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Japanese Economic Growth Almost at a Standstill

Amid a slowing global economy, Japan is the latest country to produce disappointing GDP figures. The third-biggest economy on the planet failed to grow significantly in the third quarter of 2019, with more bad news expected in the final quarter of the year.

What Do the Results Show?

The government released GDP data showing that the annualised growth rate for Japan in the previous quarter was just 0.2%.  This represented a big drop from the 1.8% that was recovered in the period from April to June of this year. 
Growth was far from reaching the 0.8% that was being widely forecast beforehand by analysts. In fact, this was the poorest rate since a 2% contraction was reported for the third quarter of 2018. 

Private consumption was down more sharply than anticipated too, from 0.6% in the last quarter to 0.4%. This is important because the government believe that domestic demand will be strong enough to help them to cope with the difficult global economy.  It is now believed that a contraction will be seen in the GDP numbers for October to December. 

Capital spending was more impressive, with a 0.9% increase in the third quarter of 2019. This meant that domestic demand was able to put 0.2% onto the growth rate.  On the other hand, external demand removed 0.2% from the growth of the GDP. This has largely been blamed on the US-China trade war that has dented supply chains all over the planet.

The Japanese economy may improve at the start of 2020, but at this point experts believe that it will probably be a fairly weak comeback. In the context of a complicated global economy, it is easy to understand the growing importance of international commercial debt recovery. 

What Are the Reasons Behind This?

The main factor that been given for this poor performance is the ongoing global trade war. When allied to low global demand, it is a difficult combination that has lowered export levels. An increase in sales tax in October may make the last few months of the year even more awkward.

It is expected that these numbers will increase demands for the government to look at boosting fiscal spending to strengthen the economy. It is worth remembering that the last sales take hike came in 2014.

At the time, private consumption before the increase took place was a lot higher than it has been this time. This has given hope that the contraction this time will be far less dramatic than the 7.3% that followed the last sales tax hike.

International demand for cars and electronic parts from Japan are down, with Economy Minister Yasutoshi Nishimura pointing out that exports will remain weak. Among the Japanese companies affected by the trade wars, Panasonic suffered a 12% decline in their operating profit during the second quarter of the year. 

Issues in the country’s relationship with South Korea have also harmed their economy, with a damaging decline in the number of tourists visiting Japan one of the results. The trade dispute between the countries has also led to the Japanese authorities restricting the export of materials to their third biggest trading partner.