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Japan economy shrinks in Q3 on natural disasters, falling exports

Japan economy shrinks in Q3 on natural disasters, falling exports

Mubasher: Japanese economy shrank in the third quarter of 2018, impacted by natural disasters and a drop in exports and consumption.

Gross domestic product (GDP) fell at an annualised pace of 1.2% in the three months ended last September, contracting again after a resilient growth of 3% in the previous quarter, initial estimates from Japan’s Cabinet Office showed.

This came larger than a median forecast of 1% annualised fall, according to analysts polled by Thomson Reuters.

The drop was attributed to a 1.8% decline in exports during the third quarter, the largest drop in more than three years, while capital expenditure edged down 0.2%, the first decline in two years, following a rise of 3.1% in the second quarter.

The contraction of the world’s third largest economy added further to signs of weakness globally, with Chinese and European economies losing pace.

However, Japanese government stuck to its view that the economy continued to rebound moderately, while attributing the contraction to typhoons and earthquakes which disrupted factories and choked consumption.

However, the setback is not the outcome of only such one-off factors alone, some analysts suggested, citing worries over declines in exports as Chinese demand slowed down and the escalating global trade conflict weighed.

“The decline in exports cannot be attributed entirely to the natural disasters,” Tokai Tokyo Research Center analyst Hiroaki Muto told Reuters.

“The message is China’s economy is weakening, which means Japan’s exports will be slow to recover and growth will stall around the first half of next year,” Muto said.

While a recovery in the current quarter is expected, it could be tepid, while growth could cease next year, after the trade disputes bite more and more.

“Japan’s economy may slow down from January onwards as the US-China trade war intensifies,” Nomura Securities senior analyst Masaki Kuwahara told the news agency.

“US tariffs on its imports of Chinese goods take effect in January, curbing Chinese shipments, which will in turn damage Japanese exports and capital expenditure,” Kuwahara said.