Japanese Real GDP Grew at a 6.0% Annualized Rate Last Quarter

November 13, 2011

Despite appearances, growth of 6% was not a big deal.  Japan remains a fragile economy, with wide swings in quarter-to-quarter growth. Real GDP last quarter

  • was unchanged from a year earlier,
  • showed annualized growth of negative 0.3% from five years before, that is the third quarter of 2006,
  • showed annualized growth of 0.8% over the past ten years from 3Q01 and during the last twenty years from 3Q91,
  • and was still 4.4% lower than GDP in the first quarter of 2008, that is at the onset of the Great Recession.

The preliminary national income account figures last quarter did not surpass expectations.  Analysts had expected GDP to expand at close to a 6% annualized rate.  Among the ten post-Great Recession calendar quarters, real GDP also advanced at annualized rates of 10.2% in 1Q10, 8.4% in 2Q09 and 6.4% in 4Q09, so the third quarter of this year only saw the fourth strongest expansion of activity from the last ten quarters.  Net growth over that 2-1/2 year period averaged just 2.4%, nonetheless.

The Great Recession wasn’t even Japan’s most recent downturn.  It emerged from a subsequent recession last quarter, which had been accentuated by the Sendai earthquake.  In the third quarter, personal consumption increased 3.9% but was just 0.1% greater than a year earlier.  Non-residential investment rose 4.4% but was 0.4% lower than in 3Q10.  Public sector spending dipped 0.4% on quarter and recorded only a 1.2% rise from 3Q10.  Exports soared 27.4% to edge a mere 1.1% above its year-earlier level. 

Midway through the fourth quarter, it’s already apparent that the momentum of activity during the summer has not been maintained.  New risks have arisen from persistent upward pressure on the yen and  in the guise of the euro debt crisis, which is weakening global export demand and creating more difficult financing conditions.  Japan’s Nikkei-225 index lost 16% between July 22 and November 10.  The Bank of Japan released new forecasts at the end of October that call for sequential GDP growth of 0.3% in the year to March 2012, 2.2% in the year to March 2013, and 1.5% in the year to March 2014.  Core CPI inflation over those three years is projected to average 0.2% per annum.  The GDP deflator meanwhile dropped 1.9% in the year to 3Q11 following a decline of 2.3% over the previous twelve months.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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