"The disappointing GDP result is a reflection of the limit of Abenomics. Fiscal stimulus and monetary stimulus can only do so much without the actual change in the competitiveness of Japanese economy."
- Takuji Okubo, chief economist at Japan Macro Advisors
The world's third largest economy failed to regain momentum during the last three months of 2013, official data showed Monday, as spending by companies and households deteriorated over the period. The Cabinet Office said the economy expanded at a tepid rate of 1.0% in the fourth quarter, falling short of analysts' expectations for a 2.8% growth and slowing down from third quarter's 1.1%. On a quarterly basis growth decelerated to 0.3% from 0.5% in the previous quarter. Weak shipments from the export-oriented economy was the main culprit. A 0.4% increase was not able to offset a 3.5% surge in import prices. Japan has been dragged down to persistent trade deficits in the recent months, due to a combination of weak domestic currency and higher energy imports amid the shutdown of nuclear industry. At the same time, capital expenditure and private consumption rose 1.3% and 0.5%, both missing analysts' expectations.
The data is heightening concerns that Shinzo Abe's polices will be able to weather further challenges expected later this year. In April Japanese government will increase the sales tax by 3% to 8%, a measure, which is projected to depress consumption. Moreover, the growth has become highly dependent on the large-scale government spending that is the second pillar of the Abenomics. While a set of economic measures are designed to increase growth potential, they still have to crystallize.
© Dukascopy Bank SA