It was a horrible way to greet a new government, especially one elected in such an historic way in Japan.
As the new Democratic Part of Japan (DPJ) savoured its huge win more figures were released showing that the Japanese rebound is weaker than thought.
The Tokyo Nikkei stock average initially rose nearly 2.2% on the news of the DPJ win to its highest level in over 10 months, but fell to close off 0.4% as China opened weaker than expected and continued falling.
China fell 5% in morning trading, which was extended to a 6.7% drop by the close in Shanghai.
That put the fall from 2009’s peak on August 4 at just on 23% and firmly in bear territory. China lost 22% in August, the biggest monthly fall in 15 years.
Yesterday’s fall, the biggest since mid 2008, overtook the news of the Japanese election result so far as markets in Asia, then Europe and the US were concerned.
Our market opened stronger, rose in tandem with Japan, then fell as China went south to finish down 10 points.
The yen strengthened to 92.77US dollars from 93.60 on Friday.
According to the latest figures, the DPJ had won 308 seats in the lower house compared with the LDP’s 119. Before the poll the LDP had 302 seats to the DPJ’s 112.
That and the recriminations inside the beaten LDP were the ‘good’ news.
The ‘bad’ news was a familiar litany of figures.
Japanese industrial production was positive in July, up 1.9% from June, but that was the weakest rise in five months, and some analysts are wondering if there’s a double dip in output coming later this year.
Industrial production rose because business rebuilt stocks of products, from cars, to car parts, to electrical and machinery bits and pieces; and government stimulus measures, especially for cars and electronics, both core parts of Japan’s export machine.
The rise was less than the 2.3% and 5.7% increase in June and May respectively and July’s output was down 22.9% from the same month of 2008, a truer indication of the hole the country remains in.
The outlook for August has been wound back to a rise of 2.4% from the June estimate of 3.3%, while the first estimate for September is for a stronger rise of 3.2%.
But other figures were gloomier.
July’s retail sales fell 2.5% from the month last year, but were up 0.4% from June.
A 7.6% rise in car sales, stimulated by the Japanese version of a car scrappage scheme, where buyers are given subsidies towards the cost of more efficient and greener cars, drove the month on month rise.
Wages across Japan fell an average 4.8% on July from July 2008, but that was better than the 7% annual fall in June.
Unemployment hit a record 5.7% in July, consumer prices fell 2.2% (and also fell 0.9% on the same month in 2008 on the core basis of excluding fresh fruit and vegetables and energy costs).
Retail sales have been falling for 11 months now on an annual basis, despite a slight perk up from April-May onwards linked to the government stimulus package.
The worry is that the latest production figures follow a slowing in exports in July to Asia and the worry is that the rebound could prove elusive, especially with Toyota cutting output.
But companies like Panasonic have trimmed their forward estimates for fiscal year losses because of better demand and sales so far.
More than one million people lost their jobs over the year to July, lifting the unemployment total to 3.59 million.
Japanese household spending fell 1.3% compared with June on a seasonally adjusted basis.
Household spending was down 2% from July 2008, reversing a 0.2% rise in June.
The export model is clearly damaged; the government has little in the way of cash to switch tack, consumers have fewer jobs, money and not much in the way of any will to start spending.
But there is a will for change, as the election result demonstrates.
Somehow that has to be harnessed by the new government to start edging Japan in new directions.
And, India’s economic growth improved for the first time since 2007 in the June quarter.
Gross domestic product rose 6.1% last quarter from a year earlier after a 5.8% rise in the March quarter.
India’s economy joins China, Japan and other Asian economies, plus Germany and France in recovering.
But economists warned that India’s recovery may yet stall as a poor monsoon threatens to cut harvests and lift food price inflation. Already sugar output will be lower, which has boosted world prices to their highest levels since 1981.
But near record global wheat crops means wheat prices (an important grain in India, along with rice) are low and won’t be too much of a problem, for the moment.
Before the monsoonal rains started easing, the Reserve Bank of India forecasts the economy would grow 6% “with an upward bias” in the year to March 31, the weakest in six years.
The government’s statistical office said manufacturing recovered in the June quarter to grow by 3.4% after contracting by 1.4% in the March three months.
Mining rose 7.9% compared with 1.6%, while electricity growth almost doubled to 6.2%.
But drought or drought-like conditions have now been seen across 44% of the nation’s districts.
And, so far this monsoonal rain has been 25% lower than the average so far. The monsoon season usually finishes towards the end of this month.
India’s industrial production rose&n
