Japan said yesterday that growth halved in the July-to-September quarter as exports weakened and consumer spending slowed, but analysts were divided over what the figures meant for Tokyo’s drive to fire up the economy.
The once-anemic economy has lately been growing faster than other G7 nations as a policy blitz led by Japanese Prime Minister Shinzo Abe helped push down the yen, giving a boost to exporters and sparking a stock market rally.
That has stoked optimism over Japan’s prospects, but official data yesterday showed that the world’s third-largest economy expanded at an annualized rate of 1.9 percent in the third quarter, a marked slowdown from the 3.8 percent rise in the previous three months.
However, the figure is higher than the 1.7 percent increase forecast in a poll of economists by the Wall Street Journal.
Tokyo’s Nikkei stock index closed up 2.12 percent, helped by a weakening yen.
On a quarter-on-quarter basis, the economy grew 0.5 percent, slightly higher than expectations, but well down from the 0.9 percent increase in the previous three months.
BEHIND THE US
The figures mean that Japan’s headline-grabbing growth in the first half of the year has now fallen behind the US economy, which expanded at a 2.8 percent annualized rate in the three months to September.
Analysts have been warning that Tokyo’s bold pro-growth program — a mix of big government spending and central bank monetary easing — is not enough on its own without promised economic reforms.
The proposed shakeup, including loosening rigid labor laws and signing wide-ranging free-trade deals, are seen as key to ushering in lasting change in an economy plagued by years of deflation.
On Wednesday, legislators passed a bill that paves the way for an opening up of the electricity sector, but other key reforms have so far been mostly talk.
That has raised the prospect of the Bank of Japan having to expand its already unprecedented monetary easing measures, launched in April, to give another jolt to the economy, analysts said.
Critics of Abe’s policy — dubbed “Abenomics” — say growth so far is largely thanks to stimulus spending and the central bank’s injections of vast sums into the financial system, similar to the US Federal Reserve’s quantitative easing.
Despite the downbeat data yesterday, Masahiko Hashimoto, an economist at the Daiwa Institute of Research, said it was too early to cast a verdict on Abenomics, with consumer spending still “solid” and exports expected to rise as key Asian demand bounces back.
“Income is improving,” Hashimoto said, adding that personal spending would “surely accelerate” before a sales tax rise takes effect in April.
However, Masamichi Adachi, senior economist at JPMorgan Securities, said much of the growth so far was driven by spending on public works.
“This is a slowdown of Abenomics,” Adachi said. “The Japanese economy will be tested after the sales tax hike.”