TOKYO: Japan’s economy grew more quickly than expected in the third quarter, marking the third straight quarter of expansion, but the upbeat figure masked continued sluggishness in spending at home. Gross domestic product expanded at an annualized 2.2% pace in the three months through September, the government said Monday, higher than the 0.9% rise expected by economists. It was the longest stretch of growth since 2013. The surprise was driven by a rebound in exports, which rose 2% compared with the previous quarter. Shipments of smartphone components including semiconductors rose, according to the Cabinet Office.
Domestic indicators told a different story. Both household spending and capital investment, which together account for roughly 70% of GDP, were flat on quarter, despite efforts by Prime Minister Shinzo Abe to get companies to spend more of their cash piles. “The Abe government has been trying to achieve domestic-led growth, but the third quarter GDP shows that the growth is reliant on exports,” said Shunsuke Kobayashi, economist at the Daiwa Institute of Research. Mr. Abe has tried to lift growth with a combination of monetary and fiscal stimulus since taking power in late 2012, but growth has since been uneven. He recently introduced a new package of government spending and other stimulus measures.
Economists say that households are still hesitant to spend because many workers haven’t seen significant pay increases. Fast Retailing Co., the operator of Uniqlo clothing stores, said last month that profits improved in the six months through Aug. 31 after it held off raising prices. Upscale department stores have seen sales fall in recent months as consumers put off luxury purchases. Businesses likewise held back from spending as a stronger yen weighed on repatriated profits.
Among the brighter spots were private housing investment, which rose 2.3% compared with the previous quarter, and a continuing rise in tourism. U.S. President-elect Donald Trump has expressed opposition to the Trans-Pacific Partnership free-trade deal, one of Mr. Abe’s main initiatives to lift Japanese exports. “The government should take steps to ensure the growth in exports will persist. With the election of Trump as president, the TPP has become difficult, but there are other free trade initiatives Japan can push forward,” said Daiwa Institute of Research’s Mr. Kobayashi.
Japan’s economy is expected to continue its gradual recovery, said economy minister Nobuteru Ishihara in a statement Monday, citing “improvements in employment and wage conditions.” Toru Suehiro, economist at Mizuho Securities, said the government would likely hold off from seeking further stimulus after a third straight quarter of expansion and the recent fall in the yen, which helps Japanese exporters. “Since the U.S. presidential election, the upward pressure on the yen has receded. This must have helped ease the worries of the government,” Mr. Suehiro said.
