"We believe domestic demand is stable and the economy continues to improve"
- Akira Amari, Economy Minister
After a spurt of growth in the first six months of the year, the world's third largest economy seems to be running out of steam, as companies cut their capital spending, while exports failed to surge even despite weaker Yen. Despite efforts done by Shinzo Abe's government to energize growth, the economy logged a 1.9% growth in the third quarter, compared with 3.8% in the preceding quarter, with the gain led by government spending and an accumulation of inventories, the Cabinet Office said. On the quarterly basis, GDP grew 0.5%, after a 0.9% expansion a quarter earlier. A widening trade gap cut off 1.8% from growth, while a 0.7% increase in corporate investment (from 4.4% a month earlier) also made a small contribution to the overall figure. The latest data, however, offset the average 1.6% rate expected by Nikkei, which also mentioned growth is likely to pick up in the last four months. Since Abe's appointment, a set of measures aimed at boosting growth have helped to push the Yen lower, and lift stocks. That helped to boost growth in the first half of the year, as the economy enjoyed soaring exports and vibrant consumer spending. Nonetheless, those pillars have lost much of the steam over the corresponding period. There is a growing pressure on Shinzo Abe to shift his attention to his own promises, and some executives already see government commitment slipping. Moreover, the government itself has appeared to step back from measures that may bring more fluidity to the labour market.
© Dukascopy Bank SA