By Stanley White
TOKYO (Reuters) - Japan's economy bounced back in the fourth quarter as business and consumer spending recovered from the impact of natural disasters but trade frictions and a proposed sales tax hike are expected to hinder growth in 2019.
The 1.4 percent annualised expansion in October-December matched the median estimate in a Reuters poll. It also followed an upwardly revised 2.6 percent annualised contraction in July-September as floods and an earthquake temporarily halted production.
Real exports rose 0.9 percent in October-December from the previous quarter, the data from the Cabinet Office showed, the fastest growth in a year.
"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."
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.
Businesses were quick to resume normal operations after these disasters.
That compares with as 2.7 percent contraction in the previous quarter, a smaller fall than initially estimated. Capital expenditure was expected to rise 1.8 percent.
Private consumption, which accounts for about 60 percent of GDP, was the second-biggest driver of growth. Consumption rose 0.6 percent in October-December, less than the 0.8 percent increase expected and followed a 0.2 decline in the previous quarter.
"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 due to increased shipments of mobile phones and clothes from overseas more than offset the increase in exports.
Despite the rise in exports, the trade war between the United States and China, the world's two largest economies, is seen as a major risk for Japan's exports of car parts, electronics, and heavy machinery to China, which are used to make finished goods destined for the United States 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, chief economist at Tokai Tokyo Research 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 Kaori Kaneko 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.)