Japan's GDP growth rate revised downward

Japan's GDP growth rate revised downward

The country's seasonally adjusted gross domestic product in the July-September quarter shrank 0.5 per cent from the previous quarter in real terms, according to revised figures released by the Cabinet Office on Monday.

On an annualized basis, Japan's real GDP was revised downward by 0.3 percentage point to a decline of 1.9 per cent, from the preliminary reading of a 1.6 per cent fall announced in November.

The downward revision, which came unexpectedly as many private research institutes had anticipated an upward revision, clearly indicates that the economy has been sluggish following the consumption tax hike in April.

Both preliminary and revised figures for real GDP fell for two consecutive quarters. The real GDP was revised downward largely due to the downward revision of capital investment to a 0.4 per cent fall, compared to a contraction of 0.2 per cent in the preliminary report. In particular, investments in real estate and electrical work dropped.

Capital investment by all industries, excluding those by financial and insurance companies, increased 5.5 per cent from a year earlier, according to corporate data for the July-September quarter that were released Dec. 1.

Therefore, some observers even expected the GDP growth rate to enter positive territory in the July-September quarter. However, the change in overall capital investment was negative because capital investment by small business operators, which are not included in the corporate data, was included in calculating the GDP.

The GDP growth rate is the percentage change from the previous quarter, not from a year earlier.

Public investment was also revised downward from a 2.2 per cent increase in the preliminary report to a 1.4 per cent rise.

Consumer spending, which accounts for about 60 per cent of the total, remained unchanged at a 0.4 per cent increase. Housing investment was revised downward from minus 6.7 per cent to minus 6.8 per cent.

In nominal terms, the GDP growth rate was revised downward from the preliminary figure of minus 0.8 per cent to minus 0.9 per cent. On an annualized basis, it was revised downward from minus 3.0 per cent to minus 3.5 per cent.

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