Japan's economy gains strength on export growth

Business Saturday 09/December/2017 13:18 PM
By: Times News Service
Japan's economy gains strength on export growth

Tokyo: Japan's economy grew twice as fast as originally estimated in the third quarter, thanks to a business spending splurge and buoyant exports, supporting the central bank's recent signals that it will shift away from crisis-era policy. The world's third-largest economy grew an annualised 2.5 per cent in July-September, revised data showed on Friday, handily topping forecasts and beating the preliminary reading of a 1.4 per cent expansion.
The better growth numbers were bolstered by a significant upgrade in capital expenditure, driven in part by a surge in tourism following the government's eased visa requirements this year. They also mark seven straight quarters of expansion, the best uninterrupted run of growth since 1994.
"You can say 'Abenomics' is doing well and producing results. Monetary policy is contributing to nominal growth," said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities, referring to Prime Minister Shinzo Abe's aggressive economic stimulus policies introduced since coming to power.
"Revisions to past data show the government's fiscal spending had a bigger impact than previously thought. The structural reform that has made the most obvious impact is allowing more tourists to visit Japan."
Tokyo's equity markets took the upward revision in its stride while the yen fell versus the dollar due to optimism about the US jobs report due later on Friday. However, rising corporate earnings and solid growth have more broadly this year underpinned benchmark Nikkei stocks, which have gained 19 percent in 2017.
Separate data showed real wages rose 0.2 per cent in October marking their first rise since December 2016 in a sign a tight job market may finally be leading to higher salaries, welcome news for policymakers.
Tourism and trade have been big drivers of Japan's economy this year.
Robust global demand for electronics goods has boosted the country's high-end tech sector while eased restrictions on visas for tourists from China have also been a major driver of activity.
In October, overseas visitors to Japan jumped 21.5 per cent from the same period a year ago to reached a record high for the month of October. Tourists from China rose 31.1 per cent.
The third quarter GDP figures follow the upwardly revised 2.9 per cent annualised growth in April-June and translate into quarter-on-quarter growth of 0.6 per cent, double the preliminary growth estimates.
However, the strong headline GDP numbers masked the continuing pains policymakers face in seeking to boost consumer spending through their ultra-loose monetary policy.
The private consumption component of the GDP data fell 0.5 per cent in July-September, unchanged from the preliminary reading, with consumers spending less on cars, dining out, and mobile phone subscriptions. Some economists had expected a slight upward revision in consumption.
Still, the data comes amid the strongest signals yet Bank of Japan Governor Haruhiko Kuroda could shift monetary policy away from its ultra-accommodative settings and allow rates to rise as the economy improves.
On Thursday, Kuroda said changes in the economy and financial system could trigger a hike in the bank's yield targets, one of its key monetary policy levers. He also for the first time acknowledged the risks current policy posed to financial stability, as low interest rates eat into banks' profits.
While some economists say the rate of growth reported on Friday is unsustainable, they remain confident that the economy will continue to expand next year at a moderate pace.
The government agreed earlier on Friday a spending package to subsidise education and encourage more corporate investment, which could support further growth. "The economy is doing well, but annualised growth above 2 per cent seems a little too quick," said Norio Miyagawa, senior economist at Mizuho Securities.
"I expect that exports and capital expenditure will lead growth next year, but the pace will moderate to around 1 per cent."
Japan's 2.5 per cent annualised growth compares with 3.3 per cent growth in the United States and 2.3 per cent year-on-year growth in Germany during the same quarter.