The Japanese economy is likely to have posted only very modest growth in the October-December quarter as corporate spending slipped, especially in the high-tech sector, and consumer demand softened, economists said. The consensus forecast is for Japan to have grown 0.1 percent from the three months to September for an annualised rate of 0.4 percent. While a slight improvement on the third quarter, the figures do not inspire great confidence that the world's second largest economy is going to move ahead sharply as the key high-tech sector faces up to slower overseas demand.
Gross domestic product (GDP) in the three months to September grew 0.1 percent on the quarter for an annualised pace of 0.2 percent after a 0.1 percent contraction in the April-June period.
Those figures meant Japan just avoided a technical recession defined as two consecutive quarters of negative growth.
"While the corporate sector has witnessed a further slowdown amid declines in exports, consumer spending could show some downturn due to the late arrival of winter weather, thereby confirming a deceleration in the growth momentum in Japan," said Daiwa Institute of Research senior economist Junichi Makino.
In the previous quarter to September, domestic demand made a positive contribution of 0.2 percentage points while net exports took 0.1 percentage point off GDP growth.
While the contribution from domestic demand should have picked up slightly, DIR forecasts corporate capital spending rose by only 0.5 percent in the fourth quarter after a gain of 1.1 percent in the third, while private consumption will be up just 0.1 percent after 0.2 percent.
Other economists also pointed to Japanese manufacturers continuing to cut output as overseas IT demand slows in line with the Chinese and US economies.
The Tankan business confidence survey by the Bank of Japan released in mid-December also found that despite growing downside risks, non-financial firms planned to boost combined capital expenditure by 6.2 percent in the year to March 2005, up from the 3.5 percent rise projected in September.
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