Japan negative growth

After two consecutive quarters of growth, Japan's GDP turned negative in the third quarter, due to weak consumption and business investment.

Figures released on November 15 showed that Japan's GDP contracted by 2.1% in the third quarter, larger than expected. In the second quarter, Japan still grew by 4.5%.

Japan's GDP contracted as consumption and exports declined, complicating the Bank of Japan's (BOJ) efforts to gradually ease monetary policy as inflation accelerates.

GDP figures also showed persistently high inflation weighing on household spending. Inflation is also weighing on manufacturers, at a time when global demand for goods is already slowing.

"Without a growth engine, I wouldn't be surprised if Japan's economy continued to contract this quarter. The risk of falling into recession cannot be ruled out. Weak growth could prompt the BOJ to delay the end of negative interest rates," said Takeshi Minami, chief economist at Norinchukin Research Institute.

People shop at a store in Tokyo (Japan). Photo: Reuters — People shop at a store in Tokyo (Japan). Photo: *Reuters*

Japanese officials had hoped domestic consumption would offset falling demand from China and other countries. But consumption was flat in the third quarter, after falling 0.9% in the previous quarter, compared with analysts’ forecasts of a 0.2% increase.

Business investment also fell 0.6% in the third quarter, the second straight quarter of decline, contrary to the BOJ's expectations that strong investment would support growth.

"The disappointing third-quarter numbers are a warning that Japan is not out of the tunnel yet," said Stefan Angrick, an economist at Moody's Analytics.

He said rising exports, driven by autos and tourism, helped underpin growth in the second quarter. “But now that trend has stopped, exposing the weakness in domestic demand,” Angrick said.

Japan’s economy has been slow to recover from its post-pandemic reopening. While a weak yen has boosted exporters’ profits, wages have not risen enough to offset inflation. Inflation-adjusted real incomes fell 2.4% in September from a year earlier, the 18th straight month of declines.

Japanese Prime Minister Fumio Kishida has repeatedly called on companies to raise wages. Japan has also recently announced a package of measures to help people during a period of inflation. However, analysts are skeptical that these policies will be effective in stimulating the economy.

Ha Thu (according to Reuters)

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