Japan third quarter GDP contracts at fastest pace since 2014, trade war dims outlook

Tuesday, 11 December 2018 00:00 - - {{hitsCtrl.values.hits}}

FILE PHOTO - A worker cycles near a factory at the Keihin industrial zone in Kawasaki, Japan - Reuters

TOKYO (Reuters): The Japanese economy contracted the most in over four years in the third quarter as capital expenditure tumbled, raising concerns about demand at home and overseas as the export-reliant nation grapples with global trade frictions.

The gross domestic product shrank at an annualised rate of 2.5%, deeper than an initial estimate of a 1.2% contraction and against economists’ median estimate for a 1.9% decline, revised data from the Cabinet Office showed.

That followed a revised 2.8% expansion in the second quarter, and marked the sharpest contraction since the second quarter 2014 when the economy was hit by a sales tax hike in April that year.

Economists expect the economy, the world’s third largest, to stage a rebound in the current quarter, noting the third-quarter slump was caused in part by natural disasters that disrupted supply chains and factory output.

However, the strength of recovery remains in doubt given cooling global growth, a rising tide of protectionism and slowing company profits.

The revised figure translates into quarter-on-quarter contraction of 0.6% in real, price-adjusted terms, against a preliminary reading of a 0.3% slide and economists’ median estimate of a 0.5% decline.

The capital expenditure component of GDP fell 2.8% in July-September from the previous quarter, versus the median forecast for 1.6% decline, and the preliminary 0.2% drop.

That was the sharpest quarter-on-quarter decrease since the third quarter of 2009, the Cabinet Office data showed, raising worries about business spending which has been a bright spot in the economy.

Analysts say capex will be underpinned by corporate demand such as for refurbishing old facilities and boosting investment in automation and labor-saving technology to cope with labor shortages, although the pace of gains will likely be modest.

Private consumption, which accounts for roughly 60% of GDP, fell 0.2% in July-September from the previous three months, versus 0.1% drop seen in the initial estimate.

Domestic demand shaved 0.5 percentage points off the revised GDP figure, while net exports – or exports minus imports – contributed minus 0.1 percentage point.

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event including Valentine ’s Day. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Flower Bouquets, Clothing, Watches, Lingerie, Gift Sets and Jewellery. Also if you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.