The economy expanded at a slower pace than initially estimated in the third quarter, sparking concern that “Abenomics” is failing to help the nascent recovery gain momentum, the government said Monday.
The downgrade means the world’s third-biggest economy grew at an annualized rate of just 1.1 percent in inflation-adjusted terms instead of a real 1.9 percent listed in the preliminary data, the government said. In the background was a downward revision to capital spending,
July-September real gross domestic product, the total value of goods and services produced at home, corresponded to a 0.3 percent gain from the previous quarter, posting the fourth straight quarter of growth, the Cabinet Office said.
The government said in the initial GDP report that was released Nov. 14 that the Japanese economy had expanded by an annualized real 1.9 percent in the three months through September, backed by large-scale public investment.
The latest figure suggested the economy has been largely supported by public investment, not private-sector growth, strengthening the view that the consumption tax hike in April to 8 percent may weigh on consumer spending and investment, in turn dampening domestic demand.
The administration of Prime Minister Shinzo Abe has pledged to prevent the tax hike from hurting the economy by steadily implementing a ¥5.5 trillion economic stimulus package and a ¥1 trillion in tax cuts to boost investment and encourage companies to raise wages.
During the third quarter, corporate capital spending, which Prime Minister Shinzo Abe’s Cabinet views as key to economic recovery, was flat from the previous quarter, downwardly revised from the 0.2 percent rise reported in the preliminary data.
Private consumption, accounting for around 60 percent of GDP, was slightly upgraded to 0.2 percent growth from a 0.1 percent climb.
Exports fell 0.6 percent and imports rose 2.2 percent, the same as in the initial report.
Imports have been rising as demand for natural gas and oil has been growing from utilities for fossil fuel-based power generation as an alternative to nuclear power in light of the nationwide reactor shutdown stemming from the Fukushima nuclear crisis. Japan depends on imports for more than 90 percent of its energy needs.
Public investment, meanwhile, jumped 6.5 percent, unchanged from the initial report, on the back of massive fiscal spending, one of the three arrows of the “Abenomics” policy mix along with drastic monetary easing and an economic growth strategy aimed at invigorating private-sector investment.
“While consumer spending and business investment slowed and exports fell, public investment bolstered the economy,” Koya Miyamae, senior economist of SMBC Nikko Securities Inc., said. “As the effectiveness of the first arrow has been waning, the economic growth has depended on the second arrow.”