Japan Posts Slower Growth, Surprise Current
Bloomberg News
Japan's third-quarter growth slowed more than initially estimated and the nation posted a surprise current-account deficit in October, underscoring headwinds to Prime Minister Shinzo Abe's efforts to cement a recovery.
Gross domestic product expanded an annualized 1.1 percent from the previous quarter, a revision from 1.9 percent, the Cabinet Office said today in Tokyo. Japan posted a 128 billion yen ($1.2 billion) shortfall in its broadest trade gauge, according to the finance ministry. The median forecast was for a surplus of 149 billion yen.
Growth may rebound as consumers splurge ahead of a sales-tax increase in April that will drive down spending. While Abe is urging companies to raise wages as he bids to reflate the world's third-largest economy, weaker-than-estimated business spending in the GDP report signals Japan Inc. is not committing to investment.
'Companies are quite cautious about the outlook for the economy,' said Junichi Makino, chief economist in Tokyo at SMBC Nikko Securities Inc. 'Imports are surging not just because of energy costs but also because of purchasing ahead of the sales-tax hike.'
The Topix stock index was up 1.3 percent in morning trading after better-than-forecast U.S. jobs data. The yen was little changed at 102.95 versus the dollar at 11:40 a.m.
Business Spending
Weaker-than-initially-estimated business investment and a smaller contribution from inventories led to the downward revision in growth, according to the Cabinet Office. Business spending was unchanged in the third quarter from the previous period, down from a preliminary estimate of 0.2 percent growth.
The cabinet last week approved an 18.6 trillion yen economic package to cushion the blow from the 3-percentage-point sales-tax bump. The measures that includes 5.5 trillion yen in spending are projected by the government to boost real GDP by about 1 percent and create about 250,000 jobs.
Today's data show the expansion slowed from an annualized 3.6 percent in the April-June quarter. The economy is projected to grow 3.6 percent this quarter and 4.8 percent in the January-March period, according to a separate Bloomberg News survey. A 4.5 percent contraction is forecast for the second quarter of 2014 after the tax increase.
The trade deficit in the current account was the first since January, and the biggest for October in comparable data back to 1985. The value of imports reached a record high for the month.
The income surplus, the portion of the current account that includes earnings from overseas investment, was smaller than expected, according to economist Yoshimasa Maruyama.
'The current-account balance will bounce between surplus and deficit in the months ahead,' said Maruyama, chief economist at Itochu Corp. in Tokyo. 'Strong demand for imported goods before the sales-tax increase may run its course this quarter, while exports will likely rebound gradually.'
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
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