Japan's run of growth longest in 28 years

A shopping area in Osaka. Private consumption, which accounts for about two-thirds of Japan's gross domestic product, rose 0.5 per cent in the October-December quarter. Exports rose 2.4 per cent, but this was offset by a 2.9 per cent jump in imports
A shopping area in Osaka. Private consumption, which accounts for about two-thirds of Japan's gross domestic product, rose 0.5 per cent in the October-December quarter. Exports rose 2.4 per cent, but this was offset by a 2.9 per cent jump in imports due to robust domestic demand.PHOTO: REUTERS

But pace of expansion slows; rebound in household consumption one bright spot

TOKYO • Japan's economy expanded for an eighth quarter, its longest continuous expansion since the 1980s bubble economy, but the pace of growth fell sharply and missed expectations.

Slower growth ahead, particularly with a stronger yen, weakens inflationary pressure and underscores the likelihood of continued stimulus from the central bank.

Japan has now posted the longest continuous economic expansion since a 12-quarter stretch of growth between April-June 1986 and January-March 1989 around the height of Japan's notorious economic bubble.

The economy grew at a 0.5 per cent annualised rate in October-December, less than the median estimate for annualised growth of 0.9 per cent, Cabinet Office data showed yesterday. That followed a revised 2.2 per cent annualised increase in July-September.

Compared to the previous quarter, gross domestic product (GDP) grew 0.1 per cent, slightly less than the median estimate of 0.2 per cent growth and following a 0.6 per cent quarter-on-quarter expansion in July-September.

Private consumption, which accounts for about two-thirds of GDP, rose 0.5 per cent from the previous quarter, more than the median estimate of a 0.4 per cent increase and a rebound from a revised 0.6 per cent decline in the previous quarter.

Capital expenditure rose 0.7 per cent in October-December from the previous quarter, less than the median estimate for a 1.1 per cent increase, but up for the fifth straight quarter and a sign of sustainable gains in business investment.

Overseas demand subtracted fractionally from GDP in October-December. Exports rose 2.4 per cent, but this was offset by a 2.9 per cent jump in imports due to robust domestic demand.

Japan's economy has cruised along at well above its potential growth rate, fuelling growing confidence that an ever-tighter labour market and record corporate profits would generate stronger consumer spending and inflation. While private consumption and business investment have improved, wage gains remain sluggish and inflation is still well below target. Economy Minister Toshimitsu Motegi said the run of growth is the longest in 28 years and is the beginning of a positive economic cycle.

"It's hard for the Japanese economy to be self-sustaining when incomes are struggling to rise," said Mr Yasutoshi Nagai, chief economist at Daiwa Securities in Tokyo. He added that one bright spot was a rebound in household consumption.

"The good news is that domestic demand is driving growth," Mr Jesper Koll, chief executive of Wisdomtree Japan, told Bloomberg TV. "The pull of imports is actually stronger than expected, and that reduces the net export contribution."

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on February 15, 2018, with the headline 'Japan's run of growth longest in 28 years'. Print Edition | Subscribe