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Revisions show Japan's economy slowed on reduced Q3 consumption, investment

Shoppers walk along the main street of Ginza district in Tokyo yesterday. Japan's economy grew at a far weaker pace in the third quarter than previously reported due to downward revisions in consumer spending and capital investment, officials said. PHOTO: AP

Japan's economy grew at a far weaker pace last quarter than previously reported due to downward revisions in consumer spending and capital investment, the government said yesterday, raising concerns about the recovery's strength.

GDP expanded at an annual rate of 0.8 percent, well below the preliminary 2.0 percent announced last month, but marked the seventh straight quarter of expansion, the government said.

Domestic demand -- which includes consumer spending, government spending and private investment -- had contracted 0.2 percent from the previous quarter instead of inching up 0.1 percent, as previously thought.

Corporate capital investment was weaker than initially estimated, while consumption dropped more than the first reading.

"The big change was in private investment," said Hiromichi Shirakawa, chief economist at Credit Suisse First Boston Securities.

But he expects better results in the current quarter because consumers were discouraged by a number of factors during last quarter, including higher energy costs, an interest rate hike by the Bank of Japan and a faltering Tokyo stock market.

Separate government data viewed as a key indicator for corporate investment, released yesterday, showed core machinery orders rose a weaker-than-expected 2.8 percent in October from the previous month. That reversed September's 7.4 percent plunge but missed the forecasts by economists surveyed by Dow Jones Newswires for 5.7 percent growth.

Economy Minister Hiroko Ota blamed the downward GDP revision mostly on weak consumer spending, but assured the public that Japan's economic revival was on track.

"The lower GDP was mainly caused by weak consumption," she said. "I don't have any concerns that the economy will fall into a downward trend. Nor do I see any signs of its entering a lull."

Finance Minister Koji Omi, meanwhile, played down the revision, pointing to improvements in the job market as a sign that consumer spending will grow.

"The economy is in solid condition," he said. "There's no change in the overall trend."

Omi pointed to improvements in the job market as a sign that consumer spending will grow.

Consumer spending dropped 0.9 percent from the previous quarter, instead of the 0.7 percent decline projected earlier. Corporate investment was revised to a 1.5 percent expansion during the quarter, rather than the earlier 2.9 percent growth. Exports, which grew 2.7 percent in the preliminary data, grew 2.5 percent in the revised data.

Compared to the previous quarter, the economy as a whole grew 0.2 percent, according to revised GDP data.
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