Japan’s economy grew for a seventh straight quarter, its longest expansion since 2001, as rising business investment and a recovery in exports offset a decline in consumer spending.
Gross domestic product grew at an annualized rate of 1.4 percent in the three months ended Sept. 30, compared with a revised 2.6 percent in the previous quarter.
Net exports, or shipments minus imports, added a 0.5 percentage point to GDP.
Business spending rose 0.2 percent from the previous quarter.
Private consumption fell 0.5 percent in the third quarter from the previous three months.
The economy continues to expand at above its potential growth rate of 0.5-1.0 percent after more than four years of fiscal stimulus under Prime Minister Shinzo Abe and massive monetary easing from the Bank of Japan. Even so, inflation remains stubbornly low. Economists are watching closely for signs that the tightest labor market in decades is beginning to bring the needed higher wage gains and accelerate consumer price gains. In the meantime, external demand in the form of exports is playing a key role in growth.
“Japan’s economy is in a sweet spot,” said Takuji Aida, chief Japan economist at Societe Generale SA. Aida was the most accurate economist in forecasting the annual GDP growth rate in Bloomberg’s survey, saying: “Japan’s economy will continue its moderate growth rate in coming quarters.”
“Private consumption fell because of bad weather,” according to Nobuyasu Atago, chief economist at Okasan Securities Co. and a former BOJ official. “Cyclical conditions are not bad for the economy and I expect a rebound in overall growth in the fourth quarter,” he said.
“Business investment wasn’t too strong, but if you look at the BOJ’s tankan survey, there are still plans for fairly strong investment,” said Masaki Kuwahara, senior economist at Nomura Securities. “The U.S. economy is doing well, so overseas demand should continue to do reasonably well.”
“The seventh straight quarter of expansion and growth still above potential give the Bank of Japan little reason to alter its policy settings for now,” according to Bloomberg economist Yuki Masujima, who also noted that the rate of expansion has slowed. “If anything, the data will make it easier for Prime Minister Shinzo Abe to push a planned ¥2 trillion economic package through the Diet by year-end,” he said.
Temporary factors such as typhoons and heavy rains weighed on restaurant spending and other private consumption, according to economy minister Toshimitsu Motegi. In a news conference after the release, he noted that nominal GDP had risen to a record and said he expected the gradual recovery to continue.
Measured quarter-on-quarter, GDP grew 0.3 percent.
Private inventories contributed 0.2 percent points to GDP.
The GDP deflator, a broad measure of price changes, rose 0.1 percent from a year earlier.