Japan’s economy continues to grow but it is not clear how sustainable that is in the face of weak spending by the country’s consumers and the possibility of US protectionist policies.
Point of view
Corporate sector strength has not spread to households who are facing higher costs of living and future uncertaintySenior economist, Mizuho Research Institute
Gross domestic product was up in the final three months of last year by 1.0 percent from the same period a year earlier. Quarter-on-quarter it increased by 0.2 percent.
It was the fourth straight quarter of expansion and the July-September period was revised up to 1.4 percent expansion.
However, domestic private consumption – which accounts for around 60 percent of GDP – did not increase at all. And rising prices of fresh food and vegetables are likely to have dented households’ purchasing power.
Exports and weak yen
Much of the growth came from exports, supported by the weakness of the yen against the dollar.
US President Donald Trump has railed against countries having weaker currencies saying that gives them an unfair trade advantage.
Japan’s has a persistent large trade surplus with the US making it vulnerable to protectionist moves by Trump.
However a two-day US-Japan summit held over the weekend apparently ended smoothly without Trump talking tough on trade and currency issues during his time with Prime Minister Shinzo Abe.
Economy Minister Nobuteru Ishihara said Japan remained in a moderate recovery trend and expected the positive momentum to be maintained, but he sounded a cautious note on the outlook.
“Attention should be paid to uncertainty over global economy and fluctuations in financial markets,” he told reporters after the GDP data release.
Analysts were equally cautious about the outlook.
“The fact that the economy grew a fourth straight quarter on the back of exports should be considered a passing mark for policymakers,” said Hidenobu Tokuda, senior economist at the Mizuho Research Institute.
“Still, the corporate sector strength has not spread to households who are facing higher costs of living and future uncertainty. The key is how price-adjusted real wages grow to support private consumption from now on.”