Japan’s economy crashes, Shares steady, Fight over budget forecasts rages on: Economy roundup

One of Australia’s biggest trading partners has been hit by the biggest quarterly GDP contraction on record.

Japan’s economy, the second largest in the world, shrank by a massive 4% in the first quarter, although this was slightly lower than the 4.2% expected by analysts. It marks the country’s fourth consecutive month of GDP contraction.

Japan’s reliance on exports has hurt it during the downturn, but some economists say that recovery in industrial output could help the economy recover in the next six months.

The Australian sharemarket opened slightly higher today despite negative results from Wall Street overnight, but was soon brought down into negative territory.

The benchmark S&P/ASX200 index was down 14.7 points or 0.4% to 3802.6 at 12.10 AEST. But the dollar has posted a strong morning, reaching a seven-month high of US77 cents.

NAB shares lost 0.7% to $21.86 while Westpac also dropped 1.5% to $19.76. ANZ dipped 0.6% to $15.48 while Wesfarmers gained 1% to $22.22.

Lion Nathan has announced a 6.9% rise in first-half net profit for the six months ending 31 March, up to $176 million from $164.6 million in the pervious corresponding quarter.

The company said it has now amended its expectations for full-year net profit, and now predicts a figure of between $305 million and $315 million.

“These first half results show the resilience of our business, which has delivered another set of robust numbers,” chief executive Rob Murray said in a statement.

The Federal Opposition is still on the attack against the Government, saying budget forecasts for the economy are wrong. Opposition Treasury spokesman Joe Hockey said on ABC television that he does not believe that a surplus will return in six years, as the Government suggests.

“Treasury’s not beyond getting it wrong,” he told ABC, calling the forecasts “hugely optimistic”.

“The fact that Ken Henry came out so aggressively defending his assumptions today [Tuesday] illustrates the fact that there was a consensus view amongst all of the economists that the Treasury assumptions were optimistic.”

In the US, Wall Street suffered under drops in financial stocks due to new regulatory laws being passed through the Senate. The Dow Jones Industrial Average fell 29.23 points or 0.34% to 8474.85.

The new legislation will help clamp down on sudden rises to credit card interest rates and hidden fees. The bill has been nicknamed the “consumer bill of rights”, but must pass the House of Representatives before reaching President Barack Obama’s desk.

“We expect to pass (the bill) by sometime tomorrow, the earlier the better … My expectation is that we will send that bill directly to the President from the House,” House Democratic Leader Steny Hoyer said.

Analysts have said that profits of lenders including Bank of America, JPMorgan and Capital One will be hit by the bill.