Japan’s economy slow to catch up

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With firms tightening spending on plant and equipment and sharply cutting inventories as the coronavirus pandemic hit demand, Japan’s economy expanded at a slower-than-initially-reported pace in October-December.

The slower growth was mainly due to a sharper contraction in private inventories and capital expenditure expanding less than previously thought in the fourth quarter, even as exports remained solid.

Other data also showed household spending was hit by a bigger annual drop in January than in the prior month, a sign the Covid-19 pandemic was keeping consumers cautious about shopping.

The economy grew an annualized 11.7 per cent in October-December, weaker than the preliminary reading of 12.7 per cent annualized growth to mark the second straight quarter of growth. The reading, which was weaker than economists’ median forecast for a 12.8 per cent gain, translates into a real quarter-on-quarter expansion of 2.8 per cent from October-December, versus a preliminary 3.0 per cent gain.

Capital spending grew 4.3 per cent from the previous quarter, lower than a preliminary 4.5 per cent rise, but outpacing the median forecast for a 4.1 per cent increase. Private inventories, including raw materials and manufactured products, subtracted 0.6 percentage point from revised growth domestic product growth (GDP), worse than a negative preliminary contribution of 0.4 percentage point.

According to Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, “Although vaccination started in Japan, it will take time to yield its impact, so the economy is forecast to go through some ups and downs. We expect the economy will pick up from the second quarter but it will be difficult to regain soon what it will lose in the first quarter.”

Source: CNBC