- Japan Gets Growth Under Abe’s Stable Hand as Trump Roils U.S.
As political turmoil in Washington roils financial markets and throws doubt over prospects for a Trump bump to growth, Japan is enjoying a stable growth.
Japanese Prime Minister Shinzo Abe — enjoying the longest tenure for a Japanese leader in a decade — has strung together a fifth straight quarter of economic expansion, the longest such run since the last period of stability through 2006.
Before Abe took power in December 2012, the country had seen five premiers in as many years — contributing to the see-sawing growth outcomes over that period.
“If you look at the Trump administration, you can’t help but think it’s great to have a stable government,” said Takashi Shiono, economist at Credit Suisse Group. “It’s been a positive for Japan’s recovery, helping boost stock prices and weaken the yen, crucial factors for Japan’s economy and sentiment.”
Japan’s gross domestic product grew 2.2 percent on an annualized basis in the three months ended March 31, driven by continued strength in exports and firmer domestic demand. While that may not be a blockbuster by many standards, it’s more than twice the potential growth rate for an economy weighed by aging demographics and stagnant wages.
While Abe has fallen short on some structural reforms, particularly in the labor market where problems abound, he’s accomplished more during his four-and-a-half years than any prime minister since Junichiro Koizumi, who left office in 2006 after the third-longest post-war tenure. Koizumi was the last leader to string together more than five straight quarters of growth.
Abe’s popularity and staying power have made it easier to challenge entrenched interests in some areas, with his successes including stronger corporate governance and reform of the agriculture sector.
“Japan’s frequent political instability had always been a real pain for the economy for several years up until Abe,” said Kenji Yumoto, vice chairman of the Japan Research Institute Ltd. and a former senior economist at the Cabinet Office. “The government couldn’t pass economic measures in a timely manner and a tangled parliament always disagreed over the nation’s needs. That’s gone under Abe.”
Still, Yumoto notes that the stable recovery took years to arrive, and only after trillions of yen in stimulus packages. And of course, there is the ongoing extraordinary monetary easing from the Bank of Japan.
Even now, external, and potentially temporary conditions — firming global demand, a weaker yen, fiscal stimulus — are largely driving growth. Economists question how long it will last.
Many Japanese consumers are still struggling. The tightest labor market in two decades is starting to exert pressure on wages, but for now consumption remains soft.
‘Sense of Relief’
Yet after two decades of deflation and falling wages, most Japanese feel “a sense of relief” about the economy’s direction, according to Masamichi Adachi, senior economist JPMorgan Securities Japan and a former BOJ official.
“It’s true that the recovery hasn’t reached Japanese households through wage growth but at the very least they don’t have to worry about their livelihoods getting worse tomorrow,” Adachi said.
The revival of Japanese stocks during Abe’s tenure has played a role in the more upbeat mood. Over the past two weeks, the Nikkei 225 flirted with the 20,000 level for the first time in more than a year, before news out of Washington hit global markets. It has doubled since Abe took office.
It’s always hard to know how much credit a national leader deserves for economic growth, said Tobias Harris, Japan analyst at Teneo Intelligence in Washington.
“Abe, I think, will take credit for it, and that’s sort of the right of a politician who gets to govern in a period like this,” said Harris, who cited an improved global outlook as well as fiscal and monetary stimulus.
But exactly how much credit should Abe get?
“Some, but certainly not all. Maybe not even most.”
Volkswagen Group, Toyota, and Renault-Nissan-Mitsubishi Alliance Lost $104.5bn in Revenue in 2020
Automakers Lost $104.5 Billion in Combined Revenue in H1 2020
Automakers had a rough start to 2020, with global auto production, and sales slumped amid the coronavirus outbreak. Supply chain disruptions, factory closures, and sales drops had a massive impact on the largest automobile manufactures, causing a sharp fall in their revenues.
According to data presented by StockApps, the Volkswagen Group, Toyota, and Renault-Nissan-Mitsubishi Alliance, as the leading automobile manufacturers based on global sales, lost $104.5bn in combined revenue in the first half of 2020.
Volkswagen Group Revenue Plunged by $34.5bn, the Biggest Drop in 2020
The world’s largest automobile manufacturer, the Volkswagen Group sold the most cars in 2019, delivering 10.2 million sedans, sport-utility vehicles, and compact cars under its top passenger car brands, and almost 734,000 trucks in its three commercial vehicle brands. Statista data also revealed the German automaker hit a 25.4% market share based on new car registrations in Europe as of October.
Although the company managed to reduce the effects of COVID-19 in the first half of the year, the H1 2020 financial report still revealed severe losses. Between January and June, the Group’s sales revenue plunged by $34.5bn to $114bn, the heaviest fall among the top three automakers.
The COVID-19 outbreak caused a 27% drop in vehicle deliveries and an adjusted operating loss of $940 million in the first half of 2020, down from an $11.8bn adjusted operating profit in the year-earlier period, forcing the German automaker to slash its dividend. The Yahoo Finance data also revealed the Volkswagen Group market cap dropped by 17% in 2020, falling from $98.1bn in December 2019 to $80.8bn last week.
Toyota Motor Corporation, the world’s second-largest car producer, sold 10.74 million vehicles in 2019. With 7.9 million cars sold between January and June, 100,000 more than VW Group, the company could become the leading automaker in 2020 if COVID-19 is contained in its most important markets, Japan and the United States.
In fiscal 2020, ended on March 31st, 2020, the Toyota sales revenue dropped by $2.9bn or 1.1% to $290bn. However, the Q1 FY 2021 results, for the period between April and June 2020, revealed a 40.4% drop in revenue and the smallest quarterly profit in nine years as the coronavirus pandemic halved its car sales. Statistics show the revenue of the Japanese automaker plunged by $29.7bn YoY in the second quarter of 2020, with a total loss in the first half of 2020 reaching $32.7bn.
The auto giant expects coronavirus to deliver a major blow to earnings and sales in the fiscal year ending March 2021, with net profit forecast to plunge 64% year-over-year to $6.97bn.
Renault-Nissan-Mitsubishi Alliance Suffered a $37.3bn Loss
With 10 million vehicles sold in 2019 and 6.3 million in the first half of 2020, the Franco-Japanese Alliance, Renault-Nissan-Mitsubishi, ranked third on the list of the top-selling car manufacturers.
Nevertheless, the COVID-19 outbreak severely affected their business. The Renault Group suffered a massive downturn for the first half of 2020. Between January and June, the company reported $21.8bn in sales revenue, a $12.5bn or 34% plunge year-over-year.
Sales figures were also down for the period, with the Renault Group suffering a 34.9% plunge globally and 41.8% in Europe, the second-worst hit region after the Americas. Nissan’s sales dropped by 47.7% globally and 33.7% in its home market of Japan.
Mitsubishi Motors reported a $12.6bn revenue loss in the fiscal year ended March 31st, 2020. The downturn continued in the Q1 of the fiscal year 2021, with revenues falling to $25.5bn, a 32% plunge year-over-year. The Japanese multinational automotive manufacturer suffered a total loss of $24.8bn in the first half of 2020, while its market cap halved reaching $2.98 bn last week.
Statistics show the Franco-Japanese Alliance lost a total of $37.3bn in sales revenue in the first half of 2020.
Oil Steadies, But Outlook Gloomy as Coronavirus Cases, Supply Grow
Oil prices eked out small gains on Tuesday after sharp losses, but sentiment remained subdued as a surge in global coronavirus cases hit prospects for crude demand while supply is rising.
Brent crude was up 43 cents, or 1%, at $40.87 a barrel. U.S. oil gained 43 cents, or 1.1%, at $38.99 a barrel. Both contracts fell more than 3% on Monday.
A lack of progress on agreeing a U.S. coronavirus relief package added to market gloom, although U.S. House of Representatives Speaker Nancy Pelosi said on Monday she hoped a deal can be reached before the Nov. 3 elections.
A wave of coronavirus infections sweeping across the United States, Russia, France and many other countries has undermined the global economic outlook, with record numbers of new cases forcing some countries to impose fresh restrictions as winter looms.
“We think demand from this point onwards is really going to struggle to grow. COVID-19 restrictions are all part of that,” said Commonwealth Bank of Australia (CBA) commodities analyst Vivek Dhar.
CBA expects U.S. oil to average $38 and Brent to average $41 in the fourth quarter this year.
Prices got some support from a potential drop in U.S. production as oil companies began shutting offshore rigs with the approach of a hurricane in the Gulf of Mexico.
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said on Monday the worst is over for the crude market.
But his comment contradicted an earlier remark from OPEC’s secretary general, who said any oil market recovery may take longer than hoped as coronavirus infections rise around the world.
Meanwhile, Libyan production is expected to reach 1 million barrels per day (bpd) in the coming weeks, the country’s national oil company said on Friday, a quicker return than many analysts had predicted.
That is likely to complicate efforts by the Organization of the Petroleum Exporting Countries (OPEC) to restrict output to offset weak demand.
OPEC+ – made up of OPEC and allies including Russia – is planning to increase production by 2 million bpd from the start of 2021 after record output cuts earlier this year.
An analyst survey by Reuters ahead of data from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday estimated that U.S. crude stocks rose in the week to Oct. 23, while gasoline and distillate inventories fell.
Nigel Farage Urged to Highlight Perils of DIY Investing
Nigel Farage appears to be advocating a DIY approach to investing – and this could be “monumentally risky” for inexperienced investors, warns the CEO of one of the world’s largest independent financial advisory and fintech organisations.
The warning from Nigel Green, chief executive and founder of deVere Group, comes as a daily finance-orientated newsletter from the team of the Brexit Party leader and political activist urges its readers to “tell us about your successes by going it alone – leaving the money men and middlemen by the side of the road…”
Mr Farage’s email is provided for correspondence.
Mr Green comments: “Successful DIY (Do It Yourself) investing can be possible, but for most people it is not recommended – indeed, it could be a costly and traumatic accident waiting to happen.
“Going it alone can be monumentally risky for inexperienced investors as the complexities involved can sink their portfolios.
“Perhaps this is why around two-thirds of wealthy individuals have a professional financial adviser of some sort, according to new independent research from the University of Toronto.”
He continues: “I would urge anyone who extols the virtues of a DIY approach to investing to also underscore the risks and potential pitfalls to be avoided.”
A pro will help you make the best investment decisions in five key ways, says Nigel Green.
“First, helping you to diversify a portfolio. Spreading money around is vital to curb risk. However, it must be used correctly – diversification will only add real value if the new asset has a different risk profile.
“Second, investing with a plan: Unless you have a sound plan, you’re gambling, not investing.
“Third, avoiding emotional decisions. Overly emotional decisions can prove deadly when it comes to investments because they are blighted by prejudices and biases.
“Fourth, regularly reviewing your portfolio: Investments need to be consistently reviewed to ensure they still deserve their place in the portfolio and that they are still on track to reach your long-term financial objectives.
“Fifth, not focusing excessively on historical returns: The future investment situation is likely to be different from time-aged averages.”
The deVere CEO concludes: “While investing remains almost universally regarded as one of the best ways to create, grow and safeguard wealth, considering the pitfalls of getting it wrong, it could be an expensive mistake for you and your family not to seek professional advice.”
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