Japan's Q2 growth far slower than first estimate

Private consumption, which makes up 60 per cent of Japan's gross domestic product growth, rose 0.8 per cent, roughly unchanged from the preliminary 0.9 per cent increase, the data showed.
Private consumption, which makes up 60 per cent of Japan's gross domestic product growth, rose 0.8 per cent, roughly unchanged from the preliminary 0.9 per cent increase, the data showed.PHOTO: REUTERS

Downgrade widely expected after revised data showed capital spending growth slowed

TOKYO • Japan's economic growth in the second quarter was much slower than seen in a stellar preliminary reading, government data showed yesterday, confounding hopes for a long awaited pick-up in domestic demand.

The downgrade was widely expected after data used to revise gross domestic product (GDP) figures showed capital spending growth from April to June slowed from the previous quarter.

While the disappointing data may weaken confidence in the government's economic policies and the business outlook, analysts still expect the economy to sustain a steady recovery as robust global demand underpins exports and a tightening job market improves the prospects for higher wages.

"It's indeed a big revision, but growth in the economy and capital expenditure is still pretty fast," said Dai-ichi Life Research Institute chief economist Yoshiki Shinke. "There's no need to be pessimistic about Japan's economy. Given strong corporate profits and improving business sentiment, capital expenditure will remain firm."

Japan's economy expanded at an annualised rate of 2.5 per cent in the April to June quarter, much less than an initial estimate of 4 per cent growth, Cabinet Office data showed.

Japan's economy expanded at an annualised rate of 2.5 per cent in the April to June quarter, much less than an initial estimate of 4 per cent growth, Cabinet Office data showed.

While it was lower than a median market forecast for a revision to 2.9 per cent growth, the economy still managed to post a sixth straight quarter of expansion.

Japan's GDP data tends to experience big revisions due to the way the Cabinet Office estimates capital expenditure, consumption and inventory in the preliminary reading.

The downgrade in annualised GDP growth, which was the biggest since comparable data became available in 2010, was largely due to a sharp markdown in corporate capital spending.

The quarter-on-quarter pace of rise in capital expenditure was revised down to 0.5 per cent from an initial reading of 2.4 per cent, reflecting data that became available after the release of preliminary GDP.

Private consumption, which makes up 60 per cent of GDP growth, rose 0.8 per cent, roughly unchanged from the preliminary 0.9 per cent increase, the data showed.

The data follows a recent run of indicators that suggests economic growth should continue in the current quarter, thanks to solid exports and factory output.

Wage growth and household spending, however, remain lacklustre despite a tight job market, keeping the Bank of Japan under pressure to maintain its massive monetary stimulus even as its US and European counterparts contemplate a gradual exit from their ultra-loose monetary policies.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 09, 2017, with the headline 'Japan's Q2 growth far slower than first estimate'. Print Edition | Subscribe