Japan economy grows faster than expected in Q3, driven by exports

Nov 14, 2016

Japan’s highest mountain, Mount Fuji at 3,776m, seen behind skyscrapers in Tokyo’s Shinjuku area at sunset on Oct 15, 2016.PHOTO: AFP

TOKYO (BLOOMBERG, REUTERS) - Japan’s economy expanded more than forecast in the three months through September, with a rebound in exports compensating for weak spending by people and companies.

Gross domestic product expanded by an annualised 2.2 per cent, according to data released by the Cabinet Office on Monday (Nov 14) compared to the median estimate of 0.8 per cent by economists polled by Bloomberg.

It marked the third straight quarter of expansion. The preliminary reading for gross domestic product (GDP) translated into a quarterly expansion of 0.5 per cent in the third quarter.

Private consumption, which accounts for roughly 60 per cent of GDP, rose 0.1 per cent, unchanged from the second quarter, a sign the effects of Prime Minister Shinzo Abe’s stimulus drive dubbed Abenomics are yet to spread to households due to tame wages.

Capital expenditure, a key component of GDP, was flat, following a 0.1 per cent decline in the second quarter, with worries about the global outlook and renewed yen gains weighing on business investment.

The stronger expansion may give relief to Japanese Prime Minister Shinzo Abe after Mr Donald Trump’s US election victory, which is set to scuttle a trade pact at the centre of Mr Abe’s reform policies. Exports have compensated for lacklustre domestic demand, but if Mr Trump’s campaign rhetoric against free trade translates into policy, it could damage Japanese companies in one of their biggest markets and hurt the economy.

"Exports have been recovering on a pick-up in emerging Asian economies, which supported third-quarter growth," Mr Masaki Kuwahara, senior economist at Nomura Securities Co in Tokyo, said before the report was released.

"We are not seeing that Japan’s economy will be derailed from its recovery path even after Trump’s victory," Mr Kuwahara said. "Even though there’s a lot of uncertainty over Trump’s policies, his pledges, such as fiscal spending and tax cuts, may help the US economy and there’s a possibility that his protectionism will not be as bad as people anticipate."

Still, Mr Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting in Tokyo, said: "With Trump’s win, the downside risks to Japan’s economy will be on the rise.

"There’s still a concern that global financial markets will remain unstable and the yen may strengthen, which may hurt global demand and Japanese exports," Mr Kobayashi said before the report was released.

Source: THE STRAITSTIMES