The case for more monetary easing in the world’s Eastern economies was strengthened today by disappointing Asian data releases.
It’s been known for some time that the economic slowdowns in China and Europe have been weighing heavily on exports but last month industrial production fell in Japan and South Korea by more than estimated.
According to a report by the Trade Ministry Japan’s output declined by the most for three months, dropping 1.3 per cent from July. Meanwhile production in South Korea fell by 0.7 per cent.
Economists involved in a Bloomberg News Survey only estimated declines of 0.5 per cent and 0.4 per cent respectively.
This data, when combined with that which showed Chinese industrial growth at its lowest levels for two years, highlights a worrying lack of policy support when it comes to the economic slowdown in Asia.
The likelihood of Japan’s economy shrinking this quarter is increasing and as the nation’s central bank has so far failed to dislodge deflation calls for more monetary easing are getting louder.
Masamichi Adachi, a senior economist with Tokyo based JPMorgan Securities, stated: ‘I’m convinced we’ll see a contraction in Japan’s GDP this quarter because consumption, exports and private investment are falling. Prices in Japan are falling because the economy is weak.’
Tomorrow’s report from HSBC Holdings Plc and Markit Economics could also indicate an 11th month of Chinese manufacturing contraction. This would no doubt trigger more speculation over the possibility of further fiscal stimulus methods.
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