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Japan’s July-September GDP figures revisved downward from gain of 2.6% to 1.5%

December 7, 2007
By Ken Worsley


Last week, a Reuters survey of economists predicted a slight upward revision in Japan’s GDP figures, and we were very skeptical of that possible outcome, given the recent data we’ve seen. It turns out that the skepticism was right; the Cabinet Office announced this morning that GDP figures for the July-September quarter have been revised down to a 0.4% rise in GDP over the April-June period, for an annualized gain of 1.5 percent.

The Nikkei reminds us that with the government having made a projection for 2.1% growth in GDP for the 2008 financial year, Japan’s economy will have to grow at an annualized pace of 4.6% for each of the next two quarters in order to hit that target. As much as I’d love to see it happen, it’s not going to happen.

Weak data on capital spending spooked us when it was announced on December 3. We’re not alone. Bloomberg quotes Seiji Adachi from Deutsche Securities as saying:

Japan’s economy is losing momentum…Slowing capital spending was a drag because companies can’t pass higher costs of oil and raw materials onto consumers and clients.

We’ve been saying all week what Mr Adachi is saying in the first half of his statement, though there are some indications that firms are trying to pass higher costs on to consumers. The trouble is that firms know they’re not paying people more, and it’s going to be difficult to ask them to spend more. Speaking at a press conference in Tokyo, Economic and Fiscal Policy Minister Hiroko Ota warned that higher oil prices would continue to case pain at the nation’s smaller firms, who have particular trouble in passing on their increased costs to consumers.

Ota also stressed that production is on the rise (industrial output hit an all-time high in October), and expressed her view that there is not a change in the overall economic trend.

The report from the Cabinet Office provides us with a bit of a breakdown on what happened with GDP figures:

  • Personal spending grew 0.3% in the July-September quarter
  • Housing investment decreased 7.9%
  • Public investment fell 2.3%
  • Exports rose 2.6%, revised downward from 2.9%
  • Domestic demand pushed GDP down 0.1% - after having pushed it up 0.2% in the preliminary figures

Next week, the Bank of Japan’s Tankan survey is due, and we’re expecting it to show a downward turn for manufacturing firms.

Filed Under Cabinet Office, Economic Reports, Economics 

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Comments

2 Responses to “Japan’s July-September GDP figures revisved downward from gain of 2.6% to 1.5%”

  1. Kraig on December 8th, 2007 3:00 am

    I’m no expert here, but this is a HUGE downward revision. How could the previous estimate be so far off? Are they simply lying and waiting until something accurate comes? I find the stats hard to believe given how big the change is.

  2. WG on December 9th, 2007 2:29 am

    What’s important to see is that nominal GDP growth is still below real GDP growth, which I’m not seeing in the media - including here. This is a big sign that deflation is still ongoing, and there seems to be an even bigger gap in the revised stats.

    Domestic consumption just isn’t picking up. There’s been little motivation given for consumers to spend, when they see little hope of higher wages or better economic security in the future.

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