Japans economy shrinks unexpectedly in third quarter, According to official data released on Tuesday, Japan’s GDP declined in the three months leading up to September as a result of slower-than-expected consumption, dashed hopes for another quarter of expansion. The third-largest economy in the world was burdened by higher import volumes and expenses brought on by the depreciating yen and the rising cost of commodities like oil. And private consumption did not witness considerable growth, despite the termination of Covid-19 limits.
Japans economy shrinks unexpectedly in third quarter
After three quarters of growth and a first-quarter initial negative result that was later revised upwards, the unexpected negative reading comes after three quarters of gain. According to government data, Japan’s gross domestic product decreased by 0.3 percent quarter over quarter from July to September, falling short of market estimates of 0.3 percent increase. According to the cabinet office, corporate investment increased during the period, but private residential investment decreased as rising imports outweighed rising exports. Private consumption increased by 0.3 percent over the course of the three months, compared to 1.3 percent in the second quarter.
The information is preliminary, and GDP numbers are frequently updated in subsequent months. Senior economist at NLI Research Institute Taro Saito projected that the negative outcome would pass quickly. According to him, the October-December quarter will once again witness growth. “The reduction this quarter is a one-off phenomenon,” he told AFP. “Both personal consumption and business investment are still strong. A government initiative to promote travel throughout the nation will probably also aid in increasing consumption “Said Saito.
Analysts projected a rise in consumption before to the data’s release, but they also highlighted that Japan’s trade balance presents challenges. According to UBS analysts Masamichi Adachi and Go Kurihara, a weaker global economy that is “expected to be dragged down by tightening in monetary policy, zero-Covid policy in China, and geopolitical uncertainty” is also bad for Japan. The secular drag brought on by an aging and declining population as well as poor medium- to long-term growth forecasts “cannot be overlooked” in addition to these other considerations, they continued.
Fumio Kishida, the prime minister of Japan, launched a $260 billion stimulus program last month in order to protect the economy from the effects of inflation and a depreciating currency. After falling to three-decade lows of 151 yen last month, the Japanese yen has fallen from about 115 versus the dollar before Russia’s invasion of Ukraine to roughly 140 on Tuesday. The US Federal Reserve, which has implemented a string of aggressive rate hikes to combat inflation, contrasts sharply with the Bank of Japan, which is sticking to its long-standing monetary easing policy, and is the primary cause of the yen’s decline.
Japan is heavily dependent on imports for both energy and other goods, including the majority of its food. After imposing strict Covid-19 border restrictions for two and a half years, the nation fully reopened its borders to foreign tourists in October.
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