Japan’s economy grows faster than expected
Last week saw good news coming from Japan, with the economy expanding faster than expected. The annualised growth rate of 2.2% between July and September was driven primarily by higher exports. Prime Minister Shinzo Abe, has been taking the opportunity to encourage employers to continue with pay rises, even though inflation has been lacklustre this year. Pay rises are seen as the best way to encourage domestic consumption and providing more sustainable economic growth.
Following the election of Donald Trump, the Yen has weakened significantly, making Japanese products more competitive overseas and importing much-needed inflation into the economy. Japan does not want to be seen as artificially weakening the Yen, although the aggressive monetary policy will have had a significant negative impact on the currency’s value. However, the recent depreciation will nonetheless come as a relief. The impact of the currency move should begin to come through over the short to medium term. Furthermore, the 28 trillion Yen (£207bn) stimulus package approved in August is beginning to have in impact and should drive domestic demand.
Upcoming political events in Europe are beginning to come onto investors’ radar. The French, German and Dutch elections are all due to take place next year as well as an Italian Constitutional Referendum this December. The trend in the campaigns has been the familiar strength of populist parties. While the current polls suggest that the winners will continue to be from the centre ground, as the world has learned, anything can happen. Investors remain concerned over the integrity of the EU project already weakened by Brexit, as well as the impact that populist movements will have on the behaviour of the incumbent political parties.
|UK 10 Year Gilt Yield||1.442||1.375||-0.067||-4.6%|
French GDP as well as German CPI and unemployment will be announced on Tuesday. US non-farm payrolls will be released on Friday.