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Japan’s GDP down 0.3% in January

According to a report released Wednesday by the Japan Center for Economic Research, Japan’s GDP fell by 0.3% in January compared to the previous month, showing a decline for the first time in two months. January’s figures contrast the 0.3% increase seen in December. Read more

GDP up on government spending

Despite the 0.9% rise in GDP over the April-June quarter, there remain some skeptics worried about how strongly Japan will be able to recover from multiple quarters of negative growth. The Nikkei published an article yesterday entitled “Jobs Weakness Could Slam Brakes On GDP Growth, Economists Fear“. The Nikkei puts it simply: “For Japan, the biggest challenge is whether the stimulus measures can create sufficient private-sector demand to trigger a self-sustaining economic recovery.” Of course, this is impossible, as stimulus measures are temporary and mainly serve to increase national debt.

While the government stimulus package has spurred the economy to some degree, we also know that about 290,000 full-time jobs and 470,000 temporary jobs have been lost over the past year. There were 760,000 fewer people employed in the April-June quarter against a year ago. Read more

Japan’s GDP contracts 3.3% in fourth quarter, 12.7% annualized

While PR fallout has yet to land concerning Finance Minister Shoichi Nakagawa’s seemingly drunken appearance at the G7 meetings in Rome this past weekend¹, data released today by the Cabinet Office shows Japan’s GDP as having fallen 3.3% in the October quarter, annualized at a 12.7% decline. This is the largest fall since since an annualized 13.1% decline in the January-March quarter of 1974.

For comparison, while Japan’s October-December GDP declined 3.3% against the third quarter, the US saw a 1% fall while the EU experienced a 1.5% contraction.

Where were the declines seen? Here’s a breakdown of performance by major categories, compared against the third quarter:

Domestic Demand: -0.3%

Private Demand: -0.6%

• Private Consumption: -0.4%
• Household Consumption: -0.4%
• Household Consumption (excluding rent): -0.6%
• Private residential investment: +5.7%
• Private non-residential investment: -5.3%

Pubic Demand: +0.6%

• Government consumption: +1.2%
• Public investment: -0.6%

Capital Spending: -2.9%

Exports of goods and services: -13.9%
Imports of goods and services: +2.9%

The largest drag on GDP figures is clearly in the export category, which fell at an annualized 45.0% in the fourth quarter. Is there any end in sight for this? With bankruptcy figures still climbing and machinery orders still falling, the head of research at the Bank of Japan, told reporters last week that there is a possibility that the first quarter of 2009 might see worse numbers than what was reported today.

The BBC quotes State Minister in charge of Economic and Fiscal Policy Kaoru Yosano as saying, “Japan alone won’t be able to recover. The economy has no border. It is our responsibility to rebuild the domestic economy for other countries.”

Such a statement seems to shrug off the possibility that an uptick in domestic consumer spending is either possible or will do much to bolster the economy. Although it’s not stated directly, Yosano’s words seem to run against the spirit of the stimulus package championed by Prime Minister Taro Aso. He is correct in believing that Japan cannot recover until exports begin selling again. However, the final sentence - “It is our responsibility to rebuild the domestic economy for other countries” - seems quite odd. Exports certainly have not fallen off due to problems with Japan being able to provide supply and inventory, and Japan would have little trouble providing ample supply should demand pick up, say, next week or so.

At least Yosano wasn’t visibly drunk when speaking.

¹For more on Nakagawagate, see what Tobias Harris has written over at Observing Japan, as well as what MTC has written at Shisaku.

Japan April-June GDP revised downward to -3.0% annualized

Just a few minutes ago, the Cabinet Office released its revisions to the April-June GDP data. The preliminary data saw the economy shrinking 0.6% for the quarter, or 2.4% annualized, while the revision shows a 0.7% quarterly drop, or 3.0% annualized.

Where were the revisions? It seems as though private demand and private investment were lower than what the government first thought. Exports also fell from -2.3% to -2.5%.

We predicted a downward revision when the figures were initially announced, and stressed that consumer spending levels (initially listed at being down 0.5%) and capital spending (at -0.2%) were not low enough.

Japan’s GDP drops an annualized 2.4% in the second quarter

Just three months ago, the Cabinet Office announced that Japan’s first quarter GDP has jumped a surprising 3.3% in annualized terms. No one expected a repeat of such rosy figures in the second quarter, and the 2.4% annualized contraction reported yesterday by the Cabinet Office was about what most observers had expected.

The bad news resounds: Exports fell by 2.3% in the second quarter, declining for the first time in three years. Imports fell 2.8 percent. Consumer spending was down 0.5%, while capital spending slipped 0.2 percent.

Looking through today’s headlines, it’s difficult to find good news: Cell phone sales have dropped through the floor - though this is a cause of an ill-explained change in the way mobile phones are sold in Japan, and should lead to sales increases next year. In the second quarter, sales at DoCoMo fell 21%, AU saw a 19% fall and Softbank’s sales slid 23%. As the Nikkei puts it: Read more

First quarter GDP growth at 0.9% - yet the word recession still finding its way into print

Let’s start with what the headlines didn’t tell us: On Friday, the Cabinet Office revised GDP data for the fourth quarter of 2007 downward from 0.9% to 0.6%. The bigger news, however, was that preliminary GDP estimates for the first quarter of 2008 showed a 0.8% increase, which translates into an annualized 3.3% gain.

These figures came as somewhat of a surprise to most commentators, and we should not yet begin speculating on whether or not they might also be revised downwards in three months time. Where was the growth? The Cabinet Office announced that strong exports and a recovery in housing starts were chiefly behind the gain. Although housing starts are nowhere near the dismal levels they were at last summer and fall, it should be noted that they were down 5.7% in January, 5.0% in February and 15.6% in March.

According to the data, housing starts rose 4.6% for the first time in five quarters, after having fallen 9.2% in the fourth quarter of 2007. Exports saw 4.5% growth in the January-April quarter, while imports increased 2.0%. Consumer spending rose 0.% while capital spending fell 0.9%. It was the first fall for capital spending registered in the past three quarters.

In fact, rising materials prices helped contribute to a 25 trillion yen outflow in the first quarter, as import prices continue to rise while export prices remain flat. That 25 trillion yen outflow was an all-time high; will there be anything left for capital spending in the second quarter of 2008? Read more

Business Conditions, Capital Spending, Industrial Output all Down, Yet Consumer Spending Holding Up

The Cabinet Office published its monthly Index of Business Conditions for January earlier today, and we have seen a decline in all three indexes for the first time since September of last year. This report generates three scores, which are referred to as diffusion indexes. The three categories reported are the leading index, the coincident index, and the lagging index. The leading index is meant to evaluate business sentiment for the future, the coincident index measures sentiment in the current period, and the lagging in the period previous to the report. For each index, a score below 50 indicates pessimism, while a score above 50 indicates an optimistic result.

January results showed the Leading Index falling from 50.0 in December to 30.0 in January, while the Coincident Index dropped from 63.6 to 22.2 and the Lagging Index fell from 66.7 to 62.5 (incidentally, we have not seen all three indexes below 50 since February 2007).

The fall in the Leading Index is what tends to worry economy watchers the most. Although it stood exactly on the fence at 50 in December (a figure which has since been revised down to 45.5), the score had seen an encouraging rise from the previous four months, when it checked in at 25.0, nil, 16.7 and 16.7.

Just last week we noted that industrial output had slid 2.0% in January, and that figure seemed to have been caused by nervousness over the course of the US economy. The Leading Index supports that supposition, though fears may be even reach beyond worries over the US economy.

To make matters worse, on Wednesday the Ministry of Finance announced that capital spending fell at its steepest pace in five years during the October-December quarter. According to the Ministry’s data, capital spending declined 7.3% during the fourth quarter, greatly exceeding the expectations of most Japan watchers. Read more

GDP up 0.9% in September-December quarter, exceeding all expectations except one

We’re halfway there.

Back in November, after July-September quarter GDP data was announced to have been a 0.6% increase, we pointed out that Japan’s GDP would need to grow at a 0.9% pace in each of the remaining two quarters in order to hit the government’s target of a 2.1% GDP growth in real terms for fiscal 2007.

This morning, the Cabinet Office announced that Japan’s GDP increased - you guessed it - 0.9% in the October-December quarter. Back in November, almost no one expected to see another quarter with strong GDP figures. The Nikkei even published an article entitled “Strong GDP Data Does Not Warrant Optimism.” I did not read any analysts predicting anything as high as a 0.9% increase.

Does stronger GDP data warrant optimism? We’re almost salivating over breakfast with tomorrow morning’s Nikkei. Of course, we don’t expect anything more than a cautious optimism, if indeed any. After all, these are only preliminary figures.

So what drove the GDP data? According to the Cabinet Office, capital spending rose 2.9 percent from the previous quarter, while consumer spending moved up just a bit, by 0.2 percent. Total domestic demand increased 0.5 percent, despite the fact that housing investment was down 9.1 percent. Exports rose 2.9 percent, with automobile and software exports leading the charge.

Last November, the Nikkei announced that “the fate of Japan’s current expansion will depend more than anything on whether corporate profits will trickle down into household income through fatter paychecks.”

That is not at all how things are playing out, at least not yet. We’re still seeing higher prices and no wage growth. However, please do not mistake disagreement with this one point made by the Nikkei as optimism on our part. We don’t expect to see a 0.9 percent GDP increase in the current quarter. Then again, maybe we should, given that it would bring us right to the government’s target.

The Nikkei also told us this in November:

The country’s economy is in a delicate state, and the policymaking vacuum that has resulted from domestic political turmoil could cause it to enter a serious downturn.

I never bought that one for a second. “Political turmoil?” Ok, there’s no space to get into that here…

So, with GDP results being a surprise and making the next quarter a bit more interesting, will the Bank of Japan pitch in and do something unexpected tomorrow morning?

Capital spending down 1.2% in July-September quarter; GDP to be revised upward?

Earlier today, the Ministry of Finance reported that capital spending had fallen 1.2 percent during the July-September quarter. Following a 4.9 percent fall in the April-June quarter, this is the second consecutive quarter with a fall in capital spending.

According to the Ministry’s results, profit fell 0.7 percent at the firms surveyed. This was the first fall reported in five years.

Bloomberg, however, says that the fall is less than the 2.5 percent that had been predicted by its survey of economists. We also see the warning that risk is developing over Japan’s continued reliance on exports and the health of external markets.

Export growth to Asia has been particularly visible this year, making up for some of the loss that might have resulted from a dropoff in exports to the United States. The question now is whether Asian economies are healthy enough in order to keep growing at a sustained pace and continue with their demand for Japanese products.

Despite the negative news on capital spending, Reuters tells us that its survey of economists predicts a slight upward revision in Japan’s GDP figures for the second quarter. Preliminary figures from the Cabinet Office put second quarter GDP growth at 0.6%, for an annualized rate of 2.6%. The Reuters survey expects to see that revised upward to 0.7% quarterly and 2.7% annually.

The revised figures are set to be released just before 9am on Friday.

GDP up 0.6% in July-September quarter, growth at annualized 2.6%

After revised statistics showed that Japan’s GDP shrank 0.3% (-1.2% annualized) in the quarter to April, statistics released by the Cabinet Office on Tuesday showing that the economy grew 0.6% in the July-September quarter were much welcomed.

We do need to bear in mind that these are preliminary GDP figures. Preliminary GDP estimates of the April-June quarter showed a 0.1% increase, which was revised downward quite strongly to the 0.3% decrease.

Where did the growth come from? The Cabinet Office tells us that strong exports to Asian countries coupled with a ‘modest’ rise in private consumption helped push the economy back into the black last quarter. Exports pushed GDP up 0.4% from the previous quarter while domestic demand led to a 0.2% increase in GDP. Capital spending pitched in a bit as well, finally. It showed a 1.7% increase over the previous quarter, for its first rise in three quarters.

If this data remains unchanged GDP needs to grow at a 0.9% pace (3.7% annualized) in each of the remaining two quarters in order to hit the government’s target of a 2.1% GDP growth in real terms for fiscal 2007.

That won’t be easy. Read more

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