Live news updates: Japan GDP shrinks more than expected due to Covid-19 and supply chain delays

Japan’s economy shrank more than expected during the third quarter due to global supply chain disruptions and a hit to spending caused by a resurgence in Covid-19 cases. 

The contraction comes as Fumio Kishida, the newly appointed prime minister, plans to soon unveil a massive stimulus package of cash handouts and subsidies for small businesses to spur growth.

The economy contracted at an annualised rate of 3 per cent in the July to September quarter, falling sharper than market expectations for a 0.8 per cent contraction.

On a quarter-on-quarter basis, gross domestic product fell 0.8 per cent compared with growth of 0.4 per cent in the second quarter, according to government data released on Monday. 

Most economists, however, expect a rebound in the coming quarters led by a recovery in personal consumption with the recent lifting of Covid-19 restrictions and a sharp drop in cases.

“Although personal consumption was more negative than expected, monthly data show that it picked up in September despite continued weakness in auto sales related to low production,” said John Vail, chief global strategist at Nikko Asset Management.

North Korea appears to be preparing to partially reopen its land border with China after almost two years of self-imposed isolation, threatening to undermine US hopes that economic pressure might force Kim Jong Un back to the nuclear negotiating table.

Satellite images in a new report by the Center for Strategic and International Studies in Washington seen exclusively by the Financial Times reveal the conversion of an air base at Uiju, near North Korea’s north-western border with China, in to a disinfection facility for containers transported across the border by train.

North Korea shut its land borders with China and Russia in January 2o20 in response to the onset of the coronavirus pandemic, leading to a mass exodus of foreign aid workers and diplomats. The country has since then conducted only very limited trade with China, by far its largest trading partner, mostly by sea.

The regime maintains that it has recorded zero Covid-19 cases, a claim that international health experts have been unable to verify as they have been blocked from delivering aid or vaccines.

In addition to the border closures, North Korea is struggling under the effects of international sanctions and a food crisis, following a poor harvest and crop damage from heatwaves and flash flooding.

Read more about the border reopening here.

Data: Japan’s Cabinet Office is expected to release preliminary gross domestic product data for the July-September quarter. Monthly industrial production is also on the schedule. Beijing will issue the country’s monthly retail sales and industrial production figures. IHS Markit will release China business outlook data. India and Indonesia are due to issue October foreign trade data, while Thailand announces third-quarter GDP.

Events: US Trade Representative Katherine Tai is scheduled to begin her visit to Japan. The Milken Institute’s eighth Asia Summit opens as a hybrid virtual and in-person event in Singapore. Melbourne Fashion Week kicks off with seven days of runways, talks, exhibitions and workshops.

Results: Japan’s Mitsubishi UFJ Financial Group and Recruit Holdings are to present their second-quarter earnings.

The Cyberspace Administration of China released draft rules on Sunday that would require firms to undergo a cyber security review before going public in Hong Kong if it implicates national security, threatening a recent shift as internet companies seek to list in the territory.

The powerful data watchdog launched a probe into Didi Chuxing for suspected data violations two days after its $4.4bn initial public offering on the New York Stock Exchange in June, forcing the once-dominant ride-hailing company to stop registering new users during the investigation.

After the move, the CAC said in July it would tighten rules for companies seeking to sell shares overseas, proposing rules that require companies with personal data of more than 1m users to undergo a security review. However, the guidelines did not clarify whether the requirement applied to Hong Kong listings.

The rules mark the first time Beijing has said that some listings in the territory will have to undergo cyber security reviews but stopped short of specifying the preconditions for this added layer of scrutiny.

Global investment banks raced over the summer to redirect Chinese groups’ IPO towards Hong Kong, seen as a more politically acceptable location to Beijing for tech companies seeking access to international financial markets.

Read more about the Cyberspace Administration of China rules here.

US Treasury secretary Janet Yellen said controlling Covid-19 was key to taming inflation, as Joe Biden’s administration tries to stop rising prices derailing the economic recovery and the president’s legislative agenda.

“The pandemic has been calling the shots for the economy and for inflation,” Yellen said, speaking on CBS’s Face the Nation programme. “And if we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do.”

Battling rising prices has become a focus of Biden’s economic team. Last week, the US consumer price index showed a 6.2 per cent gain in October from the previous year, its fastest increase since 1990.

Yellen said many workers remained cautious about the risks of catching the virus in their workplace, and outlined shifting demands from consumers associated with lockdown and new remote working patterns.

But she added that she expected spikes in the prices of goods such as used cars and petrol to abate by the second half of next year, if the pandemic is brought under control.

Read more about the pandemic and US inflation here.

Airbus has secured a multibillion-dollar order for 255 single-aisle jets from veteran airline investor Bill Franke, a deal that underlines the plane-maker’s forecast that the industry is poised to rebound strongly from the coronavirus pandemic.

The deal sealed at the Dubai Airshow on Sunday packages together A321neo aircraft for delivery across a stable of ultra-low-cost airlines backed by Franke’s Indigo Partners, including Europe’s Wizz Air and Frontier in the US. 

The order is a sign that low-cost, short-haul airlines are rapidly rebounding from the impact of the pandemic, and comes as Franke is positioning his airlines to capitalise on the industry-wide disruption.

“This order reaffirms our portfolio airlines’ commitment to consistent growth through the next decade,” he said.

The US private equity executive is considered to be one of the most successful aviation investors in history. He has bought stakes in a clutch of low-cost airlines and spurred growth by cutting costs and focusing on expanding markets such as eastern Europe.

Wizz Air, which will receive 102 aircraft, has promised to use the pandemic to expand across Europe and beyond. It made an unsuccessful bid for British rival easyJet this year.

Read more about the Airbus deal here.