Japan’s 3Q growth twice as fast as first estimated, outlook brightens

TOKYO: Japan’s economy grew twice as fast as originally estimated in the third quarter thanks to big gains in capital expenditure, revised data showed yesterday, with expansion seen to continue thanks to buoyant exports.

The economy grew an annualised 2.5 per cent in July-September, handily beating the preliminary reading of 1.4 per cent annualised expansion.

The capital expenditure component of gross domestic product was revised to a rise of 1.1 per cent from the previous quarter, well over the forecast 0.4 per cent growth, and soaring above the preliminary 0.2 per cent reading.

Economists say the rate of growth reported on Friday is unsustainable, but they are still confident that the economy will continue to expand next year at a moderate pace.

“The economy is doing well, but annualised growth above 2 per cent seems a little too quick,” said Norio Miyagawa, senior economist at Mizuho Securities.

“I expect that exports and capital expenditure will lead growth next year, but the pace will moderate to around 1 per cent.”

Japan’s economy has expanded for seven consecutive quarters, and many economists expect growth to continue as consumer spending gains strength and export growth is seen on track to continue.

“You can say Abenomics is doing well and producing results. Monetary policy is contributing to nominal growth. Revisions to past data show the government’s fiscal spending had a bigger impact than previously thought.

The structural reform that has made the most obvious impact is allowing more tourists to visit Japan,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

“The government can be satisfied with these numbers. Prices are not rising that much, which is a problem for the Bank of Japan, but at this point officials are starting to worry about how to exit from their easing.”

Friday’s updated third quarter data followed revised 2.9 per cent annualised growth in AprilJune.

The initial second quarter data put annualised GDP growth at a stellar 4.0 per cent, which was later revised down. — Reuters