Japan’s economy grew an annualized 2.9% in the April-June period, revised government data showed Monday, slowing from a previous estimate of 3.1%. The growth was driven by improved wages and increased spending. The data suggests risks remain, such as the impact of economic growth in the United States on export-heavy Japan. Political uncertainty in Japan is also a threat, especially as the ruling party elects a new leader.
A dozen candidates are vying to succeed Prime Minister Fumio Kishida as head of the Liberal Democratic Party. The winner of the Sept. 27 vote is likely to become the next prime minister, given the party’s control of parliament. The world’s fourth-largest economy grew 0.7% in the first quarter of the fiscal year, according to the Cabinet Office, reflecting a rebound after contracting in the previous quarter.
Real seasonally adjusted gross domestic product measures the value of goods and services produced by a country. The annual rate reflects whether the economy is growing or contracting if the quarterly rate continues over a full year. Gross domestic product data released Monday showed domestic demand grew 3.0% from the previous quarter, supported by a rebound in household consumption and increased private sector investment, as well as government investment. Exports also grew 6.1%, beating the previous reading of 5.9%.
Japan’s gross domestic product shrank 0.6% in the January-March quarter from a year earlier, after expanding 0.1% in the October-December period last year. The weakening of Japan’s economic clout is a pressing concern for a nation that the International Monetary Fund expects to fall to fifth place, behind the United States, China, Germany and India, in the coming years at the current rate.
Japan’s economy shrinks in January-March
Japan’s economy shrank less than initially estimated in the January-March quarter, due to upward revisions to capital spending and inventories. The revisions have provided limited support for the central bank’s plans to raise interest rates again this year. Japan’s economy is expected to hit a record low in the first three months of the year, analysts said.
However, a weak yen and disruptions at major automakers’ plants continue to pose challenges to the outlook for the current quarter. “The revised GDP figures make it easier for the Bank of Japan to be optimistic about future interest rate hikes, as they allow it to assess a slight uptick in capital investment,” said Kohei Okazaki, senior economist at Nomura Securities. Japan’s gross domestic product shrank 1.8% on-year in the first quarter from the previous three months, Cabinet Office data showed on Monday. The decline was weaker than economists’ median forecast of a 1.9% contraction and below an initial estimate of 2%. The revised figure brought the quarterly contraction to 0.5% in price-adjusted terms, matching the preliminary reading last month.
The data could come as the market speculates that the Bank of Japan may discuss tapering its purchases of Japanese government bonds during its policy review this week. This comes as part of the bank’s efforts to reduce monetary stimulus and curb the yen’s weakness. Investors are currently looking for clues on the timing of future interest rate hikes by the central bank, which raised interest rates in March for the first time since 2007, in a historic shift away from ultra-loose monetary policy.
January-March quarterly
Japan’s economy grew at an annual rate of 3.1% in the April-June period, rebounding from a contraction in the previous quarter, government data showed. The world’s fourth-largest economy grew 0.8% in the first quarter of the fiscal year, according to the Cabinet Office. Seasonally adjusted gross domestic product measures the value of a country’s goods and services. The annual rate reflects whether the economy is growing or shrinking if the quarterly rate continues over the course of a full year.
Domestic demand grew at a robust 3.5% quarter-on-quarter, helped by healthy household consumption and private sector investment, as well as government investment. Exports also rose sharply, up 5.9%. Japan’s gross domestic product, on the other hand, contracted 0.6% in the January-March period on a quarterly basis, after growing 0.1% in the October-December period last year. Economic growth has oscillated between periods of contraction and weak expansion over the past year.
Carnell was referring to Prime Minister Fumio Kishida’s announcement that he will not seek re-election as head of the ruling Liberal Democratic Party. Whoever replaces him as party leader in September’s election will become prime minister because the party controls parliament. “There is no strong contender to take over Kishida’s role, making it difficult to gauge the political direction of the next government,” Carnell said.
The Liberal Democrats have ruled Japan for almost all of the postwar era and are credited with steering the country’s rise as an economic power. But voters are increasingly concerned about Japan’s waning influence. Japan is not facing the inflationary pressures seen in parts of the United States and other advanced economies. Prices have recently risen to about 3% in Japan, which has suffered from years of deflation, or persistently low prices that underscore the fragility of the economy.
