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Japan fourth quarter GDP rebounds but trade frictions remain a concern

Reuters  |  TOKYO 

By Stanley White

TOKYO (Reuters) - Japan's economy expanded in the fourth quarter as business and consumer spending recovered from natural disasters, however global trade protectionism remained a concern for the country.

The 1.4 percent annualised expansion in October-December matched the median estimate in a poll. It followed a revised 2.6 percent annualised contraction in July-September as floods and an earthquake temporarily halted production.

The data also showed real exports rose 0.9 percent in October-December from the previous quarter, which was the fastest gain in a year.

Despite the increase in shipments, some economists remain concerned that exports will weaken this year if the and do not resolve their trade dispute.

"The numbers have rebounded, but is still an economy that is losing momentum," said Hiroshi Miyazaki, at

"The longer trade friction lasts, the more incentive Japanese companies have to halt capex. Trade friction means weaker exports. Japan's overall growth this year won't be as quick as last year or the year prior."

data showed GDP rose 0.3 percent versus the previous quarter, slightly less than the median estimate for 0.4 percent growth. That followed a downwardly revised 0.7 percent contraction in July-September.

In September a large earthquake triggered a blackout in the northern island of Hokkaido, which followed severe typhoons that damaged airports and in western

Businesses were quick to resume normal operations after these disasters.

Capital expenditure was the biggest of growth in October-December, rising 2.4 percent. That compares with as 2.7 percent contraction in the previous quarter, a smaller decline than initally estimated. The median estimate was for capital expenditure to rise 1.8 percent.

Private consumption, which accounts for about 60 percent of GDP, was the second-biggest of growth. rose 0.6 percent in October-December, which was less than the median estimate for a 0.8 percent increase and followed a 0.2 decline in the previous quarter.

"The economy is in gradual recovery as growth is led by private demand," Japanese said in a statement.

"China-bound exports of information-related materials have weakened as the Chinese economy slowed. We need to monitor uncertainty over global economic outlook including Chinese economy as well as fluctuations in financial markets."

External demand - or exports minus imports - shaved 0.3 percentage point off gross domestic product, less than the median estimate of minus 0.4 percent. A breakdown of the data showed a 2.7 percent jump in imports more than offset the increase in exports.

Despite the rise in exports, some economists remain cautious about the outlook for overseas demand.

A trade war between the and China, the world's two largest economies, is a major risk for Japan's exports of car parts, electronics, and to China, which are used to make finished goods destined for the and other markets.

"We expect exports for January-March will deteriorate as shipments of IT-related products to Asian nations, especially to China, will likely fall as the adverse impact from trade conflict appears," said Hiroaki Muto, at Institute.

"The economy for January-March is expected to grow but the global economic slowdown and a planned sales tax hike will hurt."

Another risk is the Japanese government's plan to raise the nationwide sales tax to 10 percent from 8 percent in October.

The government needs the extra tax revenue to pay for rising welfare costs, but some policymakers and economists worry the tax hike could hit consumer spending and weaken sentiment.

(Reporting by Stanley White; Additional reporting by and Tetsushi Kajimoto; Editing by Sam Holmes)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 14 2019. 06:39 IST