Japanese economy expands at glacial pace – UOB

Senior Economist Alvin Liew at UOB Group gave his opinion on the latest Japanese GDP figures for the July-September period.

Key Quotes

“Japan’s 3Q 2019 GDP growth slowed visibly to 0.1% q/q (0.2% annualized rate) from 0.4% q/q (1.8% annualized rate) in 2Q as the growth pace of both private and public demand slowed but still managed to offset the drag from net exports and private inventories”.

“Despite the underwhelming 3Q GDP outcome, it was still much better than our expectations (-1.1% q/q). As such, we revise our 2019 GDP growth forecast for Japan higher to 0.7% (from 0.5% previously). We still expect trade headwinds and more importantly, a collapse of private spending in 4Q 2019 and extending into 2020, will consequently drive Japan into a recession next year. And notwithstanding the Tokyo Olympics next year, we believe that Japan’s GDP will contract by 0.8% in 2020”.

“The next revision of 3Q 2019 GDP (the 2nd preliminary estimate) will be on 9 Dec 2019. This bears watching as a sizeable downward revision to any major GDP component such as business spending, could swing 3Q GDP into a sequential q/q contraction and that may put Japan at risk of a technical recession if 4Q GDP contracts as well”.