Economics review of the year 2011 | The Guardian 25/12/2011 12:00 GMT

The Guardian, Simon Goodley, 25/12/2011 12:00 GMT, excerpt/extracto.-

January (2011)

The year begins with a prediction. "We have to save the euro over the next six months," says Hungary's prime minister, Viktor Orbán, as the country starts its six-month turn heading the European Union.

In the UK, the economic data shows inflation shooting up to 3.7% in December, prompting growing speculation that the Bank of England will raise interest rates by the spring.

It is revealed that the UK economy shrank by a shock 0.5% in the last quarter of 2010 as Britain's recovery faltered in the pre-Christmas snow.

At the annual get-together for world leaders in Davos, George Soros – the speculator who famously "broke the Bank of England" – warns that the UK faces recession unless its austerity package is relaxed. Cynics muse that Soros might be talking up his own strategy, rather than expressing concern.

February (...)

China Passes Japan as Second-Largest Economy - by David Barboza - The New York Times

NYTimes, by David Barboza, Shanghai, 15708/2010, excerpt/extracto.-

After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.

he milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.

The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.

Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030. America’s gross domestic product was about $14 trillion in 2009.

“This has enormous significance,” said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics. “It reconfirms what’s been happening for the better part of a decade: China has been eclipsing Japan economically. For everyone in China’s region, they’re now the biggest trading partner rather than the U.S. or Japan.”

Japan unveils long-term growth strategy – Financiall Times

Financial Times, 3/12/2009

TOKYO, December 30 – Japan’s government unveiled a long-term strategy on Wednesday aiming for real GDP growth averaging over 2 per cent in the next decade by creating new demand in sectors such as the environment, health and tourism.

The growth strategy, which outlined key targets and policy proposals for the 10 years to the fiscal year starting in April 2020, focused on six areas, which also included Asia, science and technology, and employment. It seeks to create over 4m new jobs.

The Democratic party-led government, which took office in September after a landslide election victory, has vowed to cut wasteful spending and put more money into the hands of consumers to stimulate growth. But it has been criticised by market analysts for lacking a strategy to boost growth.

“We are now in a tunnel with a long downslope,” the government said in the 30-page-long growth plan, criticising previous governments under the Liberal Democratic party for failing to execute growth strategies in the past.

“What we need the most now is to show the public a vision for Japan’s future ... and a political leadership that can move foward policies towards that goal.”

But as doubts have grown about Prime Minister Yukio Hatoyama’s ability to make tough decisions on the economy and diplomacy, support for his government has slid below 50 per cent from initial highs of over 70 per cent.

Mr Hatoyama is also under a cloud over a political funding scandal.

The strategy aims to lower the jobless rate to 3-3.9 per cent in the medium term – which an official briefing reporters put at four years – and boost gross domestic product to Y650,000bn ($7,062bn) in fiscal 2020/21 from Y500,000bn now.

It also says the government will work with the Bank of Japan to overcome deflation.

The government last week compiled a record budget for the next fiscal year that will inflate the country’s already huge debt. It has been caught between the need to keep stimulating the economy and to address concerns among investors and voters about the mountain of public debt.

In budget forecasts the government said last week the nation’s economy would grow for the first time in three years in the next fiscal year, forecasting that gross domestic product would grow a real 1.4 per cent in fiscal 2010/11 after contracting 2.6 per cent in the current year to next March 31.

The government plans to finalise the growth strategy next June after discussing details including how to finance measures in the strategy, possible tax incentives and when to implement proposed policies over the next 10 years.

La economía japonesa creció un 2,3 por ciento entre abril y junio - adn.es/EFE

adn.es- EFE, 10/09/2009 La economía japonesa creció un 2,3 por ciento a ritmo anual en el segundo trimestre de 2009, menos de lo estimado inicialmente, según una revisión del Producto Interior Bruto (PIB) realizada hoy por el Gobierno de Japón. El nuevo dato correspondiente al crecimiento registrado por la segunda economía mundial, entre abril y junio, en tasa anualizada contrasta con el avance del 3,7 por ciento anunciado en agosto. Además, el PIB nipón tuvo un incremento del 0,6 por ciento entre abril y junio con respecto a los datos registrados entre enero y marzo, trimestre en el que la economía nipona se contrajo un 14,2 por ciento frente al mismo período de 2008, según las revisiones del Ejecutivo japonés. Con anterioridad, el Gobierno japonés había señalado que el aumento del PIB entre abril y junio con respecto al anterior trimestre había sido del 0,9 por ciento. El crecimiento del Producto Interior Bruto de Japón entre abril y junio puso fin a cuatro trimestres consecutivos de caídas, provocados por el descenso de la demanda global y el colapso de las exportaciones. El PIB real es el valor total de los bienes y servicios producidos en un país con los precios ajustados.

Japan offers economic stimulus package – Financial Times

Financial Times, 29/08/2008

The Japanese government on Friday unveiled a Y11,500bn (US$105.8bn) economic stimulus package which includes an income tax cut, fuel subsidies and government loans to small and medium-sized companies.

The package, which includes Y1,800bn in new spending and nearly Y10,000bn in government loans and credit guarantees, comes as the Japanese economy in July suffered its biggest contraction in seven years and inflation topped 2 per cent for the first time in a decade,

The measures highlight the pressure facing Prime Minister Yasuo Fukuda amid growing public discontent over rising prices at a time when wages are stagnating and economic activity has been sluggish.

The stimulus package, however, was widely criticized as ineffective in countering the impact of the economic slump.

“It does look to me like the impact of this package will be relatively small. It’s a knee-jerk reaction to difficult economic times,” says Robert Feldman, chief economist at Morgan Stanley in Tokyo.

Not only is the actual spending small, the substance of the package is unlikely to address the fundamental problem of the Japanese economy, which is low productivity, he says.

“It will slow the deterioration of the economy just a little but it won’t lift growth,” says Akira Maekawa, economist at UBS in Tokyo.

IHT | Around the world, pessimism about the economy

IHT, 13/08/2008

More signs of the economic slowdown appeared on two continents, Asia and Europe.

On Thursday, the German economy contracted by 0.5 percent in the quarter from April through June, from the previous quarter, the weakest performance in more than five years, the Federal Statistics Office said.

In Europe, the Bank of England offered on Wednesday a pessimistic outlook for the rest of the year, saying that it expected inflation to hit 5 percent because of energy and food prices and the economy to stagnate.

And in Asia, Japan appears to be flirting with a recession, government data showed Wednesday.

"The numbers were awful," Hideo Kumano, chief economist at Dai-ichi Life Research Institute in Tokyo, said after the Japanese government reported that the gross domestic product shrank at an annual 2.4 percent rate in the three months that ended June 30. "Things are going to be very tough in the second half of the year."

Even as commodity prices are beginning to ease, the credit and housing crises in the United States, coupled with the highest inflation in a generation, are weighing on consumers.

In Europe, where new figures on the overall economy are to be released on Thursday, analysts are expecting more bad news as well.

"It may still just be summer, but there is a feeling of chill in the economic air," Mervyn King, the governor of the Bank of England, said after the central bank issued its pessimistic outlook. He said the British economy was going through "a difficult and painful adjustment."

The euro zone, which six months ago appeared to be sailing clear of America's problems, now appears to have caught the contagion. A poll of economists by Reuters predicted that the new reports would show that the region's economy fell 0.2 percent in the second quarter compared with the previous quarter. First-quarter growth was 0.7 percent.

As for Japan, Kumano said the most serious threat came from a sharp decline in personal income, which fell 4 percent. He said he now expected growth in the fiscal year, which runs through next March, to be 0.6 percent at best, down from a previous forecast of 1.2 percent.

The rest of Asia, including China, will not be immune to the slowdown in the major economies, he said.

The International Monetary Fund, which considers growth of 3 percent or less in the world's gross domestic product to be a recession, estimated July 17 that the global economy would grow 4.1 percent in 2008 and 3.9 percent in 2009, slowing from 4.5 percent growth in the first quarter of 2008. But many private sector economists say those forecasts look overly optimistic.

"It's a race against time" whether the global economy ends up in a recession, Gilles Moëc, an economist at Bank of America in London, said. "Japan and Europe had been seen as protected from the U.S. slowdown. Strangely enough, it seems that Europe and Japan are paying the price now."

He noted that unlike in the United States, where the Federal Reserve has sharply cut interest rates since the start of the credit crisis, to 2 percent from 5.25 percent, the policy response among other central banks might not have been aggressive enough to support growth.

The Bank of Japan, which has not raised its main rate target above 0.5 percent since 1995, has "exhausted its room to maneuver," he said, while the Bank of England and the European Central Bank, with key rates at 5 percent and 4.25 percent, respectively, have chosen to focus on inflation rather than faltering growth.

There are some positive signs. Moëc said the recent decline in the price of oil and other commodities had provided grounds for hope that things would begin picking up by the end of the year. Oil prices have fallen from their peak above $147 a barrel last month to as low as $113 on Wednesday.

If prices for oil and other commodities continue to fall, companies may remain confident enough about the outlook to avoid serious cuts in payrolls, and the worst will be avoided in the major economies, Moëc said.

The IMF made its forecast in July when oil prices were at their peak, he said, noting that Bank of America's own forecasts called for 2008 growth of 3.2 percent and 2009 growth of 3 percent.

"Everything depends on oil," Moëc added.

The United States remains a question mark. The American economy grew at a 1.9 percent annualized rate in the second quarter, a disappointing performance considering the billions of dollars of government stimulus checks that went out to consumers during the period.

"We don't really see an upturn yet," the chief executive of General Motors, Rick Wagoner, said Wednesday during an interview in Bangkok. "The credit markets are still very tough. The housing market, while maybe it's not getting a lot worse, is clearly not moving back up."

"For planning purposes, we have conservative volume forecasts for the industry and ourselves for the remainder of this year and, for financial planning purposes, through next year, too," Wagoner said. "To be honest, the way the market has run in the last couple of months, I think it's far better to be conservative than to be surprised."

In Tokyo, officials were optimistic, despite Wednesday's data. The economics minister, Kaoru Yosano, said the weakness resulted mainly from external factors like high oil prices, but said the economy would bounce back.

"Even though the economy contracted in April-June, it would be more accurate to think that it won't last long," Reuters quoted him as saying.

Japan's real GDP fell 0.6 percent in the latest quarter compared with the first three months of 2008, the biggest decline since 2001. And unlike many Western banks, Japanese lenders appear to be in relatively solid shape after a decade of restructuring, and a worsening economy may not weigh heavily on their balance sheets.

The slowdown is real enough for consumers.

"I lost three clients in June," said Kozo Kimura, 40, a personal trainer in Tokyo. "I'm at the end of the food chain and am easy to dispose of."

The lost income, which can amount to ¥60,000, or $550, a client, is crimping Kimura's lifestyle, forcing him into extra work as an actor and art model.

Martin Foster and Thomas Fuller contributed reporting.