Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Japan’s Economy Loses Speed, Misses Forecasts in 4th Quarter

Published 14/02/2018, 12:04 pm
Updated 14/02/2018, 05:24 pm
© Bloomberg. A Tofuku Flour Mills Co. employee moves a bag of flour for ramen noodles at the company's warehouse in Dazaifu, Fukuoka, Japan, on Dec. 21, 2017. Fukuoka, on Japan’s southern island of Kyushu, is expanding production of a locally-developed variety of grain known as Ra-Mugi that’s designed to be perfect for tonkotsu ramen: a dish of cloudy white pork broth, with noodles and slices of pork that originates in the region.

© Bloomberg. A Tofuku Flour Mills Co. employee moves a bag of flour for ramen noodles at the company's warehouse in Dazaifu, Fukuoka, Japan, on Dec. 21, 2017. Fukuoka, on Japan’s southern island of Kyushu, is expanding production of a locally-developed variety of grain known as Ra-Mugi that’s designed to be perfect for tonkotsu ramen: a dish of cloudy white pork broth, with noodles and slices of pork that originates in the region.

(Bloomberg) -- Japan’s economy expanded for an eighth quarter, but the pace of growth fell sharply and missed expectations. Slower growth ahead, particularly with a stronger yen, weakens inflationary pressure and underscores the likelihood of continued stimulus from the central bank.

Highlights of GDP report

  • Gross domestic product grew at an annualized rate of 0.5 percent in the three months ended Dec. 31 (estimate +1.0 percent), compared with a revised 2.2 percent in the previous quarter.
  • Net exports, or shipments less imports, didn’t add or subtract anything from growth.
  • Business spending rose 0.7 percent (estimate +1.1 percent) from the previous quarter.
  • Private consumption increased 0.5 percent in the fourth quarter from the previous three months (estimate +0.4 percent).

Key Takeaways

Japan’s economy had cruised along at well above its potential growth rate in recent quarters, fueling growing confidence that an ever-tighter labor market and record corporate profits would generate stronger consumer spending and inflation. While private consumption and business investment have improved, wage gains remain sluggish and inflation is still well below target. Economy Minister Toshimitsu Motegi said the run of growth is the longest in 28 years and is the beginning of a positive economic cycle.

Economist Views

  • "It’s hard for the Japanese economy to be self-sustaining when incomes are struggling to rise," said Yasutoshi Nagai, chief economist at Daiwa Securities in Tokyo. "The results were in line with our view," he said, adding that one bright spot was a rebound in household consumption.
  • "The good news is that domestic demand is driving growth," Jesper Koll, chief executive officer of Wisdomtree Japan Inc., said on Bloomberg TV. "The pull of imports is actually stronger than expected, and that reduces the net export contribution."
What Our Economist Says...
The slowdown in Japan’s growth to less than potential in 4Q could take some of the wind out of inflation near term. Looking at the details though, the economy looks fairly healthy after two years of uninterrupted expansion. ... Risks to the outlook of course abound. U.S. protectionism would damage exports. More urgently, the recent surge in the yen is bad news for Japan’s exporters.
Yuki Masujima, Bloomberg Economics

Other Details

  • Measured quarter-on-quarter, GDP expanded 0.1 percent (estimate +0.2 percent).
  • Private inventories subtracted 0.1 percentage point to GDP.
  • The GDP deflator, a broad measure of price changes, was unchanged from a year ago.

(Adds details, economists’ comments.)

© Bloomberg. A Tofuku Flour Mills Co. employee moves a bag of flour for ramen noodles at the company's warehouse in Dazaifu, Fukuoka, Japan, on Dec. 21, 2017. Fukuoka, on Japan’s southern island of Kyushu, is expanding production of a locally-developed variety of grain known as Ra-Mugi that’s designed to be perfect for tonkotsu ramen: a dish of cloudy white pork broth, with noodles and slices of pork that originates in the region.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.