- Finalized data showed Japan’s economy contracted by 2.5% in Q3 –- more than double the preliminary reading of 1.2%.
- The Japanese yen was little-changed, after strengthening late last week amid renewed demand for safe haven assets.
- A Reuters poll of Japanese business revealed a healthy dose of pessimism on the outlook for global growth.
SYDNEY - Data this morning showed Japan’s economy shrunk in the September quarter at more than double the rate previously thought.
It follows a preliminary reading for Japan’s Q3 economic growth about a month ago, which wasn’t pretty.
The figures indicated Japan’s economy shrunk at an annualized rate of 1.2%, partially dragged down by natural disasters which slowed production.
But given the export-intensive nature of Japan’s economy, it also raised doubts around the outlook for global trade and economic activity.
Today, the finalized print showed Japan’s economy actually contracted by a hefty 2.5% in Q3 — well in excess of revised expectations for a 1.9% fall.
It had little effect on the Japanese yen, which has strengthened amid renewed demand for safe have assets as US-China trade tensions weigh on market sentiment.
The annual print translated into a quarterly decline of 0.6% in real terms, for the three months ended September. Private consumption fell by 0.2%, above the 0.1% forecast.
The result was driven by a collapse in capital expenditure, with projects delayed due to typhoon weather conditions and an earthquake in northern Japan.
Capex slumped by 2.8%, the largest decline since the global financial crisis. Despite that, due to the one-off effect of weather conditions most economists expect to see a rebound in Q4 growth.
Japan’s contraction sees it joins a number of other countries which had negative growth in Q3, including Italy and Germany.
Looking ahead, a Reuters poll of Japanese businesses showed just 14% of respondents think Japan’s economy will grow next year, with the majority predicting growth to flat-line or fall.
Their view was partially influenced by a decision from the Japanese government to raise sales taxes to 10%, from 8%.
But importantly, the outlook for the global economy wasn’t much better.
Over half of respondents said the global economy was unlikely to match the 3.7% annual rate of growth currency forecast by the IMF, while just 10% thought it would exceed that level.
In line with a broader selloff across Asian markets, stocks in Japan are down more than 2% after markets opened at 11 a.m. AEDT (7 p.m. EST).
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