Japan’s economy shrank for a second time this year after an earthquake, typhoons and torrential rain battered production at home and exports declined amid softer demand overseas.
GDP was forecast to recover from its annualized 1.2 percent drop in the third quarter and to continue growing until a sales tax hike in October next year, but the effects of a slowdown in China and trade tensions are likely to keep the expansion modest.
Reports that US President Donald Trump would hold off for now on imposing tariffs on imported Japanese cars and auto parts kept one of the largest threats to Japan’s economy at bay for the time being.
The wild weather that passed through regions, including as Osaka and Tokyo, and an earthquake on northern Hokkaido Island knocked out power supplies, halted factories and disrupted supply chains. Exports suffered the biggest decline in more than three years.
However, the falloff across a range of economic activities cannot only be explained by natural disasters, Credit Agricole Securities Asia chief Japan economist Kyohei Morita said.
“The trade war and China’s slowdown are already starting to take a toll on Japan’s economic growth,” Morita said.
Nomura Securities Co senior economist Masaki Kuwahara said that about 1 percentage point of the 1.8 percent decline in exports was due to the disasters, with the rest the slowdown in China.
The patchier growth is unwelcome news for Japanese Prime Minister Shinzo Abe, who last month confirmed that the sales tax hike would go ahead next year given the strength of the economy.
The third-quarter figures do not warrant any change of course for Abe and the Bank of Japan, economists said.
The central bank is in a tight spot, with some people thinking it should raise rates to help alleviate pressure on the profits of regional banks and limit risks to the financial system, Norinchukin Research Institute chief economist Takeshi Minami said.
“The problem is, can it really raise rates when the economy is losing momentum?” he said.
Business spending, which had been expected to slow after a 3.1 percent surge in the second quarter, edged down 0.2 percent for the first drop in eight quarters.
Private consumption, another driver of the rebound in the second quarter, slipped 0.1 percent.
On a non-annualized basis, the quarter-on-quarter drop in GDP was 0.3 percent.
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