TOKYO: Japan’s third-quarter GDP was weaker than thought with a 0.3 percent expansion, revised data showed Thursday, as slack corporate spending held back the world’s number three economy.
The latest figures were lower than an initial estimate of 0.5 percent growth in the July-September period, with exports also under pressure.
The weak reading translates into annualised growth of 1.3 percent, far below the median market forecast of an annualized 2.3 percent expansion.
But the government did offer a glimmer of hope, slightly revising up growth figures for the first and second quarter, as spending ticked up.
And while Japan’s recovery has been unsteady, the economy is “growing bit by bit”, said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.
“With slack consumption at the moment and slow capital spending, the economy may not look like it’s expanding,” he added.
“But it will carry on growing steadily even though the number may not be that strong.”
Japan’s economy contracted in the last three months of 2015, before bouncing back this year although the recovery has been wobbly.
That is putting Japanese officials under increasing pressure to deliver as more and more economists write off Prime Minister Shinzo Abe’s bid to cement a lasting recovery, dubbed Abenomics.
Separate figures last month showed that Japan’s factory output ticked up in October, expanding for the third month in a row, but spending among Japanese households was still struggling.
Meanwhile, inflation was also disappointing, with core consumer prices — which exclude volatile fresh food costs — falling 0.4 percent in October to extend their longest run of declines for five years and putting the Bank of Japan’s 2.0 percent inflation target well out of reach.
Next week, Japan’s central bank will release its closely-watched Tankan business sentiment survey.
Abe came to office in late 2012 and launched a growth plan — a mix of massive monetary easing, government spending and red-tape-slashing.
The plan sharply weakened the yen — fattening corporate profits — and set off a stock market rally that spurred hopes for a once-soaring economy caught in a deflationary spiral of falling prices and lackluster growth.
Promises to cut through red tape have been slower, and his plans to buoy Japan’s once-booming economy have looked increasingly uncertain.
The yen, often bought as a safe haven in times of uncertainty, had been on the upswing since the start of the year and got a big bump after Britain’s shock vote to exit the European Union.
But it has since reversed course, falling to eight-month lows against the dollar after billionaire businessman Donald Trump’s victory in the US presidential election.
The weaker yen is good news for Japanese exporters, which are likely to see their bottom line expand if the currency remains weak.
Japan’s economy may benefit from the “Trump effect” — hopes for big government spending, tax cuts and deregulation — said Minami at the Norinchukin Research Institute said.
“If higher fiscal spending boosts the US economy, it will power the global economy, which will translate into more exports from Japan,” he said.