The annualized 1.4 percent decline of Japan's gross domestic product in the October-December period is yet another indicator of the fragility of the economy. The government says the economy remains on a moderate recovery path, citing strong corporate earnings and favorable employment figures. But the seesawing of GDP data illustrates the lack of a self-sustaining engine to drive the economy just as uncertainties over global growth intensify. Developments since the start of the year are also not encouraging, clouding prospects of a strong rebound this quarter.
The GDP's fall in the last quarter, following a revised 1.3 percent growth in the July-September period and a 0.5 percent contraction in the preceding three months, was blamed on a 0.8 percent decline in personal consumption that was chiefly attributed to unseasonably warm weather. But the underlying weakness in consumer spending, which accounts for 60 percent of the nation's GDP, has continued since the April 2014 consumption tax hike. The annualized value of personal consumption in the October-December period was still below the level of the April-June quarter of 2014.
Household spending in December fell 4.4 percent from a year ago for the fourth monthly decline in a row. Average worker wages in 2015 fell 0.9 percent on a net basis from 2014, the fourth annual decline in a row, as prices rose faster than wage hikes — hardly a condition that encourages households to spend more. What the Abe administration calls a virtuous economic cycle — in which increased corporate profits boost consumer spending through higher wages and in turn trigger more business investments — seemingly has yet to emerge.