Japan GDP Q4 2018


Japan: GDP contracts at a sharper pace than initially reported in Q3 on weak capital expenditure

December 10, 2018

Following a barrage of natural disasters to hit the country this year, the Japanese economy contracted at the sharpest pace in over four years in the third quarter. According to revised data released by the Cabinet Office on 10 December, GDP declined 2.5% over the previous quarter in seasonally-adjusted annualized terms (SAAR), a steeper decline than the 1.2% drop initially estimated (Q2: +2.8% quarter-on-quarter SAAR). In annual terms, GDP was flat in Q3, decelerating from Q2’s 1.4% growth.

A much sharper contraction of 10.6% in private non-residential investment (previously reported: -0.9% qoq SAAR) led gross fixed capital formation to drop 8.4% (previously reported: -1.9% qoq SAAR), which represented the weakest performance in six years. Growth in private consumption and public spending, as well as the contribution from the external sector, were left broadly unchanged compared to the first estimate.

Although the contraction is expected to be only temporary, analysts at Nomura note that:

“Given that the global economy is in the midst of an ongoing slowdown, we think the slowdown in Japan's real exports, and in turn the country's economy as a whole, is likely to continue.”

The median GDP forecast among BoJ members is 0.8% for both FY 2019 and FY 2020. FocusEconomics Consensus Forecast panelists see GDP expanding 1.1% in calendar year 2019, which is unchanged from last month’s projection. In 2020, the panel projects the economy to grow 0.6%.


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