TOKYO – Japan’s economy grew 1.3 per cent in July to September from a year earlier, according to revised data reflecting weaker business investment and exports.
It was the third-straight quarter of expansion, but well below forecasts by most economists of an upward revision. The preliminary estimate put annual growth at 2.2 per cent in the last quarter.
Quarterly growth for the world’s third-largest economy was 0.3 per cent, down from the earlier reported 0.5 per cent.
Japan has yet to attain the strong momentum Prime Minister Shinzo Abe has been promising since he took office four years ago, pledging to spur investment by rekindling inflation. So far, his strategy has rested heavily on massive asset purchases by the central bank. The country remains far from the 2 per cent inflation target set in early 2013.
Thursday’s downgrade reflects a 0.4 per cent drop in business investment from the previous quarter. Originally it was reported as flat. Exports grew 1.6 per cent, below the 2.0 per cent earlier figure.
The latest data come amid mixed signals: on Thursday, China reported a rebound in trade that could auger well for Japan’s exports, since it supplies many of the materials and components used by Chinese manufacturers.
But the election of Donald Trump as president has raised uncertainty over the future course of the U.S. economy and over Japan’s trade outlook.
For now, economists say that the recent, sustained expansion and a weakening of the yen versus the dollar are good signs.
That means the central bank is likely to keep its current lavish monetary easing policy intact at a policy meeting later this month, without pushing interest rates further into negative territory, said Marcel Thieliant of Capital Economics.
“Firms’ predictions for industrial production suggest that the economy continued to expand at a solid pace in the current quarter. Our forecast is that GDP will grow by 1% next year,” he said.
Also on Thursday, the government revised annual estimates of gross domestic product for 1994-2015, raising figures across the board based on a 2011 benchmark year. The revision put Japan’s GDP in 2015 at 530.5 trillion yen ($4.66 trillion), up from the earlier figure of 499.3 trillion yen.
The newest data reflect a new calculation method based on revised international standards. It includes research and development costs, patent royalties and purchases of defence equipment that previously were not part of the calculations.
The U.S., Australia and many European countries have been using the new method for years.
The revised figures do not reflect any actual change in Japan’s sluggish economic reality, since they boost the overall GDP figure they are a “substantial windfall” from a political point of view, Masamichi Adachi of JPMorgan said in a research note.
The higher number pushes Japan closer toward Abe’s goal of attaining a 600 trillion yen ($5.3 trillion) nominal GDP. It also improves Japan’s gross debt-to-GDP ratio, which at more than twice the size of the economy is the biggest among major industrial countries.
