, employment and retail sales data, slipped a preliminary 0.4 point in August from the previous month, the Cabinet Office said on Monday.
The separate index for leading economic indicators, a gauge of the economy a few months ahead that’s compiled using data such as job offers and consumer sentiment, dropped 2.0 points from July, the Cabinet Office said.
The last time the government gave a “worsening” assessment was for April data.
The downgrade could add to speculation the government will hike spending, as Prime Minister Shinzo Abe on Friday said he was ready to take “all possible steps” if risks to the economy intensified following a sales tax hike and rising global uncertainty.
Japan rolled out a twice-delayed increase in the sales tax to 10 percent from 8 percent on Oct. 1. The move is seen as critical for fixing the country’s tattered finances but could tip the economy, hurt by the US-China trade war and weak external demand, into recession.
For April-June, Japan reported growth of 0.3 percent from the previous quarter. The last time Japan was in a technical recession, defined as two consecutive quarters of contraction, was the second half of 2015.
In recent months, the government’s assessment on the coincident index was that the economy likely stopped falling.
The government will later examine the economy comprehensively with professors and economists on a panel and officially define the country’s economic cycle.
Japan’s growth has slowed as the US-China trade dispute hit the country’s exports, sending big manufacturers sentiment — as measured by the Bank of Japan’s tankan survey — to a six-year low in the July-September quarter.
Market expectations for more policy easing by the Bank of Japan have increased after the central bank signaled its readiness to expand stimulus as early as its Oct. 30-31 meeting.


EU pledges to stay green in virus recovery

Updated 29 May 2020

EU pledges to stay green in virus recovery

  • To help economies from the 27-nation bloc bounce back as quick as possible

BRUSSELS: The European Commission pledged on Thursday to stay away from fossil-fueled projects in its coronavirus recovery strategy, and to stick to its target of making Europe the first climate neutral continent by the middle of the century, but environmental groups said they were unimpressed.

To weather the deep recession triggered by the pandemic, Commission President Ursula von der Leyen has proposed a €1.85 trillion ($2 trillion) package consisting of a revised long-term budget and a recovery fund, with 25 percent of the funding set aside for climate action.

To help economies from the 27-nation bloc bounce back as quick as possible, the EU’s executive arm wants to increase a €7.5-billion ($8.25 billion) fund presented earlier this year that was part of an investment plan aiming at making the continent more environmentally friendly.

Under the commission’s new plan, which requires the approval of member states, the mechanism will be expanded to €40 billion ($44 billion) and is expected to generate another €150 billion in public and private investment. The money is designed to help coal-dependent countries weather the costs of moving away from fossil fuels.

Environmental group WWF acknowledged the commission’s efforts but expressed fears the money could go to “harmful activities such as fossil fuels or building new airports and motorways.”

“It can’t be used to move from coal to coal,” Frans Timmermans, the commission executive vice president in charge the European Green Deal, responded on Thursday. “It is unthinkable that support will be given to go from coal to coal. That is how we are going to approach the issue. That’s the only way you can ensure you actually do not harm.”

Timmermans conceded, however, that projects involving fossil fuels could sometimes be necessary, especially the use of natural gas to help move away from coal.

The commission also wants to dedicate an extra €15 billion ($16.5 billion) to an agricultural fund supporting rural areas in their transition toward a greener model.

Von der Leyen, who took office last year, has made the fight against climate change the priority of her term. Timmermans insisted that her goal to make Europe the world’s first carbon-neutral continent by 2050 remained unchanged, confirming that upgraded targets for the 2030 horizon would be presented by September.

Reacting to the executive arm’s recovery plans, Greenpeace lashed out at a project it described as “contradictory at best and damaging at worst,” accusing the commission of sticking to a growth-driven mentality detrimental to the environment.

“The plan includes several eye-catching green `options,’ including home renovation schemes, taxes on single-use plastic waste and the revenues of digital giants like Google and Facebook. But it does not solve the problem of existing support for gas, oil, coal, and industrial farming — some of the main drivers of a mounting climate and environmental emergency,” Greenpeace said.

“The plan also fails to set strict social or green conditions on access to funding for polluters like airlines or carmakers.”

Timmermans said the EU would keep investing in the development of emission-free public transportation, and promoting clean private transport through the EU budget.