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Japan: Japanese economy enters into recession in Q3

November 18, 2015

GDP fell 0.8% in Q3 over the previous quarter in seasonally adjusted annualized terms (SAAR), which followed the 0.7% drop tallied in Q2 (previously reported: -1.2% quarter-on-quarter SAAR). With this result, Japan entered into technical recession in Q3. The print was below the 0.2% decline that market analysts had expected and represented the largest decline in a year. On an annual basis, economic activity expanded 1.0% in Q3 (Q2: +1.0% year-on-year), which marked the strongest growth since Q1 2014.

Q3’s drop reflected weaker investment activity, while dynamics in the external sector improved. Private consumption rose 2.1% in Q3 (Q2: -2.3% qoq SAAR), while public spending decelerated to a 1.2% increase (Q2: +2.6% qoq SAAR). Gross fixed capital formation worsened from a flat reading in Q2 to a 2.5% drop in Q3, which marked the steepest decline since Q2 2014. Private non-residential investment followed suit and registered a 5.0% decline (Q2: -4.8% qoq SAAR).

Exports of goods and services rebounded in Q3, expanding 10.9% over the previous quarter in annualized terms (Q2: -16.1% qoq SAAR). Imports also recovered and expanded 7.1% in Q3 (Q2: -10.8% qoq SAAR). As a result of the strong rebound in exports, the external sector’s annualized net contribution to overall growth swung from minus 0.8 percentage points in Q2 to plus 0.4 percentage points in Q3.

The Bank of Japan (BoJ) expects the economy to expand between 1.5% and 1.9% in the fiscal year 2015, which ends in March 2016. In the subsequent fiscal year, the BoJ sees GDP growth of between 1.5% and 1.7%. FocusEconomics Consensus Forecast panelists see GDP expanding 0.7% in calendar year 2015, which is down 0.1 percentage points from last month’s projection. In 2016, the panel sees the economy growing 1.2%, which is also down 0.1 percentage points from last month’s estimate.


Author: Ricard Torné, Lead Economist

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Japan GDP Q3 2015 0

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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