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Japan's GDP grows for seven straight quarters

Rising capital expenditure and exports are also expected to keep the economy growing

Stanley White & Leika Kihara | Reuters  |  Tokyo 

Japan at Top of the Growth Table Among G7 Peers

Japan’s grew faster than expected in the third quarter due to strong exports, posting the longest period of uninterrupted growth in more than a decade.
 
The expanded at a 1.4 per cent annualised rate in July-September, slightly above the median estimate for annualised growth of 1.3 percent, Cabinet Office data showed on Wednesday.

That followed revised annualised growth of 2.6 percent in April-June.

Consumer spending fell for the first time in seven quarters but this is expected to be temporary because the is near full employment, which should bolster domestic consumption in the future.

Rising capital expenditure and are also expected to keep the growing, which should ease some concerns about sluggish inflation.

"Japan's potential growth rate is around 1 percent, so the results for the third quarter show the actual rate of growth is quite high," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

"The jobs market is doing so well that consumer spending is sure to pick up in the future. Capital expenditure still looks healthy. The is doing well."
 
Gross domestic product (GDP) grew 0.3 per cent compared to the previous quarter, which matched the median estimate and followed a 0.6 per cent quarter-on-quarter expansion in April-June, Cabinet Office data showed on Wednesday.

The results show that Japan's has grown for the seventh straight quarter, the longest period of expansion since an eight-quarter run from April-June 1999 to January-March 2001.

External demand — or minus imports — was the biggest reason for expansion, adding 0.5 per cent to growth.

Shipments of cars and electronic parts to the United States and Asia were strong in the third quarter, reflecting improving global demand, a Cabinet Office official told reporters.

Japan's GDP grows for seven straight quarters

In comparison, negative external demand subtracted a revised 0.2 percentage point from growth in April-June.

Private consumption, which accounts for about two-thirds of GDP, fell 0.5 per cent from the previous quarter, more than the median estimate of a 0.3 per cent contraction to mark the first decline since October-December 2015.

The decline was driven by lower spending at restaurants and hotels, as well as reduced spending on cars and mobile phones, the official said.

Bad weather during the quarter may have hurt spending, the official said.

"There's no change to our view the is recovering moderately as a trend," Japanese Minister Toshimitsu Motegi told reporters.

"We need to make the recovery a durable one, so we'll proceed with reforms to boost Japan's productivity." Capital expenditure rose 0.2 percent in July-September from the previous quarter, less than the median estimate for a 0.3 percent increase but still up for the fourth straight quarter.

Capital Economics' Senior Economist Marcel Thielant said available data suggested that economic activity continued to expand in the current quarter, noting household incomes maintained solid growth and external demand was holding up.

Economists are watching closely for signs that the tightest labor market in decades is beginning to bring the needed higher wage gains and accelerate consumer price gains. In the meantime, external demand in the form of is playing a key role for growth.

Japan's GDP grows for seven straight quarters

"However, the is running into capacity constraints which suggests that growth will start to slow next year. We reiterate our forecast that growth will moderate from 1.5 per cent this year to 1 per cent in 2019," he said.

Japan's government is due to announce a package of economic measures by year-end aimed at increasing investment in skills training and raising productivity.

This long run of growth should encourage the Bank of to stick with the current monetary easing framework, given its argument that inflationary pressure will percolate through the as long as growth is on track.

RISING JAPAN

Net exports, or shipments less imports, added 0.5 percentage point to GDP
Business spending rose 0.2 per cent (estimate +0.3 per cent) from the previous quarter
Private consumption fell 0.5 per cent in the third quarter from the previous three months (estimate -0.4 per cent)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, November 16 2017. 02:29 IST
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