The economy grew an annualized 1.9 percent in the July-September period, marking a fourth consecutive quarter of growth but sharply down from the previous quarter as consumption slowed and exports fell, casting a cloud over “Abenomics.”
In the previous three months, gross domestic product rose at an annualized 3.8 percent.
Data announced Thursday by the Cabinet Office showed that the inflation-adjusted GDP grew 0.5 percent from the previous quarter, leading the administration of Prime Minister Shinzo Abe to justify his Abenomics policy, marked so far by drastic monetary easing and aggressive public spending.
“We believe domestic demand is holding firm and the economy is on a continued up-trend,” economic and fiscal policy minister Akira Amari said after the GDP announcement. “The government will continue to pursue its ‘three arrows’ policy (including yet-to-be implemented growth strategies) . . . to chart a solid course out of deflation toward an economic recovery.”
The GDP growth was mainly a result of the ¥20 trillion-plus emergency stimulus package the government approved in January that pushed up public investment. Public investment grew 6.5 percent from the previous quarter.
Private residential investment rose 2.7 percent, thanks to ultra-low interest rates and an upswing in consumer sentiment, the government said.
Private consumption, which accounts for about 60 percent of the GDP, increased a mere 0.1 percent, compared with the April-June growth rate of 0.6 percent.
Exports fell by 0.6 percent, compared with a 2.9 percent increase in the April-June period, due to a slump in business with emerging Asian economies.
Amari expressed optimism over the future, citing forecasts from private-sector economists pointing to an uptick in GDP in the coming quarters because of a rush in demand ahead of the consumption tax hike next April.
Ryutaro Kono, chief economist of BNP Paribas Securities, warned however that the trend may not last long.
“Growth is continuing even while inflation is on the rise, but the robust growth is due to the additional fiscal measures,” Kono said. “This will continue to support growth for a while, but we may see a slowdown in late 2014 after this support runs out, unless further fiscal measures are introduced and the yen depreciates further.”
Kono doubts the government will achieve its fiscal 2013 target of 2.8 percent real GDP growth. “It won’t, is our forecast,” he said.
Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, on the other hand, said the slowdown for the latest quarter is not a major concern.
“The results aren’t much different from what we forecast,” Shinke said. “A slowdown from the previous quarter is evident, but I would think that’s mainly a backlash from an overly high growth in exports and consumption. . . . I think the recovery is progressing steadily.”