TOKYO: Japan’s economy likely expanded modestly in the three months through September on the back of a rise in exports despite tepid spending by businesses and households. Gross domestic product likely grew an annualized 0.9% in the third quarter, according to a survey of 20 economists by The Wall Street Journal. That would mark a third straight quarter of expansion, the longest stretch of growth for Japan in three years. The data are due Monday morning in Japan.
A third consecutive quarterly expansion would likely be welcome news for Prime Minister Shinzo Abe in his quest to strengthen growth, though its slow pace doesn’t point to the kind of reinvigorated economy promised by his Abenomics policy platform. The coming figures are likely to reinforce the view that years of easy monetary policy and economic stimulus have yet to convince Japanese households and businesses to spend significantly more. “It will be positive growth, but unbalanced, largely dependent on foreign demand,” said Dai-ichi Life Research Institute economist Yoshiki Shinke in a report. “Japan’s economy is still sluggish.”
Household spending—accounting for 60% of GDP—is expected to fall 0.1% on quarter. Economists say that households are still reluctant to spend because many workers haven’t seen significant pay increases. Department store sales have fallen on year for the past 11 months through September, due in part to a fall in spending by foreign tourists, according to the Japan Department Stores Association.
Many Japanese companies also aren’t feeling optimistic, either, a factor that likely held back capital spending in the quarter. Economists forecast capital spending edged up only 0.1% on quarter. The overall economic expansion was likely due to a 1.9% rebound in exports on quarter, as well as a fall in imports. Combined, economists predict that net exports contributed a net 0.5 percentage point to growth.
Despite the rise in exports, corporate executives remain concerned about the effects of a stronger yen on repatriated profits. Even firmness in the dollar following the surprise victory of Donald Trump in the U.S. presidential election still leaves the yen far stronger than its 2015 low against the greenback around ¥125. Camera maker Canon Inc. last month cut its full-year earnings view for the third time this year as it revised its dollar assumption rate to ¥100 from ¥105.
“We decided to revise down the forecasts, considering a risk that the yen may strengthen further,” chief financial officer Toshizo Tanaka told reporters earlier this month. Mr. Tanaka said the company made the conservative earnings outlook, taking into account the possibility that the U.S. Federal Reserve may not raise interest rates this year, which could cause the dollar to fall against the yen. Still, despite weak demand at home, a 0.9% overall growth figure would still be better than Japan’s potential growth rate as estimated by most economists. The Bank of Japan most recently estimated the potential growth rate at 0.24%, while the Cabinet Office puts it at 0.3%.
