Soft Consumer Spending Sees Japan’s Q3 GDP Downgraded Further

Japan’s economy shrank 0.9% in the third quarter from the previous quarter, at an annualized pace of 3.0%, the Cabinet Office announced on Monday. This was worse than the previous estimate as the Coronavirus and supply shortage had more of a dampening affect than first thought.

Japan Q3 GDP (2nd reading)

  • GDP -0.9% q/q vs -0.8% expected
  • GDP y/y -3.6% vs -3.1% expected (first estimate -3.0%)
  • Private consumption -1.3% vs -1.1% prelim
  • External demand 0.0% vs +0.1% prelim
  • Inflation deflator vs -1.1% prelim
  • Capex -2.3% vs -3.9% expected

Household consumption fell more than initially anticipated (-1.4% vs preliminary data of -1.2% and after a 0.6% gain in Q2). Government consumption growth was revised slightly down (1.0% vs flash data of 1.1% and after a 0.7% rise previously).

Japan GDP Growth Rate
Japan GDP Growth Rate

Public investment was revised lower (-2% vs -1.5% in the first estimate and after a 2.6% growth in Q2). Business investment dropped less than initially anticipated (-2.3% vs flash data of -3.8% and after a 2.0% growth previously).

Net external demand made no contribution as exports fell 0.9% (vs -2.1% in flash figure and a 2.5% growth in Q2), down for the first time in five quarters; while imports slipped 1% (vs -2.7% in the first estimate and a 3.9% gain previously), falling for the first time in a year.

BoJ Responds

Following the release the BOJ’s deputy Amamiya said the outlook was highly uncertain due to emergence of omicron and the supply shortage. He commented on BOJ policy underscoring where Japan’s economy is going forward.

  • BOJ will continue with powerful easing to achieve goals
  • There’s no need for BOJ to modify massive monetary policy easing
  • BOJ ready to ease further without hesitation as needed
  • Economy has stagnated but expected to show clearer recovery
  • Impact of supply constraints likely to be temporary

Source: Japanese Cabinet Office

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