Japan: Economic growth disappoints in Q4
February 17, 2014
The fourth quarter national accounts data cast doubts on Japan's economic recovery as a sales-tax increase is looming on the April horizon. In Q4, GDP rose 1.0% over the previous quarter in seasonally adjusted annualized terms (SAAR). Although the print marks just a slight deceleration compared to the 1.1% increase recorded in the previous quarter, it was well below the 2.8% increase that market analysts had expected. On an annual basis, economic activity increased 2.8% in Q4 (Q3: +2.3% year-on-year). In the full year 2013, GDP expanded 1.6%, which marked an acceleration over the 1.4% increase tallied in 2012.
The deceleration in Q4 reflects a deterioration in the external sector, whereas domestic demand gained traction. Private consumption accelerated to a 2.0% increase in Q4 (Q3: +0.9% quarter-on-quarter SAAR), while government spending grew 2.0% (Q3: +1.0% qoq SAAR). In addition, private non-residential investment registered a 5.3% increase (Q3: +0.8% qoq SAAR), which marked the highest rate since Q4 2011.
Exports of goods and services rebounded, rising 1.7% over the previous quarter in annualized terms (Q3: -2.7% qoq SAAR). Meanwhile, imports expanded at their fastest pace since Q2 2010, jumping 14.9% in Q4 (Q3: +10.1% qoq SAAR). As a result of the healthy increase in purchases from overseas, the external sector's annualized net contribution to overall growth fell from minus 2.0 percentage points in Q3 to minus 2.2 percentage points in Q4.
The Bank of Japan (BoJ) expects the economy to expand between 0.9% and 1.5% in the fiscal year ending in March 2015. In the subsequent fiscal year, the BoJ sees GDP growth of between 1.2% and 1.8%. FocusEconomics Consensus Forecast panelists see GDP expanding 1.6% in the calendar year 2014, which is unchanged from last month's projection. In 2015, the panel sees the economy growing 1.3%.