TOKYO- Japan’s economy narrowly averted a recession in the final months of 2022, barely growing on frail consumption after shrinking in the third quarter, revised data showed, underscoring the challenge for policymakers trying to shore up a wobbly recovery.
Record high inflation and slowing global growth amid sweeping monetary tightening across many countries have undermined the world’s third-biggest economy’s post-pandemic revival, despite relaxation of COVID curbs, energy subsidies and ultra-easy monetary policy.
Businesses, under government pressure to increase wages to boost household consumption, are struggling to motor on in the face of muted demand at a time of crucial spring labor talks.
Japan’s gross domestic product (GDP) expanded by an annualized 0.1 percent in October-December, against a preliminary estimate of a 0.6 percent expansion and much lower than economists’ median forecast for a 0.8 percent rise in a Reuters poll. That followed a revised 1.1 percent contraction in July-September.
The expansion translates into an almost flat 0.02 percent quarter-on-quarter change, data released by the Cabinet Office showed, against a preliminary reading and economists’ estimate for 0.2 percent growth.
“There was a less strong recovery in services (spending), while rising inflation likely curbed consumption as well,” said Wakaba Kobayashi, economist at Daiwa Institute of Research.
Private consumption, which makes up more than half of the country’s GDP, grew 0.3 percent, the data showed, downgraded from an initial estimate of a 0.5 percent increase.
Spending on services such as restaurants and hotels, as well as goods, were less solid than previously estimated, the data showed.
Capital spending fell 0.5 percent, unchanged from a preliminary estimate and compared with a median market forecast for a 0.4 percent contraction, even as Ministry of Finance data last week showed an uptick in manufacturers’ output capacity in the fourth quarter.
Domestic demand as a whole knocked 0.3 percentage point from revised GDP growth, slightly more than initially estimated, while net exports added 0.4 percentage point.
Japan’s economy is being buffeted by slowing overseas demand due to deteriorating global growth, resulting in a record trade deficit and the largest factory output contraction in eight months in January.
Domestic demand is providing some support to the economy thanks to Japan’s relaxation of COVID-19 measures, including a border control easing for international tourists in October, but four-decade-high inflation is undercutting the prospects of a consumption-driven recovery.
