© Reuters. FILE PHOTO: Newly manufactured cars of the automobile maker Subaru await export in a port in Yokohama, Japan May 30, 2017. REUTERS/Toru Hanai
TOKYO (Reuters) – Japan’s automobile sales slumped 31.3% in October from a year earlier to mark the fourth straight month of declines, industry data showed on Monday, a sign output cuts caused by the COVID-19 pandemic were hurting the country’s already weak consumption.
The domestic sales data is among few indicators available so far in gauging the strength of consumption since state of emergency curbs to combat the pandemic were lifted on Sept. 30.
The sales slump highlights the widening damage of supply disruptions on the economy. A global parts and chip shortage has taken a heavy toll on automakers, forcing them to slash global output and causing delays in delivery of cars.
The supply constraints, if prolonged, could prevent Japan’s economy from staging a solid rebound from an expected flat or negative growth in July-September, analysts say.
“We expect the economy to achieve annualised growth of around 5% in October-December mainly due to strong consumption,” said Taro Saito, an economist at NLI Research Institute.
“But there are many risks,” including the chance supply constraints last longer than expected, he added. Saito expects the economy to have contracted by 0.9% in the third quarter.
The government will release Japan’s July-September preliminary gross domestic product (GDP) data on Nov. 15.
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EU plans to agree on new sanctions on Russia before next week’s summit
The European Union expects to find agreement on a package of new sanctions on Russia, or at least on its main parts, before the bloc’s summit next week, Reuters reported.
“We expect an agreement on new economic sanctions on Russia or at least on its main parts before next week’s EU summit,” a European official said.
According to the agency’s interlocutor, EU leaders are going to discuss different ideas on the energy price ceiling. He stressed that the upcoming meeting should be tense, as “difficult times” are coming.
Earlier it was reported that new EU proposals on economic sanctions against Russia will affect diamond miner Alrosa and some other Russian companies.
The EU Commission and Foreign Affairs Service put forward the ideas on September 27th against the background of the referendums.
Earlier, we reported that the Fed had lost its credibility.
Market decline triggers a wave of foreign currency intervention in Asian countries
After the start of the fight against inflation in the U.S. six months ago, when the Federal Reserve began raising the cost of borrowing, authorities in many Asian countries were also forced to carry out foreign currency intervention and increase their efforts to prevent their own currencies from falling, Bloomberg wrote.
One of the first such countries in Asia was South Korea, whose central bank spent currency intervention, saying it will buy sovereign debt of up to $2.1 billion.
Taiwan officials also took their own measures, introducing a countervailing currency intervention and declaring their readiness to ban short sales of stocks. China instructed a lot of funds to refrain from large sales of shares, and banks – to make sure the “observance” of the daily yuan rate in the market. Thus, the Japanese yen remains close to 145 per $1, and the yuan has reached its lowest level since 2008.
The rapid growth of the dollar to the detriment of all other assets is particularly acute in the Asian market. Central banks in Indonesia, Japan and India have also undertaken countervailing currency interventions to support their currencies, but their efforts seem insufficient.
“Foreign currency intervention will only help slow the decline in Asian assets, not stop it,” said Mitul Kotecha, head of emerging markets strategy at TD Securities in Singapore. – U.S. rate hikes, a stronger dollar and relatively low real rates in the region suggest the pressure will continue in the coming weeks.”
Some exception to the rule was South Korea, where the authorities’ intervention was relatively more successful as 3-year bonds rose after the central bank said it would buy government debt.
Earlier, we reported that the number of detected COVID-19 cases in the world exceeded 616.6 million.
The Fed has lost its credibility. What is the Fed doing right now?
According to Mohamed El-Erian, the sell-off in the stock market after the Fed’s recent interest rate hike indicates a loss of confidence in the Fed, which increases the risk of economic problems as Fed policy tightening continues, writes Business Insider. What is the Fed doing right now?
The economist now expects that the Fed’s policies will cause additional collateral damage in an attempt to meet its inflation target.
What is the Fed doing with interest rates?
El-Erian voiced his views Wednesday, warning that the Fed’s failure to raise inflation to the target this year would signal a loss of market confidence and a growing market belief that a U.S. recession could not be avoided at the price of “little blood.
The Fed chief warned that fighting rising prices would “bring some pain” to Americans by slowing down hiring and making mortgages and credit cards more expensive. After his press conference, the S&P 500 stock index fell 3.8 percent over the past 7 days.
The Fed was late in raising interest rates in an attempt to tame skyrocketing prices, El-Erian believes, for it initially fueled the 2021 bubble by keeping rates low even as inflation began to rise steadily.
Earlier we reported that the U.S. president’s administration is concerned about the tax cuts in the U.K.
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