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Japan economy shrinks in Q3 as natural disasters hit
TOKYO, Nov 14, 2018 (BSS/AFP) – Japan’s economy shrank in the three months
to September, official data showed Wednesday, after a string of natural
disasters hit consumer spending and exports, and China’s slowing economy cast
a shadow.
Gross domestic product for the July-September period contracted 0.3
percent from the previous quarter, reversing growth of 0.8 percent in the
April-June period, according to the government’s Cabinet Office.
A number of natural disasters dampened personal consumption, company
investment and exports, said Katsunori Kitakura, lead strategist at Sumitomo
Mitsui Trust Asset Management.
“Natural disasters forced consumers to stay indoors and halted factory
operations, which led to a slowdown in production and investment activities,”
he said in a commentary ahead of the data release.
Japan was hit by several natural disasters this summer, including massive
flooding in western regions due to torrential rains, a typhoon that inundated
a major international airport, and an earthquake in the north that disrupted
supply lines.
The temporary closure of the Kansai International Airport led to a fall in
tourism and overseas shipments, Kitakura said.
Exports of goods and services were down 1.8 percent from the April-June
quarter, with private consumption slumping 0.1 percent and corporate
investment in plants and equipment off 0.2 percent.
But Kitakura anticipated a rebound in the last quarter of the year thanks
to a broadly solid global economy.
“Going forward, we remain optimistic that the economy will improve. While
we remain cautious on China-US trade, the global economy continues to show
solid growth and exports should continue to rise,” he said.
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Kohei Iwahara, economist at Natixis Japan Securities, noted that one of
the major drivers for the Japanese economy has been external factors like
exports.
“But the trade war uncertainties have begun to increase, we see some
slowdown in Asia and that is gradually hitting Japan,” he told AFP.
For the rest of the year, Iwahara said he was “cautiously optimistic” as
the effects of the natural disasters will fade in the final quarter.
Additionally, “the government could introduce a new fiscal stimulus
package so that the economy will not fall apart and… they can hike the
consumption tax next year,” he said.
Japan has announced a long-delayed sales tax hike will go into effect in
October 2019 to address the nation’s huge public debt, despite warnings it
could hobble growth by dampening already lacklustre consumer spending.
The point-of-sale tax will rise from eight percent to 10 percent as the
ageing and heavily indebted country battles to finance snowballing social
security bills — especially medical fees.
The last such move — in April 2014 — was blamed for tipping Japan into a
brief recession.
This time, Prime Minister Shinzo Abe believes he can avoid a sharp decline
in consumer spending by introducing measures to cushion the blow, including
plans to leave the sales tax on food unchanged.
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