Japan’s economy might have expanded more slowly than first reported in February, but the size of the change was of little consequence.
Instead of the initial 3.0% gain in the December quarter from the three months to September, slower investment and lower business stocks saw the second estimate put at 2.8%, which by recent Japanese standards is still outperformance.
But it does represent a halving of growth from the 5.3% quarter on quarter rebound seen in the September quarter. That was after an 8.3% contraction in the June quarter and a 0.6% contraction in the three months to March (the final quarter of the Japanese 2019-20 fiscal year).
The 2.8% growth rate in the December quarter was also sharply better than the 1.8% slide seen in the three months to December 2019.
For the Morrison government and its vainglorious boast about Australian growth in the final six months of 2020 (3.4% and 3.1%), the Japanese figures for the same period, although a bit more volatile, were better and a 4% plus average for each quarter.
Annualised as the Americans do, growth was 11.7% instead of the first reported 12.7%. The market had been looking for a figure of 11.8%, so the difference doesn’t really matter. It was more than 22% in the three months to September.
Capital spending grew 4.3% from the previous quarter, lower than a preliminary 4.5% rise, but better than the market consensus forecast for a 4.1% increase. Private stocks detracted 0.6% from growth rather than the initial 0.4%. Both are not important differences.
Private consumption, which accounts for more than half of GDP, rose 2.2% from the previous three months, matching the first estimate, while net exports added 1.1 percentage point to revised GDP growth, while domestic demand lifted it by 1.8 percentage point, weaker than a preliminary contribution of 2.0 percentage points.
But there was something to be wary of in the household spending figures for January. They show Japanese households spent much less than forecast, a sign the COVID-19 pandemic is still keeping consumers cautious about shopping.
Household spending fell 6.1% in January compared with the same month a year earlier (which was pre-Covid), a much steeper decline than the 2.1% drop expected by the market
Separate data showed real wages dropped for the 11th straight month in January, although at a slower pace than in the prior month. That and the sharp dip in household consumption in January could be a big signal that Japan’s high growth rate is fading.
For Australia this is good news – our two biggest export markets are still growing strongly.
