By: Mike Campbell
In most developed economies, an unemployment rate of 5.7% would be a source of pride. In Japan, the figure represents a record high and points to the depth of the recession affecting the country. The unemployment figures are the worst on record since World War II. Although the nation is no longer officially in recession having posted a respectable growth rate of 0.9% in Q2, companies continue to lay-off workers and consumer prices fell by 2.2% year-on-year in July. Analysts suggest that the trend is set to continue for some time to come and that the Q2 figures were overly flattering, casting a little doubt on the strength of the recovery. These factors were seen as being critical in the rout of the Government in last weekend’s elections. It would be reasonable to assume that these data will put pressure on the value of the Yen over the longer term.
US Federal Reserve chairman, Ben Bernanke, put an upbeat spin on recent economic data from the States. He suggested that the fact that the decline in US consumer spending was levelling out coupled with a stabilization in the housing market and manufacturing output were signs that the downturn in the US economy was ending. Bernanke concluded that as other countries begin to emerge from recession, the prospects for US exports looked promising. Despite this, the Fed indicated that interest rates would remain below the 0.25% level for some time to come as a means of aiding the recovery through the provision of cheap money.
The International Monetary Fund has revised its outlook for the US economy and is now predicting a growth of 0.75% for 2010 instead of the zero level it had earlier suggested. The Dollar lost a little ground against both Sterling and the Yen but was marginally stronger against the Euro at yesterday’s close.
Britain’s Chancellor of the Exchequer, Alistair Darling, urged G20 nations to continue spending on stimulus plans, cautioning that the job was not yet done. The comments were made ahead of a G20 Finance Minister’s meeting in London on Friday. French and German Ministers have indicated that they want to discuss “exit strategies” from these government stimulation measures.