Japan economy stalls in Q3

TOKYO- Japan’s economy ground to a near standstill in the third quarter with growth at its weakest in a year as the US-China trade war and soft global demand knocked exports, keeping pressure on policymakers to ramp up stimulus to bolster a fragile recovery.

Private consumption also cooled from the previous quarter, casting doubt on the Bank of Japan’s view that robust domestic demand will offset the impact from intensifying global risks.

The world’s third-largest economy grew an annualized 0.2 percent in the third quarter, slowing sharply from a revised 1.8 percent expansion in April-June, preliminary gross domestic product (GDP) data released by the government showed on Thursday.

- Advertisement -spot_img

It fell well short of a median market forecast for a 0.8 percent gain and marked the weakest growth since a 2.0 percent contraction in July-September last year.

“Domestic demand had made up for some of the weakness in external demand, but we can’t count on this to continue,” said Taro Saito, executive research fellow at NLI Research Institute.

“A contraction in October-December GDP is a done deal. The economy may rebound early next year, but will lack momentum.”

The feeble data may heighten calls from lawmakers for the government to boost fiscal spending to support the economy, which many fear will take a hit from a sales tax hike that took effect in October.

Private consumption grew 0.4 percent in July-September, slowing from a 0.6 percent increase in the previous quarter, despite stronger demand from households which sought to beat the October tax hike.

Capital spending, a rare bright spot in the economy, rose 0.9 percent in the third quarter, accelerating from the previous three months. That helped domestic demand add 0.2 percentage point to growth.

But external demand knocked 0.2 percentage point off GDP growth, as exports were hit by the protracted China-US trade war that has upended world supply chains and hurt the global economy.

Markets have been on edge in the past month as the United States and China seek to complete an initial trade deal to de-escalate their bitter tariff row.

US President Donald Trump on Tuesday dangled the prospect of completing the initial deal with China “soon,” but has so far offered no new details on the negotiations.

The dispute has already hit big exporters hard. Japanese electronic giant Panasonic Corp 6752.T last month reported a 12 percent drop in its second-quarter operating profit due to slumping sales of electric components to factory owners.

Moreover, worsening ties with South Korea had “a big impact” on already weak exports, Economy Minister Yasutoshi Nishimura told reporters after the GDP data release.

“Exports will remain weak due to slack demand for cars and electronics parts. In addition, declines in tourists from South Korea are having large negative effects,” he said. – Reuters

Author

Share post: