Japan's Economy Wasn't in Recession in 3rd Quarter, Data Show

Japan Needs to Focus on Structural Reforms, Treves Says
  • Stronger capital spending supports updated growth figures
  • Current account balance in surplus for 16th straight month

Japan’s gross domestic product expanded in the third quarter rather than contracting as previously thought, meaning the economy didn’t enter a recession earlier this year.

The revision is good news for Prime Minister Shinzo Abe, who has made reviving the economy a priority for his administration, although growth continues to lag behind record corporate profits and rising share prices. The government is still expected to compile an extra fiscal spending package this month after the Bank of Japan in 2015 refrained from adding to its record monetary stimulus program.

  • Annualized GDP rose 1 percent in the three months ended Sept. 30 from the previous quarter.
  • Preliminary figure had indicated GDP dropped 0.8 percent.
  • Economists, who changed their forecasts after surprisingly strong capital expenditure numbers last week, expected an increase of 0.2 percent.
  • Second-quarter GDP also was revised, to -0.5 percent from a preliminary -0.7 percent.

“Japan’s economy is back on a recovery track after a soft patch. The data points to an improvement in capital spending,” Hiroaki Muto, chief economist at Tokai Tokyo Research Center Co. in Tokyo, said after the report was released. “The recovery is nowhere near what you’d call strong but we don’t have to be too pessimistic either.”

After the economy shrank in the April-June period, a second straight quarter of contraction in the three months through September would have seen Japan meet the common definition of a recession. Underscoring his optimism amid mixed signals from economic data, central bank Governor Haruhiko Kuroda said as far back as September that it wouldn’t be unusual for the economy to expand in the third quarter.

Data from the finance ministry last week foreshadowed the chance of a GDP upgrade, with capital expenditure jumping more than 11 percent in the three months ended Sept. 30 from a year earlier.

Tuesday’s revised GDP figures released by the Cabinet Office also show that:

  • Business spending rose 0.6 percent, compared with the 1.3 percent decline initially estimated.
  • Private consumption advanced by 0.4 percent from the previous quarter.
  • Private inventories subtracted 0.2 percentage point from the growth, less than the 0.5 percentage point initially thought.

Governor Kuroda and his policy board meet next week to consider any changes to their monetary program. Just one of 41 economists surveyed by Bloomberg expect a move then by the BOJ.

QuickTake Abenomics

Abe last month ordered the compilation of an extra budget for the current fiscal year. The package, which Abe adviser Etsuro Honda has said should be as much as 3.5 trillion yen ($28.4 billion), is likely to provide financial aid to low-income pensioners.

Separately Tuesday, Japan’s current account surplus for October widened to 1.46 trillion yen compared with forecasts for 1.59 trillion yen. That’s the 16th straight month of surplus.

The yen advanced 0.1 percent to 123.24 per dollar at 10:46 a.m. in Tokyo while the Topix stock index slipped 0.8 percent.

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