2013weo
TRANSCRIPT
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2013 World Economic, Industry and
Commodity Market OutlookDecember 2012
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2010/1=100
I. World Economic Outlook1-1. Advanced Country Outlook: Pick-Up in 2ndHalf of Year Developed country economies should pick-up in the 2ndhalf of 2013 In the U.S. if the fiscal cliff is avoided business and household sentiment should improve and with household balance sheetadjustments likely progressing the pace of recovery in the
U.S. economy should speed-up. In Japan, a recovery in the external (world) economy and reconstruction demand propped up by the governments supplementary budget should lead to an upturn in the economy.
Although Europe faces a hostile economic environment, a likely recovery in the world economy should allow it to escape from an economic recession.
Possible background to a weak recovery: A deterioration in U.S. fiscal circumstances, and Japan being unable to depend on external demand (andaccompanying capital investment, etc.) to drive its economy, as it has in the past, could be causes
In past U.S. economic recessions expansionary fiscal policies were used to lead to recoveries, however, this time the deficit is being reduced before the economy has picked.
In Japan, before the economic bubble the economy was led by corporate activity driven by external demand. This time input from the corporate sector is weak, while personalconsumptions contribution, driven by various types of purchase subsidies, is large.
Major Advanced Countries Mining/Manufacturing Production
Sources: FRB, Eurostat, METI
dotted line is forecast image
U.S. Fiscal Balance/GDP Growth Rate- 3 Year Periods After Recessions
Japans Corporate Sector Contribution in Economic Expansion Phases
Sources: U.S. Commerce Dept., Japan Cabinet Office
-15
-10
-5
0
5
10-10
-5
0
5
10
15 GDP1
GDP
7311 817 907 013 0712
Euro Zonerecessionary phase
U.S.
Japanrecessionary
phase(estimate)
(estimate)
GDP growth rate (left axis)fiscal balance (right axis)
(as % of GDP)
11/73~ 7/81~ 7/90~ 3/01~ 12/07~
Real GDP Cor orate Sector Contribution Contribution - OtherAverage Growth Capital Investment Personal Consumption
Rate for Period Net Exports Government Expenditure
Private Inventory etc.
2/83~6/85 5.3% 3.9% 1.4%11/86~2/91 5.7% 2.0% 3.7%10/93~5/97 2.4% 0.2% 2.3%1/99~11/00 0.9% 0.6% 0.3%1/02~2/06 1.8% 1.5% 0.3%
3/09~ 2.2% 0.5% 1.7%
Economic
Expansion
Cycles
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12/1
12/3
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Brazil Russia
India China
Deceleration Background: Influence of fiscal/monetary tightening from mid-2010 through 2011 and economic slowdown in the developed countries, affectedboth internal and external demand
The large-scale fiscal stimulus actions and monetary easing that followed the Lehman shock were curtailed from around mid-2010 and tightening ensued with negative effects appearingin 2012 in the form of slowing domestic demand.
From 2011 sporadic slowdowns in developed country economies continued suppressing somewhat the BRICs economies due to the lower external demand.
While India and Russia have sluggish growth prospects for 2013, China and Brazil are expected to move out of their deceleration paths onto recovery tracks China, Brazil and various other emerging economies are expected to reverse their current deceleration trend on the back of recoveries in advanced countries and the effects from their
current economic stimulus measures. In India, due to the high level of debt further government fiscal expenditure is difficult and with high inflation monetary easing is problematic, so the economys ability to recover is weak.
Russias economy will remain sluggish due to the impact of Europes economic woes.
BRICs Interest Rates
Source: Bloomberg.
BRICs Real GDP
Note: BRIC countries real GDPs are based on theIMFsPPP valuations
Sources: Bloomberg, IMF, each countrys government statistics
I. World Economic Outlook1-2. BRICs Outlook: China/Brazil Emerge from Deceleration Phase Toward Recovery
456789
1011121314
09/1 09/7 10/1 10/7 11/1 11/7 12/1 12/7
()
-202468
1012
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
GDP()
dotted line is forecast imageBRICs Mining/Manufacturing Production
Brazil
India
Russia
China
(vs. previous year, %)
(vs. previous years degreeof contribution, %)
domesticdemand
externaldemand GDP
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Sources: IMF World Economic Outlook , October 2012, Marubeni Research Institute
The world economy will see a gradual recovery in 2013-14. We should see average growth rates of around 2% for developed countries and 6% fornewly emerging economies.
In terms of the world economy, with the problem of fiscal deficits in the developed countries stemming from enlarged government debt and instability in the financialmarkets still remaining, economic growth in the developed countries should be moderate at around 2%. As balance sheet adjustments in the U.S. move forward, the
growth rate should gradually pick-up. In Europe, with austerity measures still being carried out economic growth will likely remain at low levels. In Japan, the currentgrowth rate of between 0% and 1% should continue.There will be no change in the emerging economies as the main players in driving the world economy. Emerging economy middle classes continue to expand, while thesize of consumer markets increase. Furthermore, strong investment is boosting domestic demand. However, because economic growth in emerging and developingeconomies is relatively unstable (inconsistent), growth rates will not generally reach the 7% to 9% levels seen before the Lehman shock occurred.
Economic Growth Rate Forecasts (vs. previous year, %)
I. World Economic Outlook
(Reference) 2013-14 Growth Rates: Advanced Countries 2%, Emerging Economies 6%
Sharevs. prior year
(actual)
vs. prior year
(actual)
vs. prior year
(actual)
vs. prior year
(estimate)
vs. prior year
(forecast)
vs. prior year
(forecast)
vs. prior year
(forecast)
100.0 2.8 -0.6 5.1 3.8 3.3 3.6 4.1
51.1 0.1 -3.5 3.0 1.6 1.3 1.5 2.3 19.1 -0.3 -3.1 3.0 1.7 1.7 2.3 2.3
14.2 0.4 -4.4 2.0 1.4 -0.4 1.1 2.2
5.6 -1.0 -5.5 4.7 -0.6 2.7 0.7 0.5
2.9 -1.0 -4.0 1.8 0.8 -0.4 1.1 2.2
3.9 1.8 -0.7 8.5 4.0 2.1 3.6 4.1
48.9 6.1 2.7 7.4 6.2 5.3 5.6 5.9
3.5 3.2 -3.6 4.6 5.3 2.0 2.6 3.2
3.0 5.2 -7.8 4.3 4.3 3.7 3.8 3.9
14.3 9.6 9.2 10.4 9.2 7.8 8.2 8.5 5.6 6.9 5.9 10.1 6.9 4.9 6.0 6.4
3.6 4.8 1.7 7.0 4.5 5.4 5.8 5.7
8.7 4.2 -1.5 6.2 4.5 3.2 3.9 4.1
2.9 5.2 -0.3 7.5 2.7 1.5 4.0 4.2
4.9 4.5 2.6 5.0 3.3 5.3 3.6 3.8
2.5 5.6 2.8 5.3 5.1 5.0 5.7 5.5
ASEAN 5
IndiaChina
Central/South America
Middle East/North Africa
Brazil
Sub-Saharan Africa
Russia
Japan
UK
Newly Emerging Economies
NIEs
Central/Eastern Europe
World
Advanced EconomiesUS
Euro Zone
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0
5
10
15
20
25
30
35
40
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
B-
BB
BBB-
BBB+
BBB+
AA+
AAA
56
9OMT
ESM103
11
/
12
27
09/10
10/45
10/6EFSF
4
ECB1112
LTRO12
2011 2012
7ECB
42
44
46
48
5052
54
56
58
60
62
10/1
10/4
10/7
10/10
11/1
11/4
11/7
11/10
12/1
12/4
12/7
12/10
5050
Obama Administration (Democrats) andRepublican Party on the Fiscal Cliff
Europe: Although financial supportmeasures put in place, it has not led toa fundamental solution to the crisis
Such financial support schemes as the
introduction of outright monetary transactions(OTM), or the unlimited purchase ofgovernment bonds (Sept.), by the ECB, and thelaunch of the European Stability Mechanism(ESM) as a safety net to maintain financialorder (Oct.), etc., have been put forth one afteranother.
Lending to Greece resumes (Dec.).Repurchases of government bonds to reducedebt proceeds smoothly, and the debt level falls9.5% against GDP.
Moves to establish a central supervisingmechanism for Euro area banks (planned to
start in March 2014). The long-term aim isregion-wide financial integration through abanking union.
On the other hand, the existence of unstabledomestic political situations, like recent localelections voicing discontent with austeritypolicies in Spain and the announcement ofPrime Minister Montisresignation in Italy, showthat confidence in these policies is dropping.
With economic growth not expected there isuncertainty over whether fiscal reconstructioncan be achieved or not in many Euro countries.
U.S.: Falling confidence overgovernment policies related to thefiscal cliff.
Due to uncertainty over the fiscal cliff businesssentiment has not improved. The key to a realeconomic recovery in the U.S. is avoiding thefiscal cliff.
Even if the fiscal cliff is avoided though, theproblem of fiscal reconstruction in the mid tolong-term still remains.
I. World Economic Outlook
1-3. 2013 Main Points: Uncertainty Over U.S./Europe Economic Policies a Risk Factor
Source: Bloomberg Note: Ireland 9 year bond rating is based on the S&P long-term Irish currency ra ting (as of 12/19)
Business Confidence (Industry PMI)
Source: Bloomberg
Sources: Various media reportsU.S. Euro Zone
Over 50 = expanding activities/Under 50 = shrinking
Dec.: LTRO carried out
Nov./Dec.: ECB lowers interest rates
Apr.: Portugal requests support
July: Portugal requests support
9/10: Greece debt problems emerge10/4-5: Greece aid request agreed to10/6: EFSF established
ESM inaugurated: Oct.ESM inaugurated: Oct.
May/June: Greek elections
July: ECB lowers interest rates
Sept.: OMT introduced
Lending to Greece resumed: Nov.
Spanish bank support/Greek bond purchases: Dec.
Greece
(B-)
Portugal
(BB)Spain
(BBB-)
Ireland
(BBB-)
Italy
(BBB-)
France
(AA-))
Germany
(AAA)
Long-Term Interest Rates and Policy Responses
President (Democrats) Republicans
Revenues
Seek to cut defense spending. Against cuts to defense budget.
Agreement in principle to end tax cuts for the wealthy (real tax
increase). Negotiating the de finition of wealthy.
Expenditures
Against any large-scale cuts to
Medicare/Medicaid.
Seek to shrink the scope of the
Medicare/Medicaid system.
Give authority to the
administration to raise the limit.
Raise the ceiling for a limited
period.Debt Ceiling
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Source: Bloomberg
Real GDP Growth Rate and Per Capita GDP (PPP)
Future growth expectations low
Even 4 years after the Lehman shock, theeconomic strength of such East Asiancountries as China and Japan, among others,continues to be lower than it was before the
crisis, which is one factor in largely reducedexpectations for future growth.
If you look at the IMFs long-term growth rateforecasts for China (all made in autumn), theywere initially around 9.5% which would havebeen a return to the growth rates of the firsthalf of the 2000s. However, the currentforecast has been substantially reviseddownward to about 8.5%.
Along the same lines, Japans long-termgrowth forecast prior to the Lehman shockwas pegged at just under 2%, but hasrecently been lowered to 1%.
Earlier forecasts for mid to long-term Koreangrowth were around 5%, but since have beencut to about 4%. It seems that countriesfacing the prospects of lower growth are morethan just a few.
Reduced confidence in growth may beshackling economies
In Japan and China, shrinking growthexpectations have led to a worsening inbusiness sentiment. As firms and householdslose confidence in the prospects for futuregrowth, economic activity falls off, and puts adamper on the possibilities for growth.
In Korea the economic growth rate hasdeclined even in the face of rising per capitaGDP. China has been following a similar path,and as mentioned above, is not likely to avoida lower growth rate.Source: IMF Note: Years after 2012 are forecasted. Source: IMF
I. World Economic Outlook1-4. 2013 Main Points:East Asia Growth Expectations Lower, Restraining Economies
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10/1
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5050
200
200
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201
201
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
-6
-4
-2
02
4
6
8
10
12
14
16
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
1GDP
GDP
GDP
1GDP
7.5
8.0
8.5
9.0
9.5
10.0
2012 2013 2014 2015 2016 2017
2009
2010
2011
2012
0.5
1.0
1.5
2.0
2.5
2012 2013 2014 2015 2016 2017
20092010
2011
2012
Business Confidence (Industry PMI)Over 50 = expanding activities/Under 50 = shrinking
Japan China
Change in China Growth Rate Forecast(all IMF autumn forecasts)
2009 forecast
2010 forecast
2011 forecast
2012 forecast
Change in Japan Growth Rate Forecast(all IMF autumn forecasts)
2009 forecast
2010 forecast
2011 forecast
2012 forecast
(China, year)
GDP growth rate(China)
per capita GDP(Korea)
GDP growth rate(Korea)
(GD
Pgrowthrate,
%)
(percapitaGDP,
$)
per capita GDP(China)
(Korea, year)
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Economy recovering, but fiscalproblem an issue
Weak corporate sector (exports, capitalinvestment) being compensated by anongoing moderate recovery in the household
sector (personal consumption, residentialinvestment).
As far as scenarios related to the fiscal cliffproblem go;the Democrats andRepublicans come to terms and avoid it,the decision is postponed until spring, orno agreement is reached, which we dontbelieve will happen.
Household debt situation improves Due to the slowdown in the world economy
and uncertainty over fiscal policy capital
investment in the corporate sector hasworsened. So the corporate sector shouldremain sluggish for the time being.
Strong auto sales show that the householdsector has picked up. The background to thisis the progress households have made incleaning up their balance sheets. Thehousing sector, which has been a majorissue in the U.S. economy, has seencontinued improvement in sales and priceswhich is giving a boost to the economy.
However, there is some concern over thesustainability of this economic recovery dueto the slow pace in the recovery ofdisposable income.
On the employment front, even though theunemployment rate has continued to remainhigh, non-farm payrolls rose by more than100,000 in the second half of the year. Ledby the private sector, the mild recovery isexpected to continue.
Household Sector Loans/Outstanding Debt Disposable IncomeHousing Sales and Prices
Real GDP Growth Rate
() 2012-13 are IMF estimates.
Sources: CEIC database, IMF
Sources: CEIC database, S&P
Source: CEIC database
Sources: BEA, FRB
I. World Economic Outlook2. U.S.: Housing Market Recovering/Household Debt Improving = Stable Economic Growt
-1,000
-800
-600
-400
-200
0
200
400
600
-100
-80
-60
-40
-20
0
20
40
60
08
1
08
9
09
1
1
1
1 11
1
11
1
100
120
140
160
180
200
220
0
200
400
600
800
1000
06Q1
06Q3
07Q1
07Q3
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
11Q3
12Q1
12Q3
20
2000/1=100
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
80
90
100
110
120
130
140
1
96
1 1
98
1 1
00
1
1
1 1 1 1 1 1 1 1
1
1
11
1
()
10
2.3
2.22.6
2.4
0.1
2.5
1.3
4.1
2.0
1.3
2.7 2.4
1.8
2 22 1
-3
-2
-1
0
1
23
4
5
6
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
10
11
12
13
GDP
Change in Non-Farm Sector Employment(vs. prior month)
(10,000 persons)
govern-ment
privatesector
non-farm sector accumulatedincrease/decrease (right axis)
(seasonally adjusted,10,000 units)
(seasonally adjusted,1/2000 = 100)
housing loans (right axis)
other loans (left axis)
outstanding debtdisposable income
$ billion
(seasonally adjusted degree ofcontribution vs. prior period, %)
externaldemand
domesticdemand
real GDP
annually
new home sales
existing home sales
Case-Shiller home price index, (20 cities, right axis)
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-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
07Q1
07Q3
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
11Q3
12Q1
GDP -1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
20
10
20
11
20
12
20
13
-0.4
2.0
1.4
0.2
80
85
90
95
100
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
11Q3
12Q1
12Q3
2008Q1=100103
95
100
105
110
115120
125
130
135
140
145
150
155
160
00Q1
00Q3
01Q1
01Q3
02Q1
02Q3
03Q1
03Q3
04Q1
04Q3
05Q1
05Q3
06Q1
06Q3
07Q1
07Q3
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
2001Q1=100
0
5
10
15
20
25
30
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
I. World Economic Outlook3. Europe: Emerging From Recession, But Recovery To Be Mild
Economic slump continues The European economy has had negative
growth ever since the Oct.-Dec. period of2011.
Growth rates in the engines of the regionseconomy, Germany and France, have beendull. No improvement in the high rates ofunemployment, centered on Greece andSpain, has been seen.
Long-term interest rates havestabilized
Following the official introduction of the OMTand ESM schemes, long-term interest ratesbegan heading downward. Followingagreement for additional aid to Greece andthe implementation of support for Spanishbanks, financial markets began to returnfrom their previous lull.
Such political cooperation as the creation ofa central supervising body for banks, etc.,aimed at stabilizing financial markets willcontinue.
Labor costs falling With austerity measures continuing, it is
difficult to expect a self-sustained recoveryled by domestic demand occurring.
Although there is no evidence of animproving economy, Greek labor costs havebeen declining.
Europes economy is expected to begin topick-up and emerge from its downturn fromspring of 2013 driven by exports centeringon Germany as a by-product of an improvingworld economy. However, the pace of therecovery should be rather moderate.
Euro Zone Real GDP
2012-13 are IMF estimates Sources: Eurostat, IMF
GDP Growth by Country
Unemployment Rate Source: Eurostat
Source: Eurostat
Labor Costs
Source: Eurostat
Germany
France
Spain
Italy
Greece
external demand
domestic demand
real GDP(vs. prior period, %)
(calendar year)
Greece
Spain
Italy
France
Germany
SpainFranceItalyGreeceGermany
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2012: Confusion due to policy effects,external demands downside
On the one hand the economy was helped byreconstruction driven demand, on the other it was hurtby the end of eco-car purchase subsidies, and the
slowdown in the world economy. This combined withreduced exports and production caused by theworsening relationship between Japan and Chinaseems to have sent the Japanese economy intorecession.
Mainly due to increased imports of fossil fuels as analternative to nuclear power the trade deficitexpanded shrinking the current account surplus.
2013: Possible external demand led recovery
A recovery in the world economy led by the emergingeconomies could spark a pick-up in the Japaneseeconomy.
However, there are fears that the economy could bepushed downward if reconstruction demand peaks outand if the deterioration in Japan-China relationsremains prolonged.
New administrations public sectorinvestment plans
The new administration wants more collaborative tieswith the Bank of Japan, and might revert to revisingthe central bank law in order to carry out strongermonetary easing policies to stamp out deflation.
The formation of the 2013 fiscal year budget has beendelayed so that it can be significantly enlarged as partof the new governments first stage emergencyeconomic measures.
The new administration has a 3 year, 15 trillion yen($150 billion) public works investment plan (NationalInfrastructure Reinforcement Plan) aimed atreconstruction (Northeast Japan) and large scaledisaster preparation. While this fiscal stimulus isexpected to make a contribution to the economy,there are concerns that Japans already critical fiscalsituation will only deteriorate further.
LDPs Main Economic/Fiscal Policies
Real GDP Growth Rate
Mining/Manufacturing Production Index
Current Account Balance (fiscal year base)
Sources: Japan Ministry of Finance, Japan Foreign Trade Council
Source: Media reports
I. World Economic Outlook
4. Japan: External Demand Starting Point to Gradual Recovery
-6
-4
-2
0
2
4
6
8
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
12Q4
Source: METI
5.84.4
5.5
-1.6
-7.3
-2.8
10.4
0.3
5.7
-0.1
-3.5
4.7
-0.6
1 7 0 7
10
-8
-6
-4
-2
0
2
4
6
8
10
12
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
10
11
12
13
GDP
-15
-10
-5
0
5
10
15
20
25
30
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
) 2012-13 are Marubeni Research Institute estimates
ource: CEIC database
externaldemand
domesticdemand
real GDP
(seasonally adjusted degree ofcontribution vs. prior period, %)
incomeothertrade and servicesbalance
annual Japan ForeignTrade Council
estimate
(trillion yen)
other
transportation machinery
mining/manufacturing industry
general machinery
electrical machinery/electronics/IT
(estimate)
(vs. prior period, %)
Policy Area Objectives/Content
New (comm and) Headquarters for Japan's Economic Revitalization, development of a
"recapture of50 trillion in national income project".
Top proirity: Escaping from deflation, yen appreciation. Achieve a nominal economic
growth rate of 3%.
Carry out 5 years of concentrated reform to becom e the "world's easiest place for
companie s to do business" and a "country where it is possible for individuals to
maximize there employment and income opportunities".
Recycle overseas investment earnings domesticall y and vice-versa to create a growth
linkage and becom e an "industry investment powerhouse c ountry".
Delation
Set 2% inflation target. With a view toward reivising the central bank law, impl ement
aggressive monetary easing policies.
Yen Depreciati on Create a "public-pri vate foreign bond fund" through cooperation betweent the finance
ministry, the BOJ and the pr ivate sector.
Early implementation of "first phase emergency economi measures (large scale
budget of 10 trillion?).
Fiscal Stimulus
Establish a "Basic National Infrastructure Reinforcement Law" (additional 15 trillion
in ivetment over 3 years).
Growth Strategy Establisha a Japan Econom ic Revitalization and Strengthening Industrial
Competitiveness Law aimedat the mid to long-term.
Significantly reduce the corporate tax rate.
Create a "Committee on Industry Competitiveness" in the Japan Economic and Fiscal
Policy Headquarters.
Overall
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12.1
10.39.7 9.8 9.8 9.5
9.2 8.9 8.1 7.6 7.46 7 8
10.4
9.37.78 2
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
10
.1Q
2Q
3Q
4Q
11
.1Q
2Q
3Q
4Q
12
.1Q
2Q
3Q
4Q
10
11
12
13
Economic Growth Stages
I. World Economic Outlook
5. China: Purposely Steering Economy Toward Self-Sustained Medium Range Growth 2012: Moderate recovery after hitting bottom in
the July-Sept. period
Such economic measures as the promotion of purchasesof eco-friendly household appliances and investment insubway construction and other projects to help jump startthe economy have been gradually successful. So, afterhitting bottom in the July to Sept. period of 2012, theeconomy began to moderately recover.
However, in order to avoid a crash from over-extendedhigh growth, the final job of the Hu Jintao governmentwas to put the economy onto a medium paced growthpath, and as such no large scale fiscal stimulus wasinjected into the economy whose growth rate is expectedto remain below (%.
2013: Growth rate moves into 8% range onimproved external/domestic demand
In 2013 both the domestic and overseas demand climatewill likely improve, so the economic growth rate shouldrise to somewhere in the 8% range.
Although the new government will in all likelihood pursuean economic growth strategy, achieving significantgrowth may prove difficult as the potential growth rate hasshifted to a lower level (economic stage).
A shift from an era of high growth to a mediumgrowth stage
Since Chinas open reforms began in 1978 it hasachieved an average annual growth rate of 10% (10%range) for more than 30 years .
However, limits are beginning to appear in Chinas highgrowth model which was spurred by exports and
investment from new economic reforms and marketopening measures as well as its population bonus. Thereis now some concern that China is falling into the middleincome country trap.
As a solution to this problem, raising incomes, expandingthe consumer market and promoting deregulation andliberalization in the economy are all necessary. In otherwords, China must shift to a self-sustainable economicgrowth model. This is the biggest challenge for the newgovernment.
Sources: China Central Statistics Bureau, United Nations Population
Bureau, World Bank
2012-13 are Marubeni Research Institute Estimates
Main Economic Indicators
Real GDP Growth Rate (vs. same period prior year, %)Final
ConsumptionNet
ExportsCapital
FormationReal GDP
China
Japan
Working Age Population Ratio
China
Capital Formation to GDP Ratio
Japan
China
Exports to GDP Ratio
Japan
Jan.-Mar. Apr.-June July-Sept. Oct.-Nov.
Fixed Asset Inv estment 20.9% 19.9% 20.7% 21.6%
Inv estment Public Ex penditure - 2.4% 12.9% 23.3% 25.6%
Residential Investment 27.0% 17.4% 19.0% 27.3%
Consumer Goods Sales 15.2% 13.9% 13.5% 14.7%
Motor Vehicle Sales -3.9% 10.0% 4.4% 6.8%
Exports 7.6% 10.5% 4.5% 6.9%
Trade Imports 7.1% 6.5% 1.6% 1.0%
Net Exports -261.6% 47.3% 24.7% 63.7%
M in in g/Ma nufa ctu rin g Pr od uctio n 1 6.6% 9 .5 % 9 .1 % 9.9%
Steel Production 0.3% 1.6% 2.1% 11.5%
Electricity Generation 6.5% 1.2% 2.1% 7.5%
PMI (manufacturing) 51.5 51.3 49.7 50.4
Consumption
Produciton
(vs. same period previous year)
Calendar Year
i O
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-6-4-202
468
101214
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
2010
2011
2012
2013
GDP
()
7.5
2.7
1.5
4.0
0
200
400
600
800
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12
3
-10
-50
0
50
100
0
100
200
300
400
500
600
700
07/1
07/4
07/7
07/10
08/1
08/4
08/7
08/10
09/1
09/4
09/7
09/10
10/1
10/4
10/7
10/10
11/1
11/4
11/7
11/10
12/1
12/4
12/7
12/10
-20
-16
-12
-8
-4
0
4
8
12
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
2010
2011
2012
2013
GDP
4.3 4.3
3.7
3.8
I. World Economic Outlook
6. Brazil Russia: Investment Recovery Expected in Brazil, Europe to Impact Russia
Brazil: Recovery in Investment Key to Economic Revival
Since 2011, Brazil has faced the problems of a high real, high labor costs, the peakingout of inward foreign investment and delayed action on monetary easing action.Although the government eventually cut interest rates and introduced measures tocurb the reals rise, the economy has continued to slow.
And although there was a pick up in the economy due to fiscal stimulus focusing onconsumption and led by increased auto sales, the recovery was short-lived and notself-sustainable.
An expected improvement in external economies, including the bottoming out of theChinese economy, and the return of capital investment spurred by monetary easingshould push the Brazilian economy to a moderate recovery.
Russia: Sluggish European economy to pull Russias down
Although the Russian economy has been supported by personal consumption andfixed capital formation, domestic demand has been dull. Energy-related prices,Russias main export category, are weak, and the sluggish European economy, itsmain export destination, will affect exports, so it is likely that the Russian economywill be headed for a slowdown.
With supply limitations and continued high food prices inflation continues. However,as the employment climate is good a large drop off in personal consumption is notexpected.
A recovery in the world economy should diminish the effects of Russias sluggishconsumption and help prop up the economy.
Russias Trade and Trade Growth() 2012-13 are IMF estimates. Sources: CEIC database, IMF
Source: CEIC database Source: CEIC database
domesticdemand
real GDPexternaldemand
(degree of contributionvs. prior period, %)
Brazils Real GDP Growth Ratecalendar
year
domestic demand
real GDP
external demand
(vs. prior period, %)
Russias Real GDP Growth Rate calendar year
() 2012-13 are IMF estimates. Sources: CEIC database, IMF
exports foreign investment flowstrade balance
Brazils Trade and Inward Foreign Investment($100 million)
($100 million)
non-energy energy-related trade growth rate (right)
(vs. prior period, %)
1
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Total Exports (value)
Real GDP Growth Rates Consumer Prices Stable growth supported by domestic demand
Steady growth continues driven by personalconsumption from expanding middle classes. In termsof the GDP growth rate, after coming in at 4.5% in 2011it shoutd hit 5.4% in 2012 and 5.8% in 2013.
Due to the slowdown in the U.S. and Chineseeconomies, exports have been sluggish and inwardinvestment from overseas has slowed, which has hadsomewhat of a suppressive effect on the ASEANeconomies as a whole. However, even in suchcountries as Thailand and Malaysia, whose economiesare highly dependent on overseas exports, fiscalstimulus measures helped boost consumption anddomestic demand bolstered the economy leading tosteady growth in general.IndonesiaMaintained solid growth in 2012 on the back
of domestic demand. 2013 should also see stablegrowth led by domestic demand, however, there is
some concern over rising inflationary pressures.PhilippinesExpanded public investment gave the
economy a boost. Remittances from overseas andstrong personal consumption continue to drivegrowth.
ThailandExperienced a V-shaped economic recoveryon the back of flood reconstruction measures. In2013 there will be limits to how much externaldemand can push up the Thai economy, and fiscalstimulus aimed at boosting consumption will shrinkwith a slight negative effect on the economy.
MalaysiaEven though external demand fell, fiscal
stimulus measures boosted consumption allowingthe economy to maintain steady growth. However,the likely reduction of these measures in the nearfuture should have some effect on the economy inthe coming year.
VietnamDue to the impact of monetary tightening,inflation is showing signs of calming. With anexpansion of public investment foreseen in 2013, theeconomy is expected to accelerate.
I. World Economic Outlook7. ASEAN: Stable Growth Buoyed by Domestic Demand
Real GDP Growth Rate
Sources: CEIC database, IMF
() 2012-13 are IMF estimates
Source: CEIC database
Source: CEIC databaseSources: CEIC database, IMF
() 2012-13 are IMF estimates
. or conom c u oo
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-12
-8
-4
0
4
8
12
16
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
2010
2011
2012
1
GDP()
10.1
6.8 6.0
4.9
-10
-5
0
510
15
-8
-4
0
48
12
07/1
07/4
07/7
07/10
08/1
08/4
08/7
08/10
09/1
09/4
09/7
09/10
10/1
10/4
10/7
10/10
11/1
11/4
11/7
11/10
12/1
12/4
12/7
12/10
GDP
7
8
8
9
91
1
1
0
200
400
600
800
1000
06Q1
06Q2
06Q3
06Q4
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q2
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
12Q1
12Q2
12Q3
(
20116100
-8
-6
-4
-2
0
2
4
07Q1
07Q3
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
11Q3
12Q1
GDP
. or conom c u oo8. India/Korea: Economic Reforms Essential for India, External Demand Dependence
Continues in Korea
India: Limitations due to high inflation and fiscal deficit, structural economicreforms essential
Due to high inflation and the government deficit, the government has not been able to carry outeffective economic stimulus measures even as the economy decelerates. So, economic growthcontinues to remain dull.
The government embarked on such economic reforms as the easing of restrictions on foreigninvestment (retail industry, etc.), and the reduction of domestic subsidies (fuel, etc.). Stock pricesare rising on the possibility of a reduction in the fiscal deficit and improved productivity in theeconomy.
While there is currently little room for monetary easing, the prerequisite for a full economicrecovery would be an upturn in the world economy as well as accelerated investment in theeconomy and a recovery in domestic production based on progress on economic reform.
Koreas Real GDP Growth Rate
Korea: Although a shift in economic policy is expected, dependence on externaldemand remains
As the Korean economy is dependent on external demand the economy has been slowing asexports have become sluggish due to the slowdown in the world economy. Further clouding thepicture is that the relatively cheap won that exports have been dependent on, is showing signs ofreversing course.
Also, household debt has risen so it is hard to imagine a situation in which personal consumptionexpands. The current external demand driven economic structure will continue into the near futureso as the world economy recovers Korean exports should pick up and lead the economy back up.
One of the major challenges facing the new administration is correcting the large disparities(income gap, etc.) in the economy and shift away from the preferential treatment allotted the largemajor corporations in the economy.
Indias Real GDP Growth Rate
Indias Wholesale Prices/Fiscal Balance
Sources: CEIC database, Korea National Statistical Office
6.3
3.6
2.7
3
0
1
2
3
4
5
6
7
2010
2011
2012
Source: CEIC database
() 2012-13 are IMF estimates. Sources: Reserve Bank of India, IMF () 2012-13 are IMF estimates. Sources: Korea National Statistical Office, IMF
domesticdemand real GDP
externaldemand
calendaryear
(degree of contributionvs. prior period, %)
external demand
domestic demand
real GDP
(calendar year)(vs. prior period, %)
other household debt
housing related debt
Seoul House Price Index
(vs. GDP, %)
(trillion won) (June 2011 = 100)
Koreas Housing Prices/Outstanding Debtprimary balance
wholesale price index (right axis)
I. World Economic Outlook
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Sources: UNCTAD, Bloomberg, BOJ
1
ODA and FDI to Africa
Sources: UNCTAD, OECD.
The Middle East/North Africa Following the Arab Spring
Japans ODA/FDI to Africa
. Wo d co o c Ou oo9. Middle East/Africa: Democracy Movements at Midpoint, World Investment in Africa
Robust
Sources: Japans Foreign Ministry, various media reports
0
100
200
300
400
500
600
700
2005 2006 2007 2008 2009 2010
ODA
-5
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010
ODA
ODA
FDI
($100 million)
ODA
FDI
($100 million, minus outflows)
Democracy movements at midpoint
The Arab Spring movements were triggered by theDecember 2010 pro-democracy demonstrations inTunisia and swiftly spread to other countries in theMiddle East and North Africa.
First in Tunisia and then in Libya and Yemen, oldregimes fell with subsequent efforts made to amendtheir constitutions and hold new parliamentary andpresidential elections, while in Egypt a civilianpresident emerged for the first t ime.
However, in Tunisia ratification of a new constitutionhas been delayed. In Egypt the expansion ofpresidential authority has led to large-scaledemonstrations, and Syria is currently in a state ofcivil war. These pro-democracy movements arenow at their midpoint.
Focus is on Africa, the last of the emerging
markets About half of the worlds top 20 fastest growingeconomies are in Africa, and with the benefit of apopulation bonus through 2050 Africas economicgrowth potential is huge.
U.S. and European companies have been quick tosee Africas attractiveness and have been investingaggressively despite the risks involved. In recentyears the amount foreign direct investment in Africahas overtaken the amount of ODA going to thecontinent.
On the other hand, the level of ODA going to Africafrom Japan still far exceeds the amount of private
investment flowing into the continent, which is acause for concern.
In June of 2013 the Tokyo International Conferenceon African Development (TICAD V), a conferenceon international cooperation between Japan andAfrica convened every 5 years, will be held . It isexpected that this conference will help activateJapanese investment in Africa.
Country How Democratization Started Current Situation
Egypt
Libya
Syria
Bahrain
Jordan
Morroco
Oman
Kuwait
Algeria
Tunisia
In June of 2012 the Muslim Brotherhood is declared free
and legitimate, their leader Mr. Morsi enters the election
and becomes the first civilian president. Morsi announces
plans to exapnd presidential powers leading to an
outbreak of demonstrations. The supreme constitutional
court invalidates part of the parlianetary elections.
President Morsi vows to hold parliamentary elections in
the 1st half of 2013. However, their is strong opposition
to a new Islamist leaning constitution, confusion reigns
over a voter referendum to ratify the constitution.
Demonstrations break out in
Decemebr 2010, PresidentBen Ali goes into exile in
January.
Demonstrations start in
February 2011. President
Saleh steps down in
November.
Yemen
Demonstrations begin to occur
in March 2011, turns into a
state of civil war.
Civil war continues between the Assad regime and the
opposition factions.
In response to calls of political and economic reform by
the citizenry, government says it will amend the
constitution
In July of 2012 elections for a constitutional assembley
are instituted. In August authority was given to a
provisional national councilA cabinet was formed in
November. They will serve until a constitution has been
enacted and a general election carried out.
In February 2012 Mr. Hadi appointed president. The
constituion is to be amended in 2nd half of 2013 and
parliamentary and presidential elections to be carried out
in February 2014.
Civil war commences from
February 2011. In October
Libya's former leader Qaddaffi
is killed.
In Oman, part of the king's authority has been transferred
to congress in respons to various pre-democracy
requests.
Demonstrations break out in
January 2011. In February
President Mubarak resigns.
Anti-government
demonstrations
Anti-government
demonstrations
An interim parliament and president are put in place in
2011. a new constitution is drawn up with parliamentaryand presidential elections schedule for 2013. However,
enactement of the constitution is postponed.
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Paper/Pulp The domestic marketfor paper and paperboard peakedin 2000. Such major products asprinting and publishing paper continue to be pressed by cheap imports. Cardboarddemand will be sluggish as reconstruction demand winds down. Industry leaders areaggressively making moves overseas to capture growth markets in Asia and otherregions.
IT/Telecom The IT network and cloud computing environment is expanding. Smart phones and tabletdevices continue to diversify applications, and the networking of smart phones, smart TVetc., creating smart appliancesthrough LTE (wireless standard) for practical use isadvancing. More advanced technology related to information securitymanagement,backupand other risk management needs is growing.
Steel With the expansion of public investment and repair of aging infrastructureand a demandrush for big ticket items like homes before the consumption tax is raised, constructiondemand will likely increase, however auto-related steel demand will be weak.Anoversupply of steel will continue in East Asia.The rising cost of electricity will especiallyhurt electric arc furnaces, so the management environment in the industry will be severe.
Textiles Despite a tough climate for personal consumption, there is expected to be demand forapparel using functional materials, In terms of industrial textiles, although home sales areexpected to recover, auto production is forecasted lower, so demand for auto-relatedtextiles should weaken. Demand for carbon fiber should be firm driven by the expansionof wind power plants and use in aviation applications.
Electric
Power/
Energy
Such fuel importsas LNG and heavy oil, etc., for use in electric power are at high levels.On the other hand, gasoline demand continues to slightly shrink. In the short-term the
restarting of nuclear powerplants and revisal of renewable energy feed-in-tariffs in thecoming year will be issues. In the mid to long-term the focus will be on government actiontoward increased liberalizationof the market and creating a fair competitive environmentthrough reform of the electric power structure.
Industrial
Plants
Due to the sluggish growth of the Chinese economy metal and mineral resource priceshave been on the weak side. Exports to Europe remain subdued. Large inventories of
construction machinery in such major markets as China are one of the main causes ofsuppressed demand. Infrastructure repair needs in developed countriesis high, sotesting equipment demand should rise, and overall demand for industrial plants andequipment in emerging economies should continue to increase.
Chemicals Ethylene production has been slack since peaking in 2007. Industrial use chemicalshipments are down in such major demand industries as motor vehicles and electricmachinery. Japanese exports are on a downwardpath as China and the Middle Eastexpand production. Against rising global cost competitiveness, the key to survival isproduction efficiency, slimming down overcapacityand targeting higher value-addedregions, meaning expanding overseas using a strategy of selection and concentration.
Construction/
Cement
According to the Research Institute of Construction and Economy forecasts constructiondemand will be up 2.0% in fiscal 2013 compared with the previous year (fiscal 2012sestimate is +4.1%). Government construction spending will likely fall compared to fiscal2012, but private residential investment, including reconstruction demand should see amoderate recovery from a demand rush by consumers to beat the raising of theconsumption tax. However, a shit to overseas investment by the private sector couldhave reverse effects offsetting the demand rush.
Electric
Machinery
Digital household appliance sales are sluggish. The market for PCs, game consoles, TVs,etc., are shrinking as smart phones and tablet devices become alternatives. Centered on
Europe, demand for office equipment is weak. In terms of electrical machinery andsemiconductors used in industry, demand is brisk in products like the i-phone, however,Japanese manufacturers are increasingly struggling in the face of overseas competition.
Attention is now turning to smart energy related equipment..
Distribution Personal consumption is expected to grow 1.1% in 2013 compared to 2012 (2012sestimate is +1.7%). Due to the commoditization of tablet devices, the analysis and
accumulation of product and service information by customers and customer informationby the service industry is both growing and becoming easier, leading to activatedservices. Retailers no longer waits for customer, but go to them. The virtual distance andphysical distance to the customer is shrinking.
Motor
Vehicles
Domestically, in lieu of the end of lower taxes on the purchases of eco-cars it is likely thatsales will drop. Additionally, the strong yen may continue to be a burden calling for areconsideration of the domestic production structure. A recovery in the U.S. andSoutheast Asian auto markets continues, however, reduced Japanese auto production inChina is a concern. Due to slumping sales in Europe, a global realignment of theindustryis starting to take place.
Food Food product sales are expected be up 1.1% in 2013 compared to 2012 (+0.2% in 2012)With the increase in elderly, dual income and single households the market for theready-to-eat meals and online supermarkets will grow. Price reduction (includingdevelopment of private brands) in anticipation of the hike in the consumption tax isspreading, Within this climate employee cutbacks and restructuring will take place. In themid-term, being able to respond to a shrinking market will be key.
II. Industry/Commodity Market Outlook
1. Japanese Industry Directions: Major Industry Trends/Issues in 20131. Newly emerging markets in Africa and Indochina are gaining attention, companies reviewing their strategies toward China.2. With the global economic growth structure shifting, companies are adjusting their business portfolios and re-integrating based on these new global realities.3. On the domestic front, with tablet devices spreading rapidly and electric power systems transforming, various Japanese industries are moving to become
smarter by equipping themselves with smart devices and systems (IT-ization).
1
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It is estimated that listed firms ordinary profits will rise by 19%, a total of about 2.8 trillion yen ($298 billion)in fiscal 2013. In particular, this will be driven by a solid U.S.car market and by the effects of structural reforms in the Japanese electrical and precision machinery industries in fiscal 2011-12 (however, this is based on theassumption that additional restructuring costs will not occur).Still, compared to 2007 ordinary company profits by industry in Japan will still be generally lower. For example, profits in the steel and non-ferrous metal industry will be73% lower than in 2007 due to a rise in raw material prices for steel and non-ferrous metals and an easing in steel demand in East Asia. On the other hand, domestic-
related demand in telecommunications, food products, and retail is on an upward trend.
II. Industry/Commodity Market Outlook2. Listed Firms (Japan) Ordinary Earnings to Recover, But Still Lower Than 2007
Source: Nomura Securities Fiscal 2012-13 Corporate Financial Results Outlook (December 2012)
Ordinary Company Profits by Major Industry
Profits
Decreased
Compared
to fiscal
2007
0
10,000
20,000
30,000
40,000
50,000
60,000
2007
2012
2013
0
10,000
20,000
30,000
40,000
50,000
60,000
2007
2012
2013
0
10,000
20,000
30,000
40,000
50,000
60,000
2007
2012
2013
0
5,000
10,000
15,000
20,000
25,000
30,000
2007
2012
2013
0
5,000
10,000
15,000
20,000
25,000
30,000
2007
2012
2013
0
5,000
10,000
15,000
20,000
25,000
30,000
2007
2012
2013
Motor Vehicles Steel/Non-Ferrous Metals
actual estimate estimate
fiscal 2007 fiscal 2012 fiscal 2013
actual estimate estimate
fiscal 2007 fiscal 2012 fiscal 2013
actual estimate estimate
fiscal 2007 fiscal 2012 fiscal 2013
Telecom Food Products Retail
Profits
Increased
actual estimate estimate
fiscal 2007 fiscal 2012 fiscal 2013
actual estimate estimate
fiscal 2007 fiscal 2012 fiscal 2013
actual estimate estimate
fiscal 2007 fiscal 2012 fiscal 2013
(100 million) (100 million) Electronics/Precision Instruments (100 million)
(100 million) (100 million) (100 million)
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Direction of the Electric Power and Energy Industries
Fundamental direction;Review of the large-scale, centralized electric power structure,promotion of energy conservation/efficiency,reduction ofdependence on nuclear power, andexpansion of renewable energy.
Liberal Democratic Partys (LDP) public pledges;Expand energy conservation and renewable energy,decide within a 3-year time frame their policy on the useof nuclear power,determine in 10-years time a sustainable energy mix plan for electric power (long-term non-dependence on nuclear power or not), andlook
at the viability of every possible type of energy resource.
Recent Notable Developments
Reintroduction of Bidding on New Thermal (fossil fuel) Power Plants Bidding procedures are under review by Tokyo Electric Power for a 2.6 million kw thermal power plant. Trading firms, steel producers, banks, other power
companies and oil and gas companies are showing interest in participating. Tokyo Electric Power is accepting proposals for various types of electric power related projects from both domestic and foreign entities. Chubu Electric Power,
Tokyo Gas, Osaka Gas, and wholesale electricity developers (J-Power) have all made proposals.
Introduction of a Renewable Energy Feed-in-Tariff System (July 2012) The recognized (approved) electric power amount related to this is 3.65 million kw (of this 3.26 million is for solar power, as of the end of November.) In Hokkaido
the cost for energy storage battery installation and the equipping of transmission networks related to renewable energy are going to be subsidized (METI).
Structural Reform of Electric Power: At the beginning of 2013 details of the reform plan will be made public.
Separation of electricity transmission/distribution: Separation of the different functions (parts) of electric power or at least the legal separation (ownership does notchange) to ensure fairness in the transmission and distribution of electricity.
Retail liberalization: Consumers can initially select between a regulated price or a free market price for electricity, eventually making a full transition to free marketprices depending on progress of competition in the market place.
Smart Community Experimental demonstration communities are already going forward. (Yokohama, Toyoda City, Kyoto-Osaka-Nara Research City, Kita-Kyushu City) Ministry of Economy, Trade and Industry to approve and then lend support to municipalities smart-community master plans. (Miyako City, Kita-Kami City,
Kesennuma City, Ishinomaki City, Ohira Village, Yamamotocho, Aizu-Wakamatsu City)Smart Meters: The aim of the governments Energy and Environmental Committee is to have smart meters installed in 80% of total demand (household, commercial
building and industrial customers) within the next 5 years. All the electric power companies have already begun to introduce smart meters (Kansai Electric Power leads in this area). The assumption is that smart meters will
be needed for demand response, dynamic pricing, HEMS and BEMS in smart cities in order to make energy, i.e. electricity, distribution advanced. Expansion ofwireless data processing equipment/systems and other semiconductor related peripheral markets.
Fuel Procurement Electric power and gas companies to rely on more diversified and flexible fuel procurement, and the joint construction and joint use of new facilities. For example
cooperating on the joint procurement of U.S. LNG (Chubu Electric Power and Osaka Gas) and U.S. coal (Kansai Electric Power and Kyushu Electric Power), etc. Aim to shift to natural gas and expand co-generation. Looking at the possibility of constructing a gas pipeline network.
1
II. Industry/Commodity Market Outlook (Japan)3. Electric Power/Energy Industries: Signs of Moves in New Directions/New Business
II Industry/Commodity Market Outlook (World)
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II. Industry/Commodity Market Outlook (World)
4. Resource Price: Gradual Recovery in World Economy, Price Rises Mild on Oversupply
Oversupply offsets effects of economic recovery, little change Supply and demand continue easing, prices may rise with
economic recovery
From excess supply constraints to a slight rise in 1sthalf of year Recovery in yields leads to increased production, lower prices
CRB Crude Oil
Copper Corn
Since many development projects havebeen postponed due to sluggish globaldemand and an economic recovery inChina is expected, prices will likely risein the first half of the yearIn the 2ndhalf though, the pace of therecovery in global demand will not beable keep up with the increase in new
supply. So there will likely be aworsening of the excess supplysituation in 2014 putt ing downwardpressure on prices. However, thisdownward pressure may have limits asChina builds up its inventories inanticipation of potential future demand.
Prices may see some downwardmovement at the beginning of the yeardue to uncertainty over the economicenvironment, however, a moderaterecovery in the world economy andexcess liquidity in the market couldlead to some gradual upwardmovement in commodity prices. Still,as the economic recovery is likely to bemild there is a limitation to how farresource prices might rise.There will be the potential foroversupply in many resources in the 2ndhalf of the year and the market will thenbe expected to soften. So, looking atthe entire year there should be little
overall change in prices.
Currently inventories are low and theprice range high, but from the nextfiscal year, acreage under cultivationshould increase and yields recover, soprices should begin to fall in Februaryand March. Weather factors can easilyinfluence prices though, so it ispossible they could rise just beforesummer. Once crop conditions areknown and fears of low inventoriesgone prices will drop.U.S. ethanol demand has leveled off,but with lower corn prices demand forcorn used in feed is likely rise.
Demand in advanced countriescontinues to fall. An economic recoverin the emerging economies is expectedbut with increased production from non
OPEC countries the oversupplysituation may continue. On the otherhand, due to low interest rate policiesthere is excess liquidity in the globalmarket. If the economic recoveryprogresses this capital may find its wayinto the oil market ahead of the summedemand season and push prices upslightly.Excess inventories of WTI in the U.S.are expected to be cut shrinking theprice differential with Brent. Geopoliticarisks will still remain a factor in pricevolatility.
450
500
550
600
650
700
750
800
850
20111 20121 20131
CBOT/
2011 2012 2013
200
250
300
350
400
20111 20121 20131
/CRB19
2011 2012 2013
6,000
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000
20111 20121 20131
LME/
2011 2012 2013
50
60
70
80
90
100
110
120
130
20111 20121 20131
/
2011 2012 2013
WTI:
Reuters-Jeffries CRB Index
19 commodity basket
forecast
Jan. 2013Jan. 2012Jan. 2011
estimate forecast average annual price
LME Copper ($/ton)
forecast
Jan. 2013Jan. 2012Jan. 2011
estimate forecast average annual price
WTI Crude Oil ($/barrel)
CBOT Corn (cent/bushel)
forecast
Jan. 2013Jan. 2012Jan. 2011
estimate forecastaverage annual price
BrentWTI
forecast
Jan. 2013Jan. 2012Jan. 2011
estimate forecastaverage annual price
-
8/21/2019 2013weo
19/19
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