Japan: Economy contracts in the fourth quarter on weaker consumer spending
February 14, 2011
In the fourth quarter, GDP dropped 1.1% over the previous quarter in seasonally adjusted annualised terms. The figure contrasted the previous quarter's 3.3% expansion but, nevertheless, surprised market analysts on the upside, beating expectations of a deeper 2.0% drop. The contraction over the previous quarter reflected a deterioration in domestic demand, which decreased 0.7% over the previous quarter, contrasting the robust 4.1% expansion tallied in the third quarter. In particular, private consumption contracted 2.9% (Q3 2010: +3.6% qoq saar), reflecting the gradual withdrawal of stimulus measures that bolstered consumption in previous quarters. In addition, government consumption decelerated to a 0.8% increase (Q3 2010: +1.2% qoq saar), while non-residential investment moderated to an annualised expansion of 3.7% (Q3 2010: +6.0% qoq saar). Exports contracted 2.8% (Q3 2010: +6.3% qoq saar), while imports dropped 0.5% (Q3 2010: +12.0% qoq saar). As a result of imports decelerating more markedly than exports, the net contribution from the external sector to overall growth stepped up from an annualised minus 0.6 percentage points in the third quarter to minus 0.4 percentage points in the fourth. In the full year 2010, the Japanese economy grew 3.9%, following on a 6.3% contraction recorded in 2009. Meanwhile, according to estimates released by the Cabinet Office, the Japanese economy was officially overtaken by China in 2010 as the world's second largest economy. Following on decades of buoyant growth in China and anaemic developments in Japan, the countries finally switched places in terms of total output in USD terms in 2010. In relative terms, however, Japan remains far ahead of China, with a GDP per capita of USD 42,266 (population 2010: 129 million) estimated for 2010 compared to USD 4,310 in the world's most populated nation (population 2010: 1,365 million).