Japan Lowers GDP Growth to 1.3%

123jump.com Staff
19 Dec, 2007
New York City

Japan lowered its economic growth forecast for the current fiscal year to 1.3% from 2.1% on weakness in the construcion industry. The recently enacted building code has substantially slowed down the construction industry and lowered the overall economic growth. Nikkei 225 Index fell sharply by 1.8% or 1,777 to close at 15,031.

[R]5:00AM New York, 7:00PM Tokyo - Japan lowered economic growth to 1.3% from 2.1% for the current fiscal year.[/R]

Stocks in Japan snapped earlier gains after a government report slashed the economic growth forecast from 2.1% to 1.3% for the fiscal year ending March 2008.

In Tokyo trading Nikkei 225 declined 1.77% or 1,777.35 o 15,030.51 while the broader Topix Index declined 12.98 to 1,456.79.

In the first section of the Tokyo Stock Exchange 8 billion shares worth 977 billion yen were traded and 296 million shares valued at 7.3 billion yen changed hands in the second section.

Of the Nikkei 225 stocks 45 gained, 174 declined, and 6 were unchanged. Nippon Kayaku led decliners with a fall of 11.21% after the company cut its net income forecast by 30% to 6.7 billion yen for the year ending March 31.

Japan Cabinet Office lowered its annual economic growth for the current year to 1.3% from the earlier projection of 2.1%. The construction slow-down from the new Building Standards Law in June hurt the overall growth. Analysts forecast that the housing slowdown would erase 0.6% or 3 trillion yen from growth this year.

According to the report, housing investment would fall 12.7% in the year ending March 2008 but would rebound 9% next year as the industry catches up with the backlog in the activities.

In addition, private consumption growth is expected to remain unchanged at 1.3% in the fiscal 2008, while capital investment is expected to increase to 3.3% in the fiscal 2008 from 0.9% in the fiscal 2007.

Industrial production is projected to rise 2.2% in 2008 from 2.4% in the current fiscal year. Exports are estimated to gain by 6.4% from 8.9% in the current year and imports are expected to rise 5.9% next year from 7.8% this year.

The GDP deflator, which gauges price changes, is expected to increase by 0.1%, while a 2.1% growth is expected in nominal terms for the next fiscal year.

Unemployment is also forecasted to fall to 3.8% from 3.9% this year.

Bloomberg news reported today Economic and Fiscal Policy Minister Hiroko Ota said in Tokyo today revenue from taxes could start falling as a result of slower economic growth.

Japan’s Finance Minister Fukushiro Nukaga also told reporters that the government still wants to balance the budget by the year 2012. Economists forecast that the country’s debt will still remain at 1.8 times the size of the economy.

Jasdaq Securities Exchange Chief Executive Takashi Tsutsui said today the exchange is in talks with the Bombay Stock Exchange to lure listings from Indian companies and shore up trading volumes. Tsutsui added that a formal agreement might be reached as early as next month. Bloomberg News reported the development and later was confirmed by sources at the Bombay Stock Exchange.

Jasdaq is also seeking to forge an alliance with India’s National Stock Exchange to swap information including trading systems.

Japan may increase its wheat prices by 30% from next April due to increased costs. Last price increase was in October of 10%. Deputy Manager of the grain trading division at the Ministry of Agriculture, Forestry and Fisheries Hirotaka Mori added that price for domestic millers would rise between 20% and 30% by next April.

The yen edged 0.19% from 113.28 to 113.23 to the dollar at the close.

Of the Nikkei 225 index shares, Taiyo Yuden Company led advancers with a rise of 4.40% followed by gains of 3.90% in NSK Limited, of 3.78% in IHI Corp, of 3.05% in T&D Holding Incorporated, and 2.61% in Inpex Holdings.

Nippon Kayaku led decliners in the Nikkei 225 index shares with a fall of 11.21% followed by losses in Denki Kagaku of 6.15%, in Fujikura Limited of 5.45%, in Nippon Oil Corp of 4.89%, and Mitsubishi Electrical Corporation of 4.34%.

Canon fell 0.55%, Komatsu Limited slipped 3.93%, and Sony Corporation retreated 1.13%.

Nippon Kayaku fell sharply after lowering its net income forecast by 30% to 6.7 billion yen. The company now expects sales to plummet by 7.2% from the initial projections to 148.5 billion yen.

Financial stocks slumped after an earlier rally spurred by speculation that the European Central Bank’s $500 billion injection into the euro zone would help ease the global credit crunch. Nikkei News reported earlier that Japanese financial institutions would reject a request by the U.S to contribute to sub-prime financial bailout fund.

Mitsubishi UFJ Financial Group slipped 0.39%, Mizuho Financial Group declined 1.31% and Mitsui Sumitomo Financial Group tumbled 1.97%.

The Nikkei online news reported today Nippon Steel Corp is considering closer ties with Sumitomo Metal Industries and Kobe Steel Limited, adding that the company would spend 50 billion yen to buy more shares of the rivals and increase its stake in Sumitomo Metal Industries to nearly 10%. Nippon Steel Corp rose 0.16%, Sumitomo Metal Industries plunged 0.44% and Kobe Steel Limited fell 0.58%.

The online edition separately reported that Nikko Cordial shareholders had approved the plan to become a wholly owned unit of U.S. lender Citigroup through a share swap under a triangular merger.