Japan GDP


Japanese economy remains mired in recession

In the fourth quarter, GDP declined 0.4% over the previous quarter in seasonally adjusted annualized terms (saar), which represents the third consecutive drop in the country's output. The print represented an improvement over the 3.8% decline seen in the previous quarter (previously reported: -3.5% quarter-on-quarter saar) and overshot the FocusEconomics Consensus Forecast that had GDP falling 1.0%. On an annual basis, economic activity expanded a mild 0.3% in the fourth quarter (Q3 2012: +0.4% year-on-year). In the full year 2012, GDP expanded 1.9% (2011: -0.6%), which matched the result expected by FocusEconomics Consensus Forecast panellists.

The contraction seen in the fourth quarter was mainly the result of a sharp fall in the external sector, while the domestic side of the economy remained supportive, adding 0.2% over the previous period in annualized terms (Q3: -1.0% qoq saar). Private consumption expanded 1.8% in the fourth quarter (Q3: -1.9% qoq saar), while public spending rose 2.4% (Q3: +1.5% qoq saar). On the other hand, private non-residential investment fell 9.9%, which, nevertheless, represented an improvement over the 13.7% drop observed in Q3.

The external sector remained deeply in negative territory, albeit it recovered some of the ground lost in Q3. Exports of goods and services declined 14.0% over the previous quarter in annualized terms (Q3: -19.0% qoq saar) amid falling shipments to China due to renewed tensions regarding the Senkaku/Diaoyu islands and the perennial weakness in the European Union. Meanwhile, imports declined at the fastest pace since Q2 2009, falling 9.0% (Q3: -1.9% qoq saar). As a result, the external sector's annualized net contribution to overall growth improved from minus 2.9 percentage points in the third quarter to minus 1.0 percentage points in the fourth.

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Japan GDP Chart

Japan GDP Q4 2012

Note: Quarter-on-quarter seasonally adjusted annualized changes and annual variation of GDP in %.
Source: Cabinet Office (CO) and FocusEconomics Consensus Forecast.

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