Japan’s economy, the world’s third-largest, contracted less than initially estimated in the third quarter, reinforcing views that it is slowly recovering from the COVID-19 pandemic, despite the fact that the main export markets show new signs of weakening.
Separate data showed the Japanese economy posted its first current account deficit in eight years in October, reflecting the high import costs imposed on households and businesses by the yen’s plunge to multi-decade lows this year.
The revised annualized quarterly contraction of 0.8% in gross domestic product (GDP) released by the Japanese Cabinet Office on Thursday was compared with the median forecast of economists in a Reuters poll for an annualized decline of 1.1 %, and with a provisional official estimate of a contraction of 1.2%.
The revision was due to the upward variation in private inventories, compared to the annualized quarterly increase of 4.5% in the previous quarter.
The Japanese economy contracted unexpectedly in the third quarter as risks of a global recession, a faltering Chinese economy, a weak yen and rising import costs hurt consumer and business.
According to some analysts, the Japanese economy could rebound in the current quarter due to the easing of supply restrictions on semiconductors and automobiles, and the lifting of border controls linked to COVID-19, which would boost tourism.
Others, however, are bracing for the global economy to enter recession next year, which would deal a severe setback for trade-dependent Asian exporters such as Japan.
Takeshi Minami, chief economist at the Norinchukin Research Institute, says: “The resumption of inbound tourism and campaigns to promote domestic travel will boost private consumption, helping the economy return to growth in the October-December quarter.”
“Looking ahead, a global slowdown led by rate hikes in advanced economies and a housing slump in China will weigh on the Japanese economy, possibly triggering a technical recession, or two straight quarters of contraction in the first half of next year.”