WeekWatch for 24th Feb 2020
Rob Pentelow
Managing Partner @ Pentelow Wealth Management | Wealth Manager, Investments, Pensions, Employee Benefits and Protection Specialist
‘Ignorance is bliss’, goes the old Japanese proverb – or, translated literally, ‘not knowing is Buddha’. In this age of statistical overload and instant news, such ignorance is hard to come by, and didn’t Tokyo know it last week.
The Japanese government came under pressure for its quarantining of the Diamond Princess cruise ship near Yokohama, as three passengers died of the new coronavirus (now known as COVID-19) and some 100 passengers were infected. The deaths came amid speculation over whether the country can prevent the virus from ruining – or even ruling out – the Tokyo Olympics this summer; some commentators went so far as to speculate that London might end up hosting the games instead. (The World Indoor Athletics Championships, which were due to take place in Nanjing, China next month, have already been postponed.)
The economic benefits of hosting the Olympics have long been disputed, but Japan could certainly do with a short-term boost. Last week, fourth quarter results in Japan showed a 1.6% plunge versus the previous quarter – or a stunning 6.3% annualised. The country is probably falling into a technical recession (defined as two consecutive quarters of negative growth). Interest rates are at -0.1% and the government has already announced fiscal stimulus, meaning fiscal and monetary response options may be limited. So, is the growth dip down to a recent sales tax hike, or is something more fundamental at play?