Japan increases Q3 GDP as COVID dangers remain despite the global slump.

The third-largest economy in the world, Japan, saw a smaller third-quarter decline than previously anticipated, supporting the idea that it is slowly emerging from COVID-19 gloom even as important export markets continue to deteriorate.

Separate statistics revealed that the economy suffered its first current account deficit in eight years in October as a result of increased import prices brought on by this year’s collapse in the value of the yen to multi-decade lows for individuals and companies.


The revised 0.8% annualised quarterly fall in gross domestic product, which the Cabinet Office reported on Thursday, was lower than both an early official estimate of a contraction and the consensus expert expectation of a 1.1% annualised decline in a Reuters survey of economists.

The revision was caused by an increase in private inventories and was in contrast to the prior quarter’s 4.5% annualised quarterly growth.

Unexpectedly, Japan’s economy contracted in the third quarter as rising import costs and prospects of a global recession affected consumer spending and company activity.

According to some observers, the economy may improve this quarter as a result of the relaxation of supply limitations on semiconductors and automobiles, as well as the removal of COVID-19 border controls, which will increase tourism.

Others, on the other hand, anticipate that the world economy will enter a recession in 2019, which would be devastating for Japan and other trade-dependent Asian exporters.


Takeshi Minami, chief economist at Norinchukin Research Institute, predicted that the resumption of inbound tourism and initiatives to encourage domestic travel will increase private spending and contribute to the economy’s return to growth in the October-December quarter.

The Japanese economy will likely be affected going forward by a worldwide slowdown brought on by rate hikes in developed nations and a real estate crisis in China, which might lead to a technical recession or two consecutive quarters of decline in the first half of next year.

Prior to annualization, third-quarter GDP decreased by 0.2% from the second quarter, which was less than the earlier estimate of a 0.3% decline. A similar drop to the preceding reading was what analysts had predicted.

Private consumption, one of the important sectors that accounts for more than half of Japan’s GDP, contributed to growth even though it was downgraded. The two major drivers of growth were capital spending and exports.

A weak yen and high import costs, which raise living expenses, more than outweigh the positive effects of GDP growth.


According to data from the Ministry of Finance, rising energy and other import costs caused Japan’s current account deficit to increase to 609.3 billion yen ($4.45 billion) in October. The lapse was the first since March 2014.

The current account deficit for October was 64.1 billion yen before the seasonal adjustment, the first deficit since January.

In the three months leading up to September, according to the Bank of Japan’s most recent “tankan” report, manufacturers’ sentiment had deteriorated due to persistently high material prices that cast a shadow over the frail economy’s prospects.

According to a Reuters monthly survey released on Wednesday, manufacturers’ optimism for future improvement remained unchanged while businesses in the service sector saw circumstances deteriorate.


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