China's economy grew at its slowest pace in seven years in the fourth quarter, as slumping exports put the brakes on the world's fastest-growing major economy.
The Bank of Japan cut its growth forecasts on Thursday, predicting the world's number-two economy would contract for two full years through March 2010.
Underlining the gloom sweeping East Asia's export-driven economies, Sony Corp (6758.T) forecast an operating loss of nearly $3 billion for the 2008/09 business year
Subscribe to All American Investor via Email
China growth slows sharply
By Simon Rabinovitch and Yuzo Saeki
BEIJING/TOKYO (Reuters) - China's economy slowed sharply in the fourth quarter and Japan's central bank said it would slide into two years of deflation as Asia's largest economies buckled under the strain of the global financial crisis.
The Bank of Japan cut its growth forecasts on Thursday, predicting the world's number-two economy would contract for two full years through March 2010, hours after data showed Japanese exports plunged a record amount in December.
Underlining the gloom sweeping East Asia's export-driven economies, Sony Corp forecast an operating loss of nearly $3 billion for the 2008/09 business year and in South Korea Hyundai Motor Co. reported a fall in profit and LG Electronics posted its first net loss in seven quarters.
"With growth in Asia and other emerging economies slowing, there is nothing to support Japanese exports," said Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute.
The global economy has deteriorated relentlessly since a credit crunch that began in 2007 with a U.S. housing slump took a turn for the worse in September with the collapse of Lehman Brothers.
In Washington, President Barack Obama's pick for Treasury Secretary, Timothy Geithner, told senators a detailed plan to rescue the U.S. financial system would be presented in the next few weeks.
Fresh worries that the poor health of banks and economies will require yet greater government intervention have sparked a new wave of risk aversion among investors, driving the Japanese currency toward multi-year highs against the dollar and euro and pushing investors into other safe havens such as U.S. Treasuries.
EXPORTS TUMBLE
Japanese exports in December tumbled an unprecedented 35 percent from a year earlier, while a measure of business sentiment hit a new low.
The figures showed a collapse in demand across the board with record falls in shipments to the United States, Europe and Asia, showing how the global crisis is reaching all corners of the world economy.
The Bank of Japan later said it was holding interest rates just above zero, but announced a string of other steps to try to ease the deepening recession.
The central bank said it would buy corporate bonds to ease an increasingly severe funding squeeze and warned deflation was returning for the second time this decade.
"Japan's economy is worsening sharply and is expected to continue worsening in the near term," the central bank said in a statement.
It saw consumer prices falling 1.1 percent in the year to March 2010 and a 0.4 percent fall the following year.
The yen rallied toward a 13-1/2-year peak against the dollar and a near 7-year high versus the euro hit the previous day.
The British pound resumed its fall against the dollar toward 23-year lows, erasing gains made after a source told Reuters that its slide will be discussed at the next meeting of the Group of Seven industrialized countries.
The pound has been under severe stress this week as a government rescue package for struggling British banks failed to reassure investors or stem losses in banking stocks. Barclays bank slid by a third to a 24-year low.
"Sterling still looks far from hitting a bottom with mounting expectations for further and bigger interest rate cuts from the Bank of England to combat the quickly deteriorating economy," said a senior trader at a Japanese trust bank.
Asia-Pacific stocks fell to a one-month low earlier on Thursday before swinging slightly higher on the day. U.S. Treasuries, a magnet for investors in times of uncertainty, were firmer in Asia trading.
In China, the world's main growth engine in recent years, official data showed that annual economic growth slowed to 6.8 percent in the fourth quarter from 9.0 percent in the third.
That left the pace of expansion for all of 2008 at 9.0 percent, a seven-year low, snapping a five-year streak of double digit growth. Illustrating the extent of the slowdown, China's economy had expanded 13 percent in 2007 to leapfrog Germany as the world's third-biggest economy.
The country's statistics bureau said the financial crisis was spreading and continued to impact the Chinese economy, and that China would aim to stimulate domestic demand.
"The deceleration of growth is beyond the market's consensus, which presents a huge challenge to this year's growth target of 8 percent," said Jin Yanshi, chief economist at Sinolink Securities in Shanghai.
COLLAPSING TRADE
Neighboring South Korea said its economy suffered its second-largest contraction on record in the fourth quarter. That pushes Asia's fourth-largest economy closer to its first recession since the regional financial crisis a decade ago.
Gross domestic product fell a seasonally adjusted 5.6 percent in the last quarter of 2008 from the previous three months, more than twice as much as economists had expected, central bank figures showed.
Trade within East Asia has collapsed as global demand for goods such as cars and electronics shrivels, prompting leading manufacturers such as Toyota Motors to slash production at an unprecedented rate and lay off workers.
Sony, citing the recession, higher yen and restructuring costs, said it was revising it forecast for the year to the end of March to an operating loss of 260 billion yen ($2.9 billion), having previously targeted a profit of 200 billion yen.
Car maker Hyundai said its quarterly earnings fell 28 percent and LG Electronics booked a wider-than-forecast fourth quarter net loss of $490 billion due to big shortfalls at its flat-screen affiliate and weak mobile phone sales.
In another sign of the pain being felt by the tech sector, Intel Corp said it was closing plants in Malaysia and the Philippines, along with its only remaining factory in Silicon Valley, cutting as many as 6,000 jobs.
(Additional reporting by Hideyuki Sano and Sachi Izumi in Tokyo, Zhou Xin in Beijing, Cheon Jong-woo, Yoo Choonsik, Rhee So-eui and Marie-France Han in Seoul, Ritsuko Ando in New York and David Lawder in Washington; Writing by Alex Richardson; Editing by Sonya Hepinstall)
No comments:
Post a Comment