View of Mt. Fuji and Tokyo skyline at sunset.
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Japan’s economy contracted at an annualized rate from July to September at the fastest quarterly pace in two years. Interim government data Rising domestic inflation has weighed on consumer demand, and weaker demand has worsened export woes, an announcement on Wednesday revealed.
Both declines were the first in four quarters in Japan and are part of a volatile trend that has seen the economy alternate between periods of expansion and contraction since the start of the coronavirus pandemic in early 2020. ing. The latest growth record highlights the policy challenges facing Prime Minister Fumio Kishida and Bank of Japan Governor Kazuo Ueda in the coming months.
Provisional gross domestic product (GDP) fell 2.1% year-on-year in the third quarter, after rising 4.8% in the April-June period. This was the largest decline since the third quarter of 2021, and was larger than the 0.6% decline expected in a Reuters poll. The GDP deflator for the third quarter was an annualized 5.1%.
The world’s third-largest economy expanded by 1.2% in the second quarter compared to the first quarter, but contracted by 0.5% in the third quarter compared to the previous quarter. This was also higher than the expected contraction of 0.1%.
“The biggest drag on economic activity was the buildup of inventories, which subtracted 0.3 percentage points from last quarter’s GDP growth,” said Marcel Thieliant of Capital Economics. That’s noteworthy,” he said. Head of Asia Pacific Region.
According to the same government announcement, the slump in GDP was partly due to lower-than-expected domestic capital investment. It shrunk by 0.6% quarter-on-quarter.
Japan’s personal consumption in the third quarter was flat compared to the previous quarter, as demand at home and abroad weighed on the economy.
“Real household income is expected to decline until at least the middle of next year, which bodes badly for consumer spending, which is expected to stagnate next year,” Thieliant added.
The Japanese yen rose slightly against the US dollar to around 150.7 yen, breaking from its lowest level in a year, but it remains sluggish near its lowest level in more than 30 years.
As Mr. Ueda considers the feasibility of ultra-easy monetary policy, the fragility of the Japanese economy highlights the complexity of the central bank, while the Japanese government’s 13.2 trillion yen plan, which is mainly based on subsidies and handouts, This supports the legitimacy of the economic measures ($87 billion). The aim is to alleviate rising utility costs for low-income households and curb the rise in living costs.
— CNBC Shreyasi Sanyal Contributed to this story.