Japan's economy in the July-September period grew at an annualized 2.0 percent in real terms from the previous quarter, roughly twice as vigorously as the average growth forecast by private-sector economists. While the economy expanded for the seventh straight quarter and financial markets, including the stock market, reacted positively to the economic data, a careful look at a preliminary report issued by the Cabinet Office does not warrant optimism.
The government hopes that personal spending, which accounts for slightly more than half of gross domestic product, will serve as an engine of economic growth. But in the latest quarter, it shrank by 0.7 percent from the previous quarter, which had seen personal spending grow by 0.5 percent.
While the economy in the July-September period grew by 0.5 percent in real terms from the previous quarter, domestic demand contributed to only one-fifth of the GDP growth, with the remaining four-fifths coming from external demand.