B2| REPORTONBUSINESS O THEGLOBEANDMAIL| TUESDAY,FEBRUARY18,
Japan’s economy shrank at the
fastest pace in almost six years in
the December quarter as a sales-
tax hike hit consumer and busi-
ness spending, raising the risk of a
recession as China’s coronavirus
outbreak chills global activity.
Analysts say the widening fal-
lout from the epidemic, which is
damaging output and tourism,
could have significant effects on
Japan if it’s not contained in the
coming months.
“There’s a pretty good chance
the economy will suffer another
contraction in January-March.
The virus will mainly hit inbound
tourism and exports, but could al-
so weigh on domestic consump-
tion quite a lot,” said Taro Saito,
executive research fellow at NLI
Research Institute.
“If this epidemic is not con-
tained by the time of the Tokyo
Olympic Games, the damage to
the economy will be huge,” he
said.
Japan’s gross domestic product
(GDP) shrank an annualized 6.
per cent in the October-December
period, government data showed
on Monday, much faster than a
median market forecast for a 3.7-
per-cent drop and the first decline
in five quarters.
It was the biggest fall since the
second quarter of 2014, when con-
sumption took a hit from a sales-
tax hike in April of that year.
The weak data also come amid
signs of struggle in the wider re-
gion with the coronavirus also
known as COVID-19, leaving Ja-
pan vulnerable to a recession – de-
fined as two consecutive quarters
of contraction.
Singapore cut its economic
growth projections for 2020, Thai-
land posted its slowest expansion
in five years and China’s home
prices rose at their weakest pace
in almost two years.
Japanese stocks slipped on the
recession prospects with the
benchmark Nikkei average 0.7 per
cent down and the broader Topix
0.9 per cent off by the close.
The sales tax hike in October
last year – as well as unusually
warm weather that hurt sales of
winter items – weighed on private
consumption, which sank a
larger-than-expected 2.9 per cent,
marking the first drop in five
quarters.
Capital expenditure fell 3.7 per
cent in the fourth quarter, much
faster than a median forecast for a
1.6-per-cent drop and the first de-
cline in three quarters, the data
showed.
Combined, domestic demand
knocked 2.1 percentage points off
GDP growth, more than offsetting
a 0.5-point contribution from ex-
ternal demand.
Japanese policy makers had
warned that the economy will suf-
fer a contraction in October-De-
cember as the sales-tax hike, ty-
phoons and the China-U.S. trade
war hurt consumption and facto-
ry output.
Still, the weakness in capital ex-
penditure – considered among
the few bright spots in the econo-
my – casts doubt on the Bank of
Japan’s view that growth will con-
tinue to expand moderately as ro-
bust domestic demand makes up
for faltering exports.
Last month, the BoJ kept mon-
etary policy steady.
BoJ Governor Haruhiko Kuro-
da said the central bank would
consider additional easing if the
COVID-19 outbreak significantly
threatened Japan’s economy and
price trends, the Sankei newspa-
per reported on Monday.
In his interview with the daily,
Mr. Kuroda said the outbreak was
the “biggest uncertainty” for the
domestic economy.
Worries about the spread of the
coronavirus and its hit to the glob-
al economy kept Japanese manu-
facturers’ mood gloomy in Febru-
ary, a Reuters poll found.
Many analysts doubt whether
the government and the central
bank have effective means to fight
another recession given their
dwindling policy ammunition.
“The government has already
taken steps to respond to the
sales-tax hike and post-Olympics
slowdown, so you cannot expect
further steps on the fiscal front,”
said Takeshi Minami, chief econo-
mist at Norinchukin Research In-
stitute.
“There’s not a lot more the BoJ
can do either ... Additional easing
may do more harm than good to
the economy.”REUTERSJapanonbrink
ofrecession
aseconomy
slumps,virus
heightensrisk
LEIKAKIHARA
DANIELLEUSSINKTOKYOA warming climate could open
millions of square kilometres of
Canada’s North to growing wheat
and potatoes over the next half-
century, according to a new study.
The environmental conse-
quences of farming these “fron-
tier” croplands, however, could
be disastrous.
Researchers from the Universi-
ty of Guelph and Conservation In-
ternational, anon-governmental
organization, modelled the po-
tential for growing staple crops in
previously uncultivated territory
amid a warming climate. In a new
paper, they estimated the land-
mass available for agriculture
globally could increase nearly
one-third by 2080 under more
dire warming scenarios – by as
much as 15 million square kilo-
metres.
“About 30 per cent to 40 per
cent of that area falls in the Cana-
dian North,” said Krishna Baha-
dur KC, adjunct professor and re-
search scientist at the University
of Guelph’s geography, environ-
ment and geomatics department.
The region “could be a bread bas-
ket for the future,” he added.
Large swaths of Russia were al-
so expected to become arable. In
the Rocky Mountains and ranges
in Central Asia, agriculture is ex-
pected to move further up moun-
tain slopes, while fringes of de-
serts in Australia and Africa are
expected to see increased precip-
itation.
Additional production from
frontiers may help solve looming
food shortages. The Food and
Agriculture Organization of the
United Nations predicted that
Earth’s population will grow by
2.3 billion people between 2009
and 2050; food production would
have to be raised 70 per cent to
feed all those additional mouths.
But depending on how they’re
exploited, frontiers may create as
many problems as it would solve.
Carbon locked in soils, equivalent
to more than a century’s worth of
emissions by the United States,
might be released after just a few
years of tillage.
Huge releases of greenhouse
gases are already expected from
Canada’s permafrost regions this
century, which by themselves
have already contributed to fears
of “feedback loops” leading to
runaway climate change. Farming
the North could worsen that sit-
uation.
“Under the boreal forest, the
huge amount of carbon is stored
in that soil,” Prof. KC said. “As
soon as we start cutting trees and
farming, slowly that carbon will
be released into the atmosphere.”
Elsewhere, significant biodi-
versity hot spots might be con-
verted into farmland, causing par-
ticular harm to birds. And water-
sheds serving billions of people
could be degraded.
Climate change’s impact on the
availability of arable land has
been studied for at least the past
quarter century. This study’s re-
sults accord with previous work
that found climate change might
increase available cropland in
countries at higher latitudes in
the northern hemisphere. While
University of Guelph study au-
thors acknowledged this previous
work, they said much of it over-
looked the negative effects of cul-
tivating these emerging farming
frontiers.
“The trade-offs between envi-
ronmental concerns and food
production may be very signifi-
cant,” said Evan Fraser, a co-au-
thor and director of the Guelph,
Ont., university’s Arrell Food In-
stitute.
The Guelph study considered
future land suitability for 12 major
crops under projections from 17
global climate models. Just four of
those crops can tolerate the Cana-
dian winter: Wheat and potatoes
are expected to be most success-
ful given expected future condi-
tions, while small patches might
become appropriate for growing
corn and soy.
The range for potatoes, for ex-
ample, could expand into the
north of the Prairie provinces,
northern Quebec, Labrador and
even the Northwest Territories.
Even under the most extreme
climate models, Canada won’t be
growing large quantities of sor-ghum and cassava any time soon.
Remarkably, the study found
that only relatively small areas of
the world’s existing cropland –
about 0.2 per cent – would be ren-
dered unsuitable for agriculture
by climate change.
Previous studies emphasized
widespread decreases in agricul-
tural suitability, particularly in
tropical and subtropical regions.
A 2014 federal study predicted
that while longer, warmer grow-
ing seasons would allow farming
farther north in Canada, such
conditions would also foster
more (and more severe) out-
breaks of pests and diseases, weed
growth “and other challenges
that could negatively affect pro-
duction.”
Guelph’s researchers empha-
sized that their high-level analysis
shows the maximum amount of
land that may become available
for agriculture; they didn’t assess
the economic feasibility of culti-
vating all that land, for example.
Further studies would need to be
conducted to assess soil charac-
teristics, transportation infras-
tructure, receptivity of local com-
munities and other local factors.
The federalgovernment, for its
part, does not estimate how much
farmland may become available
amid a warming climate. James
Watson, a spokesperson for Agri-
culture and Agri-Food Canada,
said there simply isn’t enough da-
ta about soil characteristics out-
side today’s agricultural heart-
lands to make an effective fore-
cast – although thegovernment is
working to address this data gap.
Prof. KC said there are already
isolated examples of northward
migration of farming. “In the
Northwest Territories, farmers are
already practising growing soya
on land that was never under agri-
cultural activities until a few years
ago,” he said. “In southern Mani-
toba, some farmers are already
growing corn.”
Future agricultural opportuni-
ties could pose a moral dilemma
for Canada and Russia. “Frontier
cultivation may have significant
economic, food security and trade
benefits for these countries,” the
researchers wrote in their paper.
“However, the likely environ-
mental cost, especially related to
climate change, will be felt inter-
nationally, with disproportionate
impact on poor nations.”SylviaGrinnellTerritorialParkinIqaluitisseenlastOctober.Astudysaysfourcropscouldtoleratetheexpectedfutureconditionsof
Canadianwinters:wheatandpotatoeswouldfarebest,whilepatchesofcornandsoymayalsobegrown.STEPHANEMAHE/REUTERS
Climatechangesettoopen
Northtomorefarming:study
Whilewarmingwould
beboonforagriculture,
environmentaleffects
ofusingnewlyexposed
‘frontier’croplands
couldbedevastating
MATTHEWMcCLEARN
Additional
productionfrom
frontiersmayhelp
solvelooming
foodshortages.
TheFoodand
Agriculture
Organizationofthe
UnitedNations
predictedthat
Earth’spopulation
willgrowby2.
billionpeople
between
and2050;food
productionwould
havetoberaised
70percent
tofeedallthose
additionalmouths.Home goods retailerPier 1 Im-
ports Inc.says it has filed for
bankruptcy protection in the
United States and plans to close
all Canadian stores as part of its
restructuring process.
The Texas-based company has
been struggling with increased
competition from budget-friend-
ly online retailers such as Wayfair.
Pier 1 says it will pursue a sale,
with a March 23 deadline to sub-
mit bids.
The company last month an-
nounced it would close 450
stores, including all its Canadian
locations.
Pier 1’s Canadian website now
directs customers to a short
statement announcing the clos-
ings and thanks them for their
loyalty. The company is also com-
mencing creditor protection pro-
ceedings in Canada.
Osler, Hoskin & Harcourt LLP
are serving as Canadian legal ad-
visers.
In a statement Monday, the
company said it will continue to
shutter stores as part of its bank-
ruptcy proceedings.
The company, which was
founded in 1962, is also closingtwo distribution centres.
A hearing is scheduled for
Tuesday at the U.S. Bankruptcy
Court for the Eastern District of
Virginia. In the meantime, Pier 1
said lenders have committed ap-
proximately US$256-million in
debtor-in-possession financing
so it can continue its operations
during the Chapter 11 proceed-
ings.
Pier 1’s sales fell 13 per cent to
US$358-million in its most recent
quarter, which ended Nov. 30. It
reported a net loss of $59-million
for the quarter as it struggled to
draw customers to its stores.
Pier 1’s shares have fallen 45
per cent since the start of the year.
They closed at US$3.58 a share on
Friday.THECANADIANPRESS,WITHFILES
FROMTHEASSOCIATEDPRESSPier1ImportstocloseCanadianstoresamidrestructuring
Texas-basedPier
Importssaysitwill
pursueasale,with
aMarch23deadline
tosubmitbids.
JOERAEDLE/GETTYIMAGES