• Kyodo


Japan’s economy shrank at an annual rate of 2.5 percent in the July-September quarter, downgraded to the sharpest contraction in more than four years as a string of natural disasters weighed on capital expenditure, government data showed Monday.

The Cabinet Office had initially reported that real gross domestic product, the total value of goods and services produced in the country adjusted for inflation, shrank 1.2 percent in the third quarter of 2018.

It was the sharpest contraction since a 7.3 percent shrinkage logged in the April-June quarter in 2014, when the world’s third-largest economy lagged under an increase in the consumption tax, and compared with a contraction of 2.1 percent forecast by private-sector economists in a Kyodo News poll.

Quarter-on-quarter, GDP shrank a real 0.6 percent, downgraded from the earlier reading of a 0.3 percent contraction.

Natural disasters including Typhoon Jebi, which tore through western Japan and temporarily shut down Kansai International Airport in Osaka Prefecture, and a magnitude 6.7 earthquake that triggered an island-wide power outage in Hokkaido in September, dampened spending by businesses such as retailers and technology firms.

Capital expenditures fell 2.8 percent from the previous quarter, sharply downgraded from a 0.2 decrease, though a Cabinet Office official pointed out that this had been preceded by a nearly two-year-long growth streak.

“While there was certainly the impact of the natural disasters, we expect the basic growth trend of capital expenditure to continue,” a Cabinet Office official told reporters.

Private consumption, which also suffered from the series of disasters, was slightly downgraded to a 0.2 percent fall from a 0.1 percent decline.

Public investment was downgraded to a 2.0 percent decrease from a 1.9 percent fall, while growth in private residential investment was slightly raised to 0.7 percent from 0.6 percent.

Exports were unchanged at a 1.8 percent fall.

Nominal GDP, which is unadjusted for inflation, was downwardly revised to an annualized 2.7 percent contraction from a 1.1 percent shrinkage.

Economists said they expect the economy to be boosted by a rebound in domestic demand in the October-December quarter, though some expressed doubts over whether the economy will continue to grow through next year.

“Of course we can’t ignore the transitory impact of this summer’s natural disasters, but the underlying cause (of the weak GDP data) is the slowing of growth in exports and global trade as a whole,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.

“Japan increasingly looks headed for a soft landing around the middle of fiscal 2019, and there is a possibility that the current expansionary phase will end,” he said.

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