Japan's Economy Grows at 3.9% Annual Pace, More Than Estimates
Japan Grew 3.9% in Third Quarter, More Than Forecast
Tomohiro Ohsumi/Bloomberg
Gross domestic product rose an annualized 3.9 percent in the three months ended Sept. 30, following a revised 1.8 percent expansion in the previous quarter, the Cabinet Office said in Tokyo today.
Gross domestic product rose an annualized 3.9 percent in the three months ended Sept. 30, following a revised 1.8 percent expansion in the previous quarter, the Cabinet Office said in Tokyo today. Photographer: Tomohiro Ohsumi/Bloomberg
Japan’s economy grew more than forecast in the third quarter as consumer spending increased, shielding the expansion from a stronger yen and export slowdown likely to have a greater impact this quarter.
Gross domestic product rose an annualized 3.9 percent in the three months ended Sept. 30, following a revised 1.8 percent expansion in the previous quarter, the Cabinet Office said in Tokyo today. In nominal terms, the economy grew 2.9 percent.
Consumption, accounting for about 60 percent of GDP, led the gain as households stepped up purchases of fuel-efficient cars ahead of the expiration of a subsidy program and as smokers stocked up before an Oct. 1 tobacco-tax rise. The yen’s climb to a 15-year high will probably damp growth this quarter as companies from Sharp Corp. to Nikon Corp. cut profit forecasts.
“Japan can’t be wild with joy over the stronger-than- expected GDP figure,” said Susumu Kato, chief economist for Japan in Tokyo at Credit Agricole CIB and CLSA. “There will be a huge payback in the fourth quarter as the waning effects of the government’s incentive programs and the impact of the yen’s gain should materialize.”
Japan’s currency weakened after the release, with the yen trading at 82.72 per dollar at 1:48 p.m. in Tokyo from 82.47 before the report was published. The Nikkei 225 Stock Average rose 0.9 percent to 9,811.91.
Outlook for GDP
The median forecast of 21 economists surveyed by Bloomberg News was for a 2.5 percent increase in GDP last quarter. Growth may slow to a 0.3 percent in October to December, according to a Bloomberg News survey of economists taken before today’s data, with seven of 15 of them predicting GDP will shrink.
“The economy could have slowed in the third quarter” if the one-off factors bolstering household spending were stripped out, said Kohei Okazaki, an economist at Nomura Securities Co. in Tokyo. “The economic trend is shifting downward.”
Household outlays rose 1.1 percent from the previous three months. In addition to the stimulus boost, the nation’s hottest summer in more than a century also fueled demand for air conditioners. The gains in spending at home helped counter slower growth in overseas demand. Net exports, or shipments less imports, were unchanged in the third quarter, after overseas sales grew at half the pace they did in the previous three-month period.
‘Temporary Increase’
Growth was supported by “a temporary increase in consumer spending,” Economy Minister Banri Kaieda said in a statement in Tokyo today. “We’ll probably see weakness in exports and consumption because production slowdowns in Asia and payback for” surging car and tobacco sales at home, the minister said.
Companies plan to step up investment in plant and equipment, today’s report showed. Business spending gained 0.8 percent in the third quarter. A separate report today showed industrial production fell a revised 1.6 percent in September, smaller than the 1.9 percent drop initially reported.
Even with the faster growth, Japan’s quarterly $1.372 trillion GDP lagged behind China’s $1.415 trillion, figures from the Cabinet Office show, the second straight period Japan’s output was smaller than China’s on a quarterly basis. Japan was still the world’s second-largest economy in the January through September period, with GDP totaling $3.967 trillion versus China’s $3.947 trillion, the government said.
The fallout from the stimulus expiry and the stronger yen may compel the central bank to loosen credit even after it cut rates to near zero last month and introduced a 5 trillion-yen ($61 billion) asset purchase program.
“An expansion of the fund could be in the cards if the yen strengthens further,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “The trend of weaker dollar and stronger yen probably will continue for some time” amid speculation of easing by the U.S. Federal Reserve, she said.
Stimulus Funding
Prime Minister Naoto Kan’s Cabinet last month endorsed a 5.1 trillion yen stimulus package and has extended its incentive program to buy energy-saving household appliances by three months to end on March 31. Funding for those measures may be held up in the opposition-controlled upper house of parliament.
The yen climbed to 80.22 against the dollar on Nov. 1, the highest level since April 1995. Japan’s effort to stem the local currency’s advance by intervening in currency markets on Sept. 15 failed to stop the strengthening. The currency’s advance may also be worsening deflation by making imports cheaper. Today’s report showed the GDP deflator fell 2 percent from a year earlier, larger than the 1.8 percent decline reported in the second quarter.
Cutting Forecasts
Nikon, a Japanese maker of cameras, lenses and chip-making equipment, cut its full-year operating profit and revenue forecasts on Nov. 4, citing a stronger yen. Sharp, Japan’s largest maker of liquid-crystal displays, also cut its annual profit forecast by 40 percent last month, blaming the yen’s appreciation and falling prices of panels.
Toyota Motor Corp. President Akio Toyoda said in October he felt an “an extreme sense of crisis” because of the strong yen.
Government reports in the past month show industrial production slumped by more than double the pace economists forecast in September and exports increased least this year. The central bank also lowered its economic assessment this month, describing the expansion as “pausing.”
“The macro-economy should avoid a double-dip,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “Capital spending will likely continue to increase, albeit at a gradual pace.”
To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net
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