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Hans India
a day ago
- Business
- Hans India
Double whammy for Land of the Rising Sun
In 2025, India's economic growth has propelled it to become the world's fourth-largest economy, surpassing Japan. While this marks a significant milestone for India, Japan faces challenges including potential US tariffs and a sluggish recovery, leading to anxieties amidst this shift in global economic rankings. As the US prepares to impose 25 per cent tariffs on Japanese goods from August 1, 2025, threatening to erode export earnings and slow growth, and with India projected to overtake Japan as the world's fourth-largest economy, Asia's trade dynamics are undergoing a dramatic shift. Against this backdrop, Rubix Data Sciences has released its latest Country Insights Report: Japan, offering a timely analysis of how Japan is navigating these challenges and how its deepening partnership with India is becoming increasingly strategic. Despite decades of economic strength, Japan is facing headwinds. Growth in 2024 slowed to just 0.1 per cent, and while corporate investments in chipmaking and record-breaking Mergers and Acquisitions (M&A) have offered some support, weak household spending and rising import costs have weighed heavily. Inflation, once dormant, remains above target at 3.7 per cent, with the Bank of Japan (BoJ) cautiously raising rates. The US' 25 per cent tariffs on Japanese exports, scheduled to take effect August 1, 2025, could slash Japan's GDP growth by up to 0.26 percentage points and cut exporter profits by 25 per cent, particularly in the critical automotive sector. 'The trade deficit has doubled in three years, and new tariffs are set to deepen the strain,' the report warns. Notably, the report highlights how Japan's corporate sector is responding with a wave of M&A activity, driven by governance reforms, private equity interest, and undervalued assets. Japan recorded its busiest year forM&A since 1985 in 2024, with deal value surging 44 per cent to over $230 billion, and the momentum has continued into 2025. Landmark transactions, such as Nippon Steel's acquisition of US Steel and Bain Capital's record healthcare deal, illustrate how Japanese firms are pursuing growth abroad and strengthening competitiveness at home. In parallel, India is projected to surpass Japan's GDP in 2025, signalling a tectonic shift in Asia's economic hierarchy. The report notes India's GDP edging ahead to $4,187 billion, narrowly overtaking Japan. Yet, rather than competitors, the two nations are increasingly strategic partners. Bilateral trade between India and Japan grew at a 13 per cent CAGR between FY2021 and FY2025 to cross $25 billion in FY2025, though India's trade deficit with Japan has nearly doubled, reaching $12.7 billion. Japan's imports from India, buoyed by rising demand for automobiles and smartphones, grew at an impressive eight per cent CAGR between FY2021 and FY2025, while India's imports from Japan grew by 15 per cent CAGR during the same period, driven by steel, copper, and precious metals. Automobiles now account for 13 per cent of India's exports to Japan, a remarkable rise from just one per cent four years ago, positioning India among Japan's top-5 car suppliers.
AllAfrica
09-07-2025
- Business
- AllAfrica
China wins as Trump's ‘Tariff Man' act trashes Japan's 2025
TOKYO — As if Japan's economy weren't having a rotten enough 2025, Donald Trump just upped the pressure exponentially with a 25% tariff. The same day Tokyo got disastrous news from Washington, data showed that real wages in Japan fell the fastest in 20 months in May. The 2.9% year-on-year drop marks the fifth consecutive month in which wages fell. This is bad news on a number of levels. Not least of which is that 2025 was supposed to be the year Japan's long-coveted virtuous cycle finally arrived to hasten consumer spending and broader economic growth. In spring 2024, unions scored the biggest wage increase in 33 years — 5.28%. By year-end, though, the increase failed to materialize. Wages ended 2024 essentially flat. Then came US President Trump's trade war, which is making wage gains even less likely. Might wage cuts now be the question? The 25% import tax that Trump just slapped on Japan, effective August, will be layered on top of his 25% auto tariff. 'If the high tariffs persist, negative effects on exports and capital investment will be unavoidable,' says Takeshi Yamaguchi, chief Japan economist at Morgan Stanley MUFG. As much as this is a loss for Japan, the return of 'Tariff Man' is a win for China. Japan isn't alone this week. Trump hit close US ally South Korea with a 25% wallop, while his administration shocked Southeast Asia with outsize tariffs. He slapped a 32% tax on Indonesia, 36% on Cambodia, 40% on Laos, 40% on Myanmar. Trump risks single-handedly assembling a China-Japan-Korea-Southwest Asia bloc, something that Xi Jinping's inner circle could never have done on its own. Certainly, Trump just gave Japanese Prime Minister Shigeru Ishiba and new Korean President Lee Jae Myung a fresh reason to join forces. And to take seriously signals from Beijing that a three-way free-trade deal could be in the cards. An immediate loser is the Bank of Japan, which spent the last year working to normalizing interest rates. 'With wage growth stumbling and inflation proving sticky, the BoJ's job will get much harder,' says Stefan Angrick, senior economist at Moody's Analytics. Also, Angrick says, 'this casts a long shadow over the upper house election on 20 July,' when Ishiba's Liberal Democratic Party had hoped to win back an outright majority in parliament. Ishiba could always try to rush a US trade deal into existence before August, but likely at great cost for Japan's commercial interests. But as Ishiba said this week about Trump's threats, 'we will not easily compromise. That's why it is taking time and why it is tough' to do a deal. Angrick adds that the 'fact that pay growth is slowing is hardly surprising, given the flurry of shocks hitting the Japanese economy since the start of the year. US tariffs and tariff threats have damaged Japanese manufacturing, created uncertainty, and delayed investment in capital and in workers.' But, Angrick adds, 'it's sobering that underlying wage growth hasn't proven more resilient, even after shunto wage negotiations from 2023 to 2025 produced multi-decade record results. With US-Japan trade talks stuck … the economic outlook is incredibly challenging.' For BOJ Governor Kazuo Ueda, 'justifying' additional 'rate hikes will get tougher if pay keeps sliding,' Angrick concludes. At the same time, prospects for lower US interest rates are dwindling. Considering higher oil prices, ever-rising tariffs and immigration restrictions in the US, 'the bottom line is that we should see inflation move higher over the coming months,' notes Torsten Slok, chief economist at Apollo Global Management. It's but one example of how Trump risks sabotaging his own economy. At the moment, Scott Wren, global market strategist at Wells Fargo Investment Institute, thinks Wall Street consensus is 'overly optimistic on the tariff outlook.' Wren worries the feedback effects from tariffs will slam US growth. 'Our feeling is that stocks are ahead of themselves and, as a result, we are looking to trim positions in markets and sectors we find to be overvalued,' Wren explains. Others think the US economy won't necessarily be derailed by global headwinds. 'Our base case remains that the uncertainty around tariffs won't be enough on its own to bring the US economy to a crashing halt,' write analysts with Capital Economics. 'If so, it's unlikely to be enough to dampen investors' enthusiasm for US equities.' The wild card is how tariffs affect the outlook for consumer prices. the Capital Economics analysts say. 'It's been clear in recent weeks that many [Federal Reserve officials] are not confident about cutting rates until the inflationary effects of tariffs are clearer, and we doubt they'll cut this year.' Kai Wang, a strategist at Morningstar, thinks Asia will take tariff fallout in stride. 'Asian markets are treating the latest tariff move more as posturing than policy, with room still seen for dialogue,' he says. Yet throwing Japan under the proverbial bus raises tantalizing questions, including how Tokyo leverages the US$1.1 trillion worth of US Treasuries it owns. As Morgan Stanley's Yamaguchi asks: 'Will Japan use US Treasury holdings as a bargaining chip?' Yamaguchi's take is that it's unlikely under the current Ishiba administration. Yet in May, Finance Minister Katsunobu Kato raised eyebrows around the globe by stating that 'everything that could be a bargaining chip should be on the table' regarding Japan's US Treasuries holdings. Though Kato later tried to walk back that statement, it remains a live question in market circles. This isn't the first time bond traders worried Tokyo might dump large blocks of Treasuries. In 1997, for example, then-Japanese Prime Minister Ryutaro Hashimoto told a New York audience that 'several times in the past, we have been tempted to sell large lots of US Treasuries' to make a point. One such episode was the heated auto negotiations a few years earlier. This time, the intrigue involves the Trumpian turmoil already on full display. Back in April and May, the so-called 'bond vigilantes' literally screamed at the Trump administration over its tariffs. These activist traders sent US Treasury yields skyrocketing amid fears of the inflationary impact of Trump's trade war and the fiscal implications.
The Star
08-07-2025
- Business
- The Star
Real wages fall the most since September 2023
TOKYO: Japanese workers' real wages dropped by the most since September 2023 as inflation continued to outpace salary growth, posing a growing problem for Prime Minister Shigeru Ishiba ahead of a key election taking place in about two weeks. Real wages declined 2.9% from a year earlier in May, compared to economists' consensus call of a 1.7% fall, the Labour Ministry reported yesterday. Nominal wages rose 1% from the previous year, limited by smaller bonuses, and climbed at a much slower pace than economists expected. While the drop in real wages showed the pain being felt by voters heading into the election on July 20, the strength in underlying wage trends keeps the Bank of Japan (BoJ) on a path of mulling further interest rate hikes. The sharp drop in real wages highlights the persistent strength of inflation and presents a headache for the minority ruling coalition ahead of the upcoming upper house election. With prices continuing to rise faster than wages, public frustration has grown, pressuring political leaders to come up with more convincing strategies to alleviate the cost-of-living squeeze. 'In the ongoing election campaign, candidates often cite real wage figures from this monthly report,' said Sota Takano, senior economist at Itochu Research Institute. 'Today's release suggests people are struggling with the cost of living – that's a discouraging result for Ishiba.' Japan's key inflation rate stood at 3.7% in May, well above the BoJ's 2% target, driven by broad increases across essentials, from food to service fees. With the election just two weeks away, Ishiba's Liberal Democratic Party has pledged a 20,000 yen cash handout per adult, along with additional initiatives to spur wage growth. However, recent opinion polls suggested the one-off boost isn't popular among voters, many of whom are leaning towards opposition party proposals of cutting the sales tax. On the monetary policy front, while weak real wages remains a concern, ongoing nominal pay increases may provide the BoJ with room to consider proceeding with further rate hikes. The central bank is closely monitoring wage and price dynamics as it evaluates the timing of its next move amid global tariff uncertainty. Yesterday's report showed base pay increased 2.1%, while a more stable measure that avoids sampling problems and excluded bonuses and overtime showed wages for full-time workers climbed 2.4%, staying at or above 2% for two years. The BoJ's next policy decision is due on July 31, with markets broadly expecting the central bank to maintain its benchmark rate at 0.5%. 'Under the hood of a surprisingly slower headline gain in Japan's labour cash earnings in May, details suggested wage growth remained solid,' said Bloomberg economist Taro Kimura. 'Swings in special cash earnings, such as discretionary payments, and fewer working days in broad sectors – likely due to calendar effects – dragged on the headline gains.' Looking ahead, wage momentum is expected to remain strong following robust outcomes from this year's spring wage negotiations. Workers secured an average pay hike of 5.25%, the largest in 34 years, according to the final tally by Rengo, the country's largest labour union federation. These gains, which cover roughly 10% of Japan's workforce, are likely to become more visible in payroll data over the summer. A major driver of current wage growth in Japan is chronic labour shortage, which is prompting companies to raise salaries to attract and retain talent. Rengo's data showed that sectors such as the information industry saw the highest pay increases, reflecting an acute lack of software engineers. US tariffs, however, also pose a risk to wage momentum, as higher levies could squeeze corporate profits and limit employers' capacity to continue raising wages. In its latest outlook report, the BoJ warned that US tariffs could particularly affect large manufacturers, which typically set the tone for nationwide wage negotiations. 'There's little doubt that manufacturers such as automakers are set to face a tougher situation,' said Takano. 'While pay gains appear to be on track this financial year, we need to be cautious whether businesses can maintain the same level of pay hikes in the next round of talks.' — Bloomberg
Qatar Tribune
05-07-2025
- Business
- Qatar Tribune
Japan's monetary normalisation is not a source of global financial risk
After decades of battling deflationary stagnation, which started after the bust of the domestic asset price bubble in the late 1980s, Japan's macroeconomic environment has begun to change. During the deflationary period (1990-2020), the country operated in an anomalous setting of ultra-low growth, subdued inflation, and extraordinary monetary accommodation. But the confluence of the Covid-19 pandemic, global supply shocks, and aggressive fiscal and monetary stimulus appears to have finally 'reflated' the Japanese economy. Post-pandemic, Japan has experienced more consistent growth alongside inflation levels that are no longer materially below those of other advanced economies. This marks a structural shift, moving Japan into a more 'normal' macro regime after years of being a global outlier. In this context, the Bank of Japan (BoJ) has initiated a long-awaited monetary policy normalization process. Negative policy rates have been abandoned, yield curve control (YCC) has been phased out, and the central bank is gradually stepping away from its role as the dominant buyer of Japanese government bonds (JGB). The policy stance has evolved in response to improving domestic fundamentals, including a tighter labour market and persistent inflation above 2%. However, Japan's normalization has raised concerns in global financial circles. Market participants fear that this policy shift could catalyze a rapid reversal of capital flows and destabilize global financial markets. These concerns are rooted in Japan's historical role as a key source of global liquidity. Years of ultra-loose monetary policy – negative rates, YCC, and massive asset purchases –positioned the BoJ as an anchor for global interest rates. Japanese investors, in search of higher yields abroad, became significant players in global capital markets, engaging in large-scale cross-border investments and yield-seeking 'carry trades.' In fact, Japanese residents hold the world's largest net international investment position, comfortably above that of China or the Euro area. Given this backdrop, the fear is that monetary policy normalization and rising JGB yields could trigger a capital reallocation back to Japan, tightening global liquidity and generating market stress. In our view, however, these concerns are overstated. Two main reasons explain why Japan's monetary tightening is unlikely to generate material financial instability, either domestically or globally. First, even after the recent adjustments, interest rate differentials against major advanced economies remain wide – both in nominal and real terms. Currently, the BoJ's short-term policy rate stands at 0.5%, while the US Federal Reserve maintains its federal funds rate at 4.5% and the European Central Bank's deposit facility rate is at 2%. And this comes in a context where inflation in Japan runs at 3.5%, significantly above what is seen across peers. Hence, real interest rates are still deeply negative in Japan, contrasting with positive real rates in the US and Euro area. These enduring differentials continue to incentivize Japanese investors to seek higher returns abroad, sustaining outbound capital flows and carry trade activities. Second, the monetary tightening is expected to be orderly and well executed, preventing significant bouts of financial or economic stress. In fact, the BoJ's normalization strategy is cautious, deliberate, and well-communicated. The pace of tightening has been slow, allowing markets to adjust smoothly. The BoJ retains flexibility and has signalled a willingness to adjust course if needed. Importantly, monetary policy in Japan remains deeply accommodative, i.e., policy rates and even the 10-year JGB yields are far below the nominal neutral rate of 2.5%. Should the gradual monetary policy tightening continue as expected, with two 25 basis points rate hikes per year, the transition to a more neutral or restrictive stance should be smoothed, reducing the likelihood of sudden capital flow reversals. All in all, while Japan's transition to a more conventional macroeconomic and monetary regime represents an important global shift, it is not a source of financial instability. Interest rate differentials still support global capital flows and the BoJ's normalization is prudent and transparent. Rather than a shock to global liquidity, Japan's monetary shift should be viewed as a positive signal of macroeconomic normalization after decades of stagnation. — By QNB Economics
Business Standard
20-06-2025
- Business
- Business Standard
Yen upbeat as Japan's core inflation accelerates
The Japanese yen stays upbeat against the dollar on Friday following higher inflation data that increases possibility of rate hike by BoJ. Data released earlier today showed that Japan's annual consumer price index (CPI) remained well above the Bank of Japan's (BoJ) target of 2% in May. Japans consumer prices excluding fresh food quickened for a third month to 3.7% from a year earlier in May, according to a Ministry of Internal Affairs released Friday. Thats the fastest pace since January 2023. Food inflation was again a major driver, with the price of rice the nations staple food jumping 102% from a year earlier. Service prices, a metric closely watched by the BOJ, rose 1.4% from a year earlier, slightly more than 1.3% in April. However, the BoJ earlier this week signaled its preference to move cautiously in normalizing still-easy monetary policy and decided to slow the pace of reduction in its bond purchases from fiscal 2026 that could limit gains in the counter. Nevertheless, safe haven demand amidst persistent trade-related uncertainties and rising geopolitical tensions in the Middle East could keep the yen supported. Currently, USDJPY is seen quoting at 145.29, down 0.14% on the day. Meanwhile, on the NSE, JPYINR futures are down 0.93% at 59.42.
