Japanese quarterly GDP growth disappoints
Japan’s economic recovery failed to regain momentum as expected in the last three months of 2013, government data showed on Monday, with spending by households and businesses offset by deteriorating terms of trade. Gross domestic product increased by 0.3 per cent in the October-December quarter, or 1.0 per cent in annualised terms, according to a preliminary estimate by the Cabinet Office. That matched the pace of growth in the period between July and September but fell well short of forecasts by analysts, who had been looking for growth of around 0.7 per cent. Weak export growth was the main culprit. The small increase in the value of exports, at 0.4 per cent, was not nearly enough to balance a 3.5 per cent surge in imports. Japan’s once vaunted trade surpluses have been turned to persistent deficits by a combination of a weak yen and sharply higher energy imports amid the post-Fukushima shutdown of the country’s nuclear industry. The Japanese currency’s more than 20 per cent fall since late 2012 has boosted profits at global manufacturing groups such as Toyota. But it has done so mainly by lifting the yen value of goods sold overseas – and, increasingly, produced there also – and done relatively little to spurt exports from Japan itself. "Growth in October-December was totally dependent on domestic demand," said Takuji Aida, an economist at Société Générale. Housing investment was up 4.2 per cent, consumer spending increased 0.5 per cent and capital investment by companies rose by 1.3 per cent. Government spending also increased, though at a slower pace than in the previous quarter. Growth had slowed in the July-to-September period from rates of 1 per cent or more in each of the first two quarters, and economists had forecast a renewed acceleration. More worryingly, experts have cautioned that the domestic spending that has supported the economy will be hit by an increase in Japan’s national sales tax in April. The planned increase is encouraging some people to make big purchases now, before prices rise, creating a temporary extra burst of economic activity. Consumers are expected to continue supporting growth in the current quarter, before the 3-percentage-point rise takes effect, but a significant slowdown is likely immediately afterward. How quickly the economy can recover from that reversal will be crucial to the future of the "Abenomics" recovery – the roughly year-old growth spurt that has accompanied the stimulative economic policies of Shinzo Abe, prime minister. Growth for 2013 as a whole was 1.6 per cent, the Cabinet Office said, the fastest rate since 2010.