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Japan’s economy continues to struggle

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Japan’s economy continues to struggle

While Australia’s real estate market continues to rise, in Japan the opposite is happening. Over there, an ageing population, stagnating wages and negative interest rates are being blamed for a savage slump in the volume of home sales.

In Tokyo, sales of new condominiums hit 13,300 for the eight months to August 2016 – down 32 per cent year on year. It’s the lowest level since 1992.

Poor demographics, stagnating wages and negative interest rates are to blame for this slump.  Potential buyers are turning down 35-year fixed mortgages in the low one per cent region, as the deflationary mindset of the world’s third largest economy could be deepening.

Stagnation in salaries is undermining consumer spending and efforts to spur inflation and sustained economic expansion in Japan.  Total compensation for employees including wages, bonuses and social security contribution made on their behalf slowed to an increase of 0.3 per cent in the June 2016 Quarter from 1.1 per cent in the March 2016 Quarter.

In August 2016, Japan’s consumer prices fell by 0.5 per cent year on year, the sixth straight month of decline.  The nearly 18 per cent appreciation of the Yen/ US dollar exchange rate from 120 to 102 over the past year is not assisting the BOJ’s ambitions to reflate the economy.

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Chief Executive Officer of Montgomery Investment Management, David has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

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This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564) and may contain general financial advice that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking advice from a financial advisor if necessary.

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