BUSINESS Japan's April-June GDP growth beats expectations, but headwinds remain

BUSINESS

Japan's April-June GDP growth beats expectations, but headwinds remain

Xinhua

20:08, August 09, 2019

TOKYO, Aug. 9 (Xinhua) -- Japan's economy grew an annualized real 1.8 percent in the April-June quarter, the government said in a report on Friday, beating median economists' expectations for a more moderate expansion of less then one percent.

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Photo: VCG

According to the Cabinet Office, the expansion in inflation-adjusted gross domestic product for the April-June period equates to a 0.4 percent increase from the previous quarter.

While the preliminary reading came in ahead of median economists’ forecasts, the latest figure marked a slowdown from a revised expansion of 2.8 percent booked in the January-March period.

"The result showed Japan's economy continues to moderately recover, centering on domestic demand," economic and fiscal policy minister Toshimitsu Motegi told a press briefing on the matter, adding, however, that global risks still remain prevalent.

“The government will take countermeasures without hesitation if such risks materialize,” Motegi said, referring to the possibility of a global economic slowdown and fluctuations in financial markets.

Local economists noted that while Japan’s economy has expanded for a third successive quarter, the road ahead could remain bumpy amid ongoing trade issues and the yen’s recent rise against other major currencies.

Japan’s key exporters rely on a weaker yen to boost profits made overseas when they are repatriated and to maintain price competitive in foreign markets.

A strong yen, however, sees profits eroded, which can force exporters to downwardly revise their profit outlooks and guidances, which sees market confidence in Japanese firms diminish and stocks pressured.

 In the April-June quarter, private consumption, the biggest GDP component, which accounts for around 60 percent of Japan’s economy, increased 0.6 percent from the previous quarter.

This component could take a hit looking ahead, analysts warned, as a planned consumption tax hike in October from 8 percent to 10 percent could see businesses, consumers and households rein in their spending.

Some economists said the uptick in spending in the latest quarter was owing to the imminent consumption tax hike.

"Private consumption was supported by pent-up demand of durable goods ahead of the tax hike," Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities, was quoted as saying.

"It’s likely that domestic demand will weaken quite substantially from the October-December quarter onwards because of the sales tax hike," Miyazaki added.

The Cabinet Office in its preliminary report also said that capital expenditure rose 1.5 percent and public investment rose 1.0 percent from the previous quarter.

This was owing to firms here increasing their spending on factory automation equipment and other technological aids that are becoming increasingly more essential in some companies as Japan’s demographic crisis intensifies and the tightening of the labor market necessitates automated solutions amid a dwindling workforce.

Exports slipped 0.1 percent in the recording period. The Cabinet Office’s data showed demand from some overseas economies waned, but imports rose 1.6 percent in the quarter, the government said.

Unadjusted for price changes, Japan's economy grew an annualized 1.7 percent and 0.4 percent on quarter, the Cabinet Office said ahead of its revised GDP data which will be released on Sept. 9.

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