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ECONOMY > Economic Indicators

Japan’s July-Sept. GDP falls on slow consumption, exports

  • November 15, 2021
  • , Jiji Press , 2:11 p.m.
  • English Press

Tokyo, Nov. 15 (Jiji Press)–Japan’s economy shrank in July-September reflecting sluggish private consumption and exports amid the resurgence of the novel coronavirus, government data showed Monday.

 

In the reporting period, the country’s seasonally adjusted gross domestic product fell by 0.8 pct from the preceding quarter in price-adjusted real terms, or by 3.0 pct on an annualized basis, the Cabinet Office said in a preliminary report. The economy contracted for the first time in two quarters.

 

The poor result affirmed a rocky road for the government’s aim of bringing the GDP back to the level marked in October-December 2019, before the start of the pandemic, by the end of this year.

 

Although coronavirus infections have settled down since October, surging prices of crude oil and other materials are expected to negatively impact the economy.

 

“We will do all we can to deal with downside risks, and will make sure to prevent a further decline of the economy,” economic and fiscal policy minister Daishiro Yamagiwa said at a press conference Monday, stressing that the government will speed up efforts to compile a new economic stimulus package.

 

“Income outflow stemming from global supply chain constraints and higher materials prices are becoming apparent,” Chief Cabinet Secretary Hirokazu Matsuno told a separate press conference.

 

“We need to be fully cautious of the resulting downside risks and the risk of a resurgence in coronavirus infection cases,” the top government spokesman added.

 

Personal consumption, the main pillar of domestic demand, dropped a real 1.1 pct quarter on quarter in July-September, affected by the government’s coronavirus state of emergency that was in place in many prefectures in summer.

 

Consumption on services faltered, with people staying home during summer holidays. The Tokyo Olympics and Paralympics, which were mostly held behind closed doors, did not give the economy a boost.

 

Sales of new automobiles struggled as automakers were forced to cut production amid worldwide shortages of semiconductors and the disruption of global supply chains partly blamed on the spread of the coronavirus in Southeast Asia.

 

Home appliances sales slumped because demand from people staying home due to the pandemic tapered.

 

Corporate capital spending fell 3.8 pct due to weak expenditures by automakers, and constriction and production machinery makers.

 

Reduced automobile production dealt a blow to exports, which went down 2.1 pct to mark the first drop in five quarters.

 

Meanwhile, government consumption gained 1.1 pct thanks to spending related to coronavirus vaccines.

 

In nominal terms, Japan’s July-September GDP sank 1.1 pct, for an annualized decline of 2.5 pct.

 

The economy shrank sizably because the pace of drop in private spending was bigger than expected, Toru Suehiro, senior economist at Daiwa Securities Co., said.

 

“In October-December, spending on services will likely recover somewhat thanks to resumed economic activity, and there is a possibility of private consumption as a whole marking a quarter-on-quarter rise,” he said.

 

But Suehiro added that the weakness of goods consumption resulting from prolonged supply chain constraints will make a V-shaped consumption recovery unlikely.

 

“The government’s target of bringing the GDP back to pre-pandemic levels by the end of fiscal 2021 is almost unattainable,” he noted.

 

On the other hand, Akiyoshi Takumori, chief economist at Sumitomo Mitsui DS Asset Management Co., said that there are developments signaling the possibility of consumption, capital spending and exports picking up, such as the recent decline in coronavirus infection cases and Toyota Motor Corp.’s <7203> announcement last week that its domestic plants will operate normally in December.

 

“Ahead of the expected resumption of the state-backed ‘Go To Travel’ tourism promotion scheme and the release of fresh economic stimulus measures by the government, hopes over the economic outlooks are likely to rise further,” Takumori said, suggesting that the economy will recover steadily although it is difficult for the country’s fiscal 2021 real GDP growth to reach the government’s target of 3.7 pct.

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