Japan’s economy shrank at a worse-than-anticipated annualized rate of 2.5 percent in the July-to-September period due to weaker consumer demand and corporate investment.
The revised figure released yesterday was more than double the 1.2 percent contraction reported earlier.
Economists have said the setback for the world’s third-largest economy is likely temporary.
Photo: Bloomberg
The data from the Japanese Cabinet Office shows that the seasonally adjusted GDP — the total value of a nation’s goods and services — dipped 0.6 percent in the third quarter from the previous quarter.
Japan’s economy returned to expansion in the April-to-June quarter, but contracted in the quarter before that. That contraction ended the longest straight period of expansion for Japan in nearly three decades.
The new data require a revision of assessments about economic growth and investment, said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities Inc in Tokyo.
“But the overall trend of economic growth continues,” he said in a report, adding that recent natural disasters had crimped growth.
Natural disasters weighed on consumer travel and spending, which means growth could recover if such events do not occur during the final quarter.
The closure of a major airport in the western Kansai area after a typhoon was among the factors that hurt the economy in the third quarter. A major earthquake also hit the northernmost island of Hokkaido during the quarter, causing deadly landslides and widespread blackouts.
Until recently, Japan had been experiencing moderate growth under Japanese Prime Minister Shinzo Abe’s “Abenomics” policies based on a deflation-fighting stimulus program of cheap lending.
The nation’s continuing labor shortage and slow wage growth are also taking a toll.
Uncertainty over the outlook for exports is another concern, since Japanese companies face direct effects of trade friction with the US and indirect effects as suppliers to Chinese manufacturers hit by tariffs on Chinese goods exported to the US.
Convincing Japanese companies to invest more, both in hiring and in other areas, would be key to long-term sustainable growth, but has proven elusive in a market where demand is expected to decline in the long term as the population ages and shrinks.
Stefan Angrick of Oxford Economics said he still expects the slowdown to be temporary and is “cautiously optimistic” about domestic demand.
“Nonetheless, today’s outcome does suggest some downside risks to our 2018 GDP growth forecast of 1 percent and may indicate that the investment cycle is close to peaking,” he said.
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