Japan Revises Q2 GDP Downward Due to Sluggish Spending and Declining Wages

Japan Revises Q2 GDP Downward Due to Sluggish Spending and Declining Wages

08 Sep, 2023

 

Japan Revises Q2 GDP Downward Due to Sluggish Spending and Declining Wages

 

Japan's economic growth for the second quarter fell below initial estimates, and a decline in wages during July raises doubts about the central bank's expectations for a robust domestic demand-led recovery. Revised gross domestic product (GDP) data revealed that capital expenditure and private consumption both decreased in the April-June period, underscoring the fragility of Japan's economy amid challenges from weakening Chinese and U.S. growth.

Separate data indicated that real wages, adjusted for inflation, declined for the 16th consecutive month in July, suggesting that households continued to feel the impact of rising prices, which could negatively affect consumption. Takeshi Minami, chief economist at Norinchukin Research Institute, pointed out that "Weak exports to China may be making Japanese manufacturers cautious about investing. The hope is that service-sector firms will pick up the slack, though sluggish consumption could discourage them from spending money too."

The revised GDP data showed that Japan's economy grew at an annualized rate of 4.8 percent in April-June, down from the preliminary estimate of 6.0 percent and below market expectations of a revised 5.5 percent expansion. The primary reason for this downgrade was a 1.0 percent decline in capital expenditure, casting doubt on the Bank of Japan's view that strong corporate spending would support the post-pandemic economy. This decline was larger than the median market forecast of a 0.7 percent fall. Private consumption, representing over half of the economy, also fell by 0.6 percent quarter-on-quarter in the April-June period, compared to the preliminary 0.5 percent decline.

While exports remained robust in April-June, contributing 1.8 percentage points to GDP growth, shipments to China saw a significant 13.4 percent drop in July, marking the eighth consecutive month of decline. Overall exports fell by 5.0 percent year-on-year in the first half of August, following a 0.3 percent decline in July, indicating the adverse impact of the global economic slowdown on Japan.

Weak domestic demand led to declines in imports, resulting in Japan's current account surplus reaching a record level for July, according to separate data released on Friday. Takeshi Minami of Norinchukin commented, "I won't be surprised if Japan suffers two consecutive quarters of contraction during the rest of this year," adding that "The chance of an early end to ultra-loose monetary policy is diminishing." Japan's recovery from the COVID-19 pandemic has been delayed this year due to rising living costs and sluggish global demand.

Given the uncertainties, Bank of Japan policymakers have emphasized their commitment to maintaining ultra-loose monetary policy until cost-driven inflation transitions into price increases driven by domestic demand and higher wage growth.

 

 

 

 


Related News

Biden's Steel Decision Sparks Concerns Within Japan's Business Community

08 Jan, 2025

The U.S. government’s decision to block Nippon Steel Corp.'s acquisition…
Read More
Ukraine, Japan Business Federation Strengthen Ties, Aim for Expanded Cooperation

17 Dec, 2024

For the first time in five years, the Ministry of…
Read More
Teva Announces Agreement to Divest Teva-Takeda Business Venture in Japan

06 Dec, 2024

Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) has entered…
Read More
IndiGo and Japan Airlines to Launch Codeshare Partnership Next Month

28 Nov, 2024

Japan Airlines and IndiGo are gearing up to launch their…
Read More
IBK Industrial Bank Partners with Japan's Mizuho Bank for Growth

21 Nov, 2024

 IBK Industrial Bank has entered into a significant business agreement…
Read More
Japanese Businesses Express Growing Pessimism Over China's Economic Prospects.

20 Nov, 2024

Japanese firms operating in China are growing increasingly pessimistic about…
Read More

© 2025 Business International News. All rights reserved | Powered by Cred Matters.