Roundup: Japan eludes recession in Q3 with upgraded GDP growth, Q4 growth likely tepid

Japan's economy grew an annualized 1.0 percent in the third quarter, reversing initial data showing a contraction, meaning that the world's third-largest economy has side-stepped a technical recession based on the preliminary figures, the government said Tuesday.

The Cabinet Office said that its initial estimate of a 0.8 percent contraction in the July-September period, was revised upwards owing to better-than-expected corporate capital spending, a mainstay of the government's ongoing push to encourage businesses to spend more based on solid earnings on a weak yen and hike wages to boost consumption.

The latest government report also shows an uptick in private consumption, as well as fairly robust exports.

According to the latest data, corporate capital spending rose 0.6 percent in the recording period, reversing a negative reading of 1.3 percent in the preliminary report, while private consumption, which accounts for 60 percent of Japan's GDP, added 0.4 percent from the previous quarter, following a preliminary reading of a 0.5 percent increase.

Exports were upwardly revised, the government's data showed Tuesday, from a preliminary reading of 2.6 percent to 2.7 percent, while imports remained unchanged at an increase of 1.7 percent, Tuesday's data showed.

The government's preliminary report on Nov. 16 showing that Japan's economy contracted in the third quarter owing to waning business investment and slumping inventories, with the second straight quarterly contraction meaning the world's third-largest economy had entered a technical recession for the second time since Prime Minister Shinzo Abe came into office in 2012, raised questions about the efficacy of both editions of Abe's aggressive "Abenomics" blend of economic policies.

And while the latest data shows that businesses have been spending after all, the Finance Ministry along with the central bank will be eager to ensure that big businesses here, who netted record profits in the recording period, go on to not just invest, but to pass on their profits to their employees and raise wages, and, further augment their capital expenditure, to ensure the economy stays on a moderate recovery path.

The government's upcoming supplementary budget, which is likely to be at least to the tune of some 3 trillion yen (24.35 billion U.S. dollars), will go some way towards stimulating further business investments and while the Bank of Japan's (BOJ) ultra-accommodative monetary policy is also helping to underpin spending and tackle deflation, according to remarks made by a key BOJ board member Monday, a deflationary mindset is still prevalent in Japan.

This, the top economist said, is inhibiting spending from businesses down to households, and shows a lack of faith in the bank's reflationary efforts and goals, despite BOJ chief Haruhiko Kuroda remaining perpetually upbeat about the situation, in contrast to some leading analysts.

Atsushi Takeda, an economist at Itochu Corp. in Tokyo, noted recently that further stimulus may be imminent as the prime minister has laid out lofty growth goals of expanding Japan's nominal GDP by 20 percent to 600 trillion yen (4.90 trillion U.S. dollars) over five years, and the BOJ is under increasing pressure to hit a 2 percent inflation target, following decades of Japan's economy being mired in deflationary pressure.

"Japan's economy is in a soft patch, and even though it may rebound in the coming months, the momentum will probably be very weak. The government will probably have no choice but to take action to stimulate the economy, and pressure for additional monetary easing will likely build up again," Takeda said recently.

Takeda added that business spending was unlikely to increase significantly in the near future, owing to concerns about a slowdown in emerging economies, but the government's official stance as of this week is that the economy was on a "moderate recovery path" despite some weakness and that it would continue to improve gradually even though overseas economies "posed downside risks."

Japan's Economics Minister Akira Amari has said that GDP is likely to expand in the October-December period and may be additionally underpinned by an extra budget for the Trans-Pacific Partnership (TPP) and measures to combat the rising costs of socials security, as the population here continues to age and shrink, but the vast majority of leading economists and market analysts maintain that in the current quarter Japan's economic rebound will, at best, be marginal. Enditem