Japan Capital Expenditure Healthy, Economy Doing Well
Japan Capital Expenditure Healthy, Economy Doing Well

Japan Capital Expenditure Healthy, Economy Doing Well

Japan’s economy has grown for the seventh straight quarter, the longest period of expansion since an eight-quarter run from April-June 1999 to January-March 2001

Japan Capital Expenditure Healthy, Economy Doing Well

Japan's economy shrugged off a consumer spending dip in the third quarter to post the longest period of uninterrupted growth in more than a decade, showing strong fundamentals.
The economy expanded at a 1.4% annualized rate in July-September on strong exports and slightly above the median estimate for annualized growth of 1.3%. That followed revised annualized growth of 2.6% in April-June, Reuters reported.
Weakness in consumer spending is expected to be temporary because the economy is near full employment, which should bolster domestic consumption in the future. Rising capital expenditure and exports are also expected to keep the economy growing, which should ease some concerns about sluggish inflation.
"Japan's potential growth rate is around 1%, so the results for the third quarter show the actual rate of growth is quite high," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
"The jobs market is doing so well that consumer spending is sure to pick up in the future. Capital expenditure still looks healthy. The economy is doing well."
Gross domestic product grew 0.3% compared to the previous quarter, which matched the median estimate and followed a 0.6% quarter-on-quarter expansion in April-June, Cabinet Office data showed on Wednesday.

Longest Period of Expansion
The results show that Japan's economy has grown for the seventh straight quarter, the longest period of expansion since an eight-quarter run from April-June 1999 to January-March 2001.
External demand—or exports minus imports—was the biggest reason for expansion, adding 0.5% to growth. Shipments of cars and electronic parts to the United States and Asia were strong in the third quarter, reflecting improving global demand, a cabinet office official told reporters. In comparison, negative external demand subtracted a revised 0.2 percentage point from GDP growth in April-June.
Private consumption, which accounts for about two-thirds of GDP, fell 0.5% from the previous quarter, more than the median estimate of a 0.3% contraction to mark the first decline since October-December 2015.
The decline was driven by lower spending at restaurants and hotels, as well as reduced spending on cars and mobile phones, the official said. Bad weather during the quarter may have hurt spending, the official said.
"There's no change to our view the economy is recovering moderately as a trend," Japanese Economy Minister Toshimitsu Motegi told reporters. "We need to make the recovery a durable one, so we'll proceed with reforms to boost Japan's productivity."
Capital expenditure rose 0.2% in July-September from the previous quarter, less than the median estimate for a 0.3% increase but still up for the fourth straight quarter.
Japan's government will announce a package of economic measures by year-end aimed at increasing investment in skills training and raising productivity.
This long run of growth should encourage the Bank of Japan to stick with the current monetary easing framework, given its argument that inflationary pressure will percolate through the economy as long as growth is on track.

Government’s Stimulus Program
The economic expansion came mostly from abroad. After unusually exuberant spending by Japanese consumers in the April to June period, foreign trade took over as the main engine of growth from July through September. Exports have been central to Japan’s recovery, helped in part by a weak yen.
The government’s stimulus program, colloquially known as Abenomics after the prime minister, calls for the central bank to inject vast amounts of money into the financial system. That weakens the yen, making Japanese cars, electronics and other products more attractive to foreign buyers.
Consumer prices have been declining in Japan since the 1990s, a debilitating cycle known as deflation that can lead consumers and companies to put off purchases or investments, hitting economic growth and leading to a vicious cycle where prices continue to fall. That has squeezed companies’ revenues, leaving them with less money to pay workers.
Ending deflation is the ultimate goal of Abenomics. After lurching between rises and falls for about five years, consumer prices have been rising steadily, if modestly, this year. Though inflation—now at 0.7% by the Bank of Japan’s preferred “core” measure—remains at less than half the target of 2%, some analysts say they think the government may soon declare an official end to the two-decade deflationary scourge.


Short URL : https://goo.gl/ZmbnZ7
  1. https://goo.gl/kLQzm3
  • https://goo.gl/WuLbcv
  • https://goo.gl/j1YC6J
  • https://goo.gl/HiixPT
  • https://goo.gl/1VS2Hn

You can also read ...

GDP expanded 6.8% year-on-year in the Q1.
With growth resilient and progress made in the pursuit of high...
Venezuela Wants to Improve Economy
Venezuelan Labor Minister Eduardo Pinate says the Bolivarian...
New Whistleblower Rises Against India’s ICICI Bank
India’s private lender ICICI Bank has been identified as a...
Closing Africa’s Wealth Gap
From “Africa Reeling” to “Africa Rising”, there’s a new...
Asian countries form a crucial part of the supply chain for many of the Chinese electronics the US has slapped with tariffs.
The mounting trade tensions between the US and much of the...
The accumulated improvement in the structural balance since 2015 amounted to 0.7% of GDP.
The European Council closed the excessive deficit procedure...
Italy’s New Gov’t Facing Daunting Challenges
Italy’s Five Star Movement and the Lega party managed to form...
Bitcoin Falls to Four-Month Low
Bitcoin dropped to a more than four-month low on Friday,...

Add new comment

Read our comment policy before posting your viewpoints