Japan Chalks Up Best Winning Streak Since 2001 on Export Boost

Updated on
  • Business investment expands for a fourth straight quarter
  • Bad weather curbs growth by weighing down consumption
Tomo Kinoshita, chief market economist at Nomura Securities, discusses Japan’s third-quarter GDP figures.

Japan’s economy grew for a seventh straight quarter, its longest expansion since 2001, as a recovery in exports and rising business investment offset a decline in consumer spending.

Highlights of GDP report

  • Gross domestic product grew at an annualized rate of 1.4 percent in the three months ended Sept. 30 (estimate +1.5 percent), compared with a revised 2.6 percent in the previous quarter.
  • Net exports, or shipments less imports, added 0.5 percentage point to GDP.
  • Business spending rose 0.2 percent (estimate +0.3 percent) from the previous quarter.
  • Private consumption fell 0.5 percent in the third quarter from the previous three months (estimate -0.4 percent).

Key Takeaways

The economy continues to expand at above its potential growth rate (0.5-1.0 percent) after more than four years of fiscal stimulus under Prime Minister Shinzo Abe and massive monetary easing from the Bank of Japan. Even so, inflation remains stubbornly low. Economists are watching closely for signs that the tightest labor market in decades is beginning to bring the needed higher wage gains and accelerate consumer price gains. In the meantime, external demand in the form of exports is playing a key role for growth.

Economist Views

  • “Japan’s economy is in a sweet spot” said Takuji Aida, chief Japan economist at Societe Generale SA. Aida was the most accurate economist in forecasting the annual GDP growth rate in Bloomberg’s survey. "Japan’s economy will continue its moderate growth rate in coming quarters."
  • “Private consumption fell because of bad weather,” according to Nobuyasu Atago, chief economist at Okasan Securities Co. and a former BOJ official. "Cyclical conditions are not bad for the economy and I expect a rebound in overall growth in the fourth quarter," he said.
  • "Business investment wasn’t too strong, but if you look at the BOJ’s Tankan survey, there are still plans for fairly strong investment," said Masaki Kuwahara, senior economist at Nomura Securities. “The U.S. economy is doing well, so overseas demand should continue to do reasonably well.”

Bloomberg Economics

"The seventh straight quarter of expansion and growth still above potential give the Bank of Japan little reason to alter its policy settings for now," according to Bloomberg economist Yuki Masujima, who also noted that the rate of expansion has slowed. "If anything, the data will make it easier for Prime Minister Shinzo Abe to push a planned 2 trillion yen economic package through the Diet by year-end," he said.

Temporary factors such as typhoons and heavy rains weighed on spending at restaurants and other private consumption, according to Economy Minister Toshimitsu Motegi. In a press conference after the release, he noted that nominal GDP had risen to a record and said he expected the gradual recovery to continue.

Other Details

  • Measured quarter-on-quarter, GDP grew 0.3 percent (estimate +0.4 percent).
  • Private inventories contributed 0.2 percent points to GDP.
  • The GDP deflator, a broad measure of price changes, rose 0.1 percent from a year earlier.

— With assistance by Yoshiaki Nohara, and Toru Fujioka

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