Consumption in Japan
Japan - Consumption
GDP contracts in Q3 on weaker external sector, surprising market
According to a preliminary reading, GDP contracted 1.2% in seasonally adjusted annualized rate terms (SAAR) in the third quarter, below the 4.6% expansion recorded in the second quarter. Q3’s reading marked the worst since Q3 2021 and belied market expectations of an expansion.
Private consumption growth moderated to 1.1% SAAR in Q3 from a 5.1% expansion in Q2. Government consumption was stable (Q2: +3.4% SAAR). Meanwhile, fixed investment growth slowed to 4.8% in Q3 from 6.0% in the previous quarter.
Exports of goods and services increased 7.9% on a SAAR basis in the third quarter, above the second quarter’s 7.2% expansion. In addition, imports of goods and services growth picked up to 22.6% in Q3 (Q2: +3.3% SAAR). Therefore, the external sector detracted from the reading.
On an annual basis, economic growth improved marginally to 1.8% in Q3, compared to the previous period’s 1.7% growth.
The unexpected contraction in Q3 was primarily due to a negative net contribution from the external sector. Moderating private consumption growth also contributed to weaker growth amid a spike in Covid-19 cases during the summer. Our panelists expect GDP growth to pick up in Q4, as the economy benefits from a rebound in tourism and the government’s new USD 200 billion spending package.
Analysts at Nomura commented on the outlook:
“We think private-sector consumption, a representative measure of domestic demand, will slow in 2023 H2 while exports will start falling in 2023 H1. We attribute the slowdown in private-sector final consumption to the dropout of spending stemming from the reopening of the economy. The fall in exports will likely reflect economic downturns in the US and eurozone in 2022 depressing demand for exports of goods from Japan in 2023 H1.”
Naohiko Baba, chief Japan economist at Goldman Sachs, said:
“We expect real GDP in Q4 (Oct-Dec) to recover, driven mainly by consumer spending and exports (including inbound spending) especially on the services front due to reopening of the Japanese economy. Furthermore, we expect imports to temporarily fall steeply as the one-off factor drops out.”
FocusEconomics panelists see the economy expanding 1.4% in 2023, which is down 0.1 percentage points from last month’s forecast, and 1.3% in 2024.
Japan - Consumption Data
|Consumption (annual variation in %)||-0.2||-0.3||1.3||0.0||0.1|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||-0.02||-4.41 %||Dec 30|
|Exchange Rate||108.7||-0.35 %||Jan 01|
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Japan: Japanese government unveils JPY 29.1 trillion (USD 200 billion) supplementary budget in November
November 22, 2022
On 8 November, the Japanese government unveiled a JPY 29.1 trillion (USD 200 billion) supplementary budget—worth around 5% of GDP. Around 25% of it will be spent on shielding businesses and households from rising inflation via electricity and fuel subsidies, and measures to boost wages. Additional funds will be spent on initiatives to boost wealth equality, disaster resilience and national security. Impact on inflation: The Japanese government has claimed that the budget will bring down inflation by 1.2 percentage points between January and September next year.
November 18, 2022
Inflation rose to 3.7% in October, above September’s 3.0%.
November 17, 2022
Yen-denominated merchandise exports rose 25.3% over the same month last year in October, weaker than September’s 28.9% jump.
November 16, 2022
Core machinery orders—which cover the private sector, exclude volatile orders and are a leading indicator for capital spending over the coming three-to-six-month period—decreased 4.6% in month-on-month seasonally -adjusted terms in September, which was a smaller drop than August's 5.8% decrease.
November 15, 2022
Industrial production decreased 1.7% month-on-month in seasonally-adjusted terms in September (August: +3.4% mom).