Japan: Economy contracts faster than initially estimated in Q4
The economy contracted 7.1% in the fourth quarter compared to the previous quarter in seasonally-adjusted annualized terms (SAAR), according to a second release of GDP data. This is sharper than the 6.3% contraction initially reported and market analysts’ expectations of a revised contraction of 6.6%, and contrasts the 0.1% expansion in the third quarter. In year-on-year terms, the economy shrank 0.7% in Q4, down from the 0.4% contraction initially reported and contrasting Q3’s 1.7% expansion.
In seasonally-adjusted annualized terms, fixed investment contracted a revised 12.2% in Q4 (previously reported: -9.9% SAAR; Q3: -2.0% SAAR), as business confidence among large manufacturers fell to a near seven-year low. Private consumption fell a revised 10.6% in Q4 (previously reported: -11.0% SAAR; Q3: +1.8% SAAR), as the consumption tax increase in October and the devastating effects of Typhoon Hagibis in the same month hampered spending. Meanwhile, government consumption growth was confirmed at 0.9% in Q4, down from 3.0% in Q3.
On the external front, exports dropped a revised 0.3% in Q4 (previously reported: -0.4% SAAR), after falling 2.8% in Q3, amid downbeat global demand for Japanese goods and services. Imports, meanwhile, slumped a revised 10.2% in Q4 (previously reported: -10.1% SAAR), contrasting the 2.8% increase in Q3. All in all, the external sector contributed 1.9 percentage points to economic growth in Q4—unchanged from the initial estimate—after detracting 1.0 percentage point in Q3.
Commenting on what the GDP revision means for the outlook this year, analysts at Nomura said: “The overall picture of the entire economy falling into a sharp decline in the wake of the October 2019 consumption tax hike is unchanged from the first preliminary estimates. We do not think these updated GDP estimates have any major implications for economic growth from Jan–Mar 2020 onward, as the main focus has shifted to the impact of the COVID-19 outbreak.”