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Japan: Economic growth decelerates further in Q3

November 14, 2013

Third quarter national accounts data proved to be less upbeat than in the previous two quarters. In the third quarter, GDP rose 1.9% over the previous quarter in seasonally adjusted annualized terms (SAAR), which marks a deceleration over the 3.8% increase recorded in the previous quarter. The print, however, represents the fourth consecutive expansion in the country's output and slightly overshot the 1.7% rise that market analysts had expected. On an annual basis, economic activity increased 2.7% in the third quarter (Q2: +1.1% year-on-year).

The deceleration in Q3 reflects a deterioration in the external sector, whereas domestic demand gained some traction. Private consumption slowed to a 0.4% increase in the third quarter (Q2: +2.3% quarter-on-quarter SAAR), while government spending decelerated to a 1.1% rise (Q2: +3.1% qoq SAAR). Private non-residential investment registered a 0.7% increase, which was less than the 4.4% expansion observed in Q2. That said, GDP largely benefited from a positive shift in inventories.

The external sector posted a disappointing quarter, with exports of goods and services falling 2.4% over the previous quarter in annualized terms (Q2: +12.2% qoq SAAR). Meanwhile, imports expanded 9.2% (Q2: +6.8% qoq SAAR). As a result, the external sector's annualized net contribution to overall growth shifted from plus 0.6 percentage points in the second quarter to minus 1.8 percentage points in the third.

The Bank of Japan (BoJ) expects the economy to expand between 2.6% and 3.0% in the fiscal year ending in March 2014. In the following fiscal year, the BoJ sees GDP growing between 0.9% and 1.5%. FocusEconomics Consensus Forecast panelists see GDP expanding 1.9% in 2013, which is up 0.1 percentage points from last month's projection. In 2014, the panel sees the economy growing 1.7%, which is unchanged from last month's estimate.


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Japan GDP Chart


Japan GDP Q3 2013

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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