Japan’s slide back into recession deeper than initially estimated

8th December 2014


Japan’s fall back into recession was deeper than originally forecast but growth is expected to return in the last three months of 2014.

The second estimate for GDP growth during the three months to the end of September showed that the world’s third largest economy shrank by 0.5% compared to the previous quarter and by 1.9% on an annualised basis. This marks a slightly larger decline than the preliminary estimate of a 0.4% fall quarter on quarter (q/q).

This was in turn a far weaker result than the upward revision to 0.1% expected by the Bloomberg median.

Capital Economics Japan Economist Marcel Thieliant said: “While a survey published by the Ministry of Finance last week had pointed to rising non-residential investment, today’s data showed a 0.4% q/q drop instead of the preliminary estimate of a 0.2% q/q decline. Public investment was weaker than initially reported, too.”

However, Thieliant noted too that the large drag from inventories last quarter overstated the weakness of the economy somewhat. In the meantime, the monthly data have been more encouraging. “The upshot is that the economy likely returned to growth this quarter,” he added.

In regards to the nation’s current account data, the jump in the seasonally-adjusted surplus from 414bn yen to a three-year high of 947bn yen was far above the Bloomberg median of 455bn.

Thieliant added: “This was caused by a jump in the service balance, which recorded a surplus for the first time in the history of the series, as well as a spike in the primary income balance, which surged to a record high, too. In particular, the sudden surge in the service balance, which saw by far the largest monthly change on record, looks odd, and we would expect the surplus to drop again in November.”

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