Connect with us

Hi, what are you looking for?

News

Japan’s economy shrinks more than expected as supply shortages hit

REUTERS

TOKYO — Japan’s economy contracted much faster than expected in the third quarter as global supply disruptions hit exports and business spending plans and fresh coronavirus disease 2019 (COVID-19) cases soured the consumer mood.

While many analysts expect the world’s third-largest economy to rebound in the current quarter as virus curbs ease, worsening global production bottlenecks pose increasing risks to export-reliant Japan.

“The contraction was far bigger than expected due to supply-chain constraints, which hit car output and capital spending hard,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“We expect the economy to stage a rebound this quarter but the pace of recovery will be slow as consumption did not get off to a good start even after COVID-19 curbs were eased late in September.”

The economy shrank an annualized 3.0% in July-September after a revised 1.5% gain in the first quarter, preliminary gross domestic product (GDP) data showed on Monday, much worse than a median market forecast for a 0.8% contraction.

The weak GDP contrasts with more promising readings from other advanced nations such as the United States, where the economy expanded 2.0% in the third quarter on strong pent-up demand.

In China, factory output and retail sales unexpectedly rose in October, data of Monday showed, despite supply shortages and fresh COVID-19 curbs.

On a quarter-on-quarter basis, GDP fell 0.8% compared with market forecasts for a 0.2% decline.

Some analysts said Japan’s heavy dependency on the auto industry meant the economy was more vulnerable to trade disruptions than other countries.

Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting, said automakers make up a large part of Japan’s manufacturing sector with a wide range of subcontractors directly affected.

STIMULUS PLAN
Prime Minister Fumio Kishida plans to compile a large-scale economic stimulus package worth “several tens of trillion yen” on Friday, but some economists were sceptical about its impact on growth near-term.

“The package will likely be a mixed bag of near-term and long-term growth measures, and the focus may be blurred, so it won’t have much impact near-term,” Norinchukin’s Minami said.

Consumption fell 1.1% in July-September from the previous quarter after a 0.9% gain in April-June.

Capital expenditure also decreased 3.8% after rising a revised 2.2% in the previous quarter.

Domestic demand shaved off 0.9% point to GDP growth.

Exports lost 2.1% in July-September from the previous quarter as trade was hurt by chip shortages and supply-chain constraints.

Analysts polled by Reuters expect Japan’s economy to expand an annualized 5.1% in the current quarter, as consumer activity and auto output pick up.

However, Japanese firms still face risks from higher commodity costs and supply bottlenecks, which threaten to undermine the economic outlook over the short- to mid-term.

Real GDP, which factors in the effects of inflation, won’t return to pre-pandemic levels until the second half of 2023, said Takahide Kiuchi, a former Bank of Japan board member who now serves as chief economist at Nomura Research Institute.

“China’s slowdown, supply constraints, rising energy prices and a slowdown in inflation-hit western countries will reduce the pace of growth towards mid-2022,” Mr. Kiuchi said.

“As exports remain severe, Japan’s economy will likely undergo moderate growth of around 1%-2% annualized in the second quarter onwards, even taking effects of stimulus into account.” — Reuters

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

Editor’s Pick

Bowmark Capital, the private equity investor, has backed the buy-out of Cornwall Insight, a leading provider of research, data and analysis to the energy...

Editor’s Pick

Rising diesel prices could soon stop Britain’s fishing crews from setting sail as it becomes too costly to fish, boat captains warned this weekend....

Editor’s Pick

Fewer firms are at risk of failure compared with last year, but smaller companies are struggling to stay afloat after the end of pandemic...

Editor’s Pick

Big Issue Group has revealed its exciting new rebrand and ambitious five-year strategy, which will reflect the organisation’s response to the huge challenges faced...

Editor’s Pick

The UK economy is at significant risk of entering a “mild recession” next year as soaring inflation takes its toll, according to KPMG. GDP...

Financial Advisors

The introduction of aggressive climate objectives by global economies and growing prospects for reducing carbon emissions are driving the growth of the district heating...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Financial Advisors

The healthcare ecosystem is one that has thrived on the cusp of scientific progress, benefitting enormously from the winds of change in the technological...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.