Japanese economy contracted in July–Sept
TOKYO: Japan’s economy shrank in the third quarter on account of slower-than-expected consumption, official data showed on Tuesday, dashing hopes of another quarter of growth.
Higher import volumes and costs fueled by the weak yen and the soaring price of commodities, such as oil, weighed on the world’s third-largest economy.
And private consumption did not see a significant jump despite the end of coronavirus restrictions.
The surprise negative reading follows three consecutive quarters of growth, after an initial negative reading in the first quarter was revised upward.
From July to September, Japan’s gross domestic product (GDP) contracted 0.3 percent quarter on quarter, missing market expectations of 0.3-percent growth, government data showed.
Corporate investment was up for the period, but private residential investment declined, while an increase in imports overwhelmed an increase in exports.
In the three-month period, private consumption inched up 0.3 percent, down from 1.3 percent in the second quarter.
The data is preliminary, and GDP figures are often revised in later months.
Taro Saito, senior economist at NLI Research Institute, predicted the gloomy result would be shortlived.
“The contraction this quarter is a one-off phenomenon, and we think the October-December quarter will see growth again,” he told Agence France-Presse (AFP).
“Individual consumption and corporate investment both remain strong. A government campaign to support tourism across the country [is] also likely [to] help boost consumption,” Saito added.
Before the data release, analysts had predicted a pickup in consumption, but acknowledged that Japan faces headwinds because of its trade balance.
A slower global economy, which is “likely to be dragged down by tightening in monetary policy, zero-Covid policy in China and geopolitical uncertainties,” is also a negative factor for Japan, UBS economists Masamichi Adachi and Go Kurihara said.
“On top of these factors, the secular drag from a shrinking and aging population and low medium-to-long-term growth expectations cannot be ignored,” they added.
Last month, Japanese Prime Minister Fumio Kishida announced a $260-billion stimulus package to cushion the economy from the impact of inflation and the weak yen.
The Japanese currency has tumbled from about 115 against the dollar before Russia’s invasion of Ukraine to about 140 on Tuesday after hitting three-decade lows of 151 yen last month.
The main driver of the yen’s fall is the gap between the stance of the Bank of Japan, which is sticking to its long-standing monetary easing policies, and its American counterpart, the Federal Reserve, which has made a series of aggressive rate hikes to tackle inflation.
Japan is heavily reliant on imported energy and also ships in other goods, including much of its food.
The East Asian country fully reopened its borders to foreign tourists in October after two-anda-half years of tough Covid-19 border restrictions.