By Makiko Yamazaki and Satoshi Sugiyama
TOKYO- Japan’s economy expanded by an annualized 0.9 percent over the July-September quarter, government data showed on Friday, slowing from the previous three months due to tepid capital spending though an unexpected pickup in consumption added a bright spot.
The slower growth highlights the frailty of Japan’s economy just as there is a growing risk of slowdown in the US and further weakness in China which could weigh on exports.
Stronger-than-expected private consumption, however, supports the central bank’s forecast of a solid recovery driven by higher wages and consumption helping inflation sustainably hit its 2 percent target and justifying higher interest rates.
The increase in gross domestic product was faster than a median market estimate of a 0.7 percent, but slower than the revised 2.2 percent growth of the previous quarter, the data showed.
The reading translates into a quarterly rise of 0.2 percent, matching economists’ median market estimate in a Reuters poll.
Private consumption, which accounts for more than half of economic output, rose 0.9 percent, outpacing a market estimate of 0.2 percent and picking up from the revised 0.7 percent of the previous quarter.
“The large increase in consumption was a big surprise,” said economist Kengo Tanahashi at Nomura Securities.
Still, that may reflect one-off factors such as recovery in auto production after safety certification scandals and a boost from temporary income tax cuts, he said.
Overall, the data bodes well with further rate hikes, Tanahashi said.
“The growth in GDP at around 0.9 percent is slightly above the potential growth rate,” he said. Capital spending, a key driver of private demand-led growth, fell 0.2 percent in the third quarter, matching a decrease of 0.2 percent expected in the Reuters poll. Slowdown in overseas economies has put downward pressure on machinery investment in such sectors as chipmaking equipment, economists said. – Reuters
