World Economy

Japan Economy in Slow Recovery

Japan Economy in Slow RecoveryJapan Economy in Slow Recovery

Japan, the world’s third-largest economy, has been in recession four times since the global financial crisis but latest gross domestic product figures, released in December, signal a more positive future for the Land of the Rising Sun.

Growth in the third quarter of 2015 was revised from an annualized fall of 0.8% (according to preliminary GDP figures released in November) to an annualized rise of 1%, NewsNow reported.

While Japan’s overall economic outlook still remains challenging, the latest GDP figure suggests that its economy is back on a recovery track, with growth boosted by consumer spending and business investment.

The forthcoming 2020 Summer Olympics, to be held in Tokyo, is also expected to give the economy a much-needed lift, according to recent research from the Bank of Japan.

The research said the Games would likely boost Japan’s economy by 0.2-0.3% each year upto 2018, with investment in the construction and tourism sectors expected to support growth, offsetting some of the impact of a sales tax increase scheduled for 2017.

 Morale Slips

Japanese manufacturers’ morale slipped in January and is expected to stay subdued over the coming three months, a Reuters poll found, in a sign that fears of a deepening China-led global slowdown and market turmoil are taking their toll on exporter confidence. The monthly Reuters Tankan, which closely tracks the Bank of Japan’s tankan quarterly survey, showed service-sector sentiment improved but was seen falling back again–highlighting the fragility of domestic demand.

“China’s slowdown and recent yen gains dampened the processing industries’ sentiment. Domestic demand is weak as well, and the economy may have contracted in the last quarter,” said Yuichiro Nagai, economist at Barclays Securities.

The poll of 514 big- and mid-sized Japanese companies between Jan 5 and 15, of which 272 responded, was taken as the new year got off to a nervous start due to the collapse of oil and commodity prices, reflecting the slowdown in China and financial market turmoil there.

“Although shipments to domestic clients slightly rose and US-bound shipments held firm, shipping to Asia remains low and those to China in particular are falling a lot,” a manager at a rubber maker said in the survey, which firms answer anonymously.

Reuters Tankan sentiment index for manufacturers fell to six in January from nine in December, weighed on by exporting industries such as steel, electric machinery and precision machinery. The index is seen unchanged in April.

The service sector index rose to 27 from 18 in December, the first improvement in three months, led by retailers, real estate/construction and information/communications firms. The index is, however, seen falling to 23 in the next three months.

BOJ tankan, one of the major indicators the central bank scrutinizes in guiding monetary policy, showed in December that business mood held steady but it was seen deteriorating three months ahead–reflecting the slowdown in emerging economies.