World News

Japan’s economy shrinks faster than expected in the quarter Business and Economics

[ad_1]

The world’s third-largest economy is taking a hit between global supply disruptions and new COVID-19 outbreaks.

The Japanese economy shrank much faster than expected in the third quarter as global supply disruptions and new COVID-19 cases impacted business and consumer spending, creating challenges for the new government’s growth plans.

While many analysts expect the world’s third-largest economy to recover in the current quarter, the deterioration in global production necks is forecast to increase risks.

“The contraction was much higher than expected due to supply chain constraints, which hit production and capital expenditure hard,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.

“We expect the economy to rebound in the quarter, but the pace of the recovery will be slow as consumption has not been a good start even after the COVID-19 limits were eased in late September.”

The economy fell 3 percent year-on-year in the July-September quarter, after a 1.5 percent revision in the first quarter, with first-quarter gross domestic product (GDP) data on Monday showing a 0.8 percent contraction compared to the average market forecast.

Weak GDP contrasts with more promising readings from other advanced nations, such as the United States, which expanded its economy by 2 percent in the third quarter due to strong demand.

Between the quarters, GDP fell by 0.8 per cent compared to market forecasts, a fall of 0.2 per cent.

Japanese Prime Minister Fumio Kishida is planning a multi-trillion promotion to boost the economy [FILE: Behrouz Mehri/Reuters]

Prime Minister Fumio Kishida plans to complete a large-scale economic promotion package worth “several trillion yen” on Friday, but some economists were skeptical of the impact it will have on growth in the near term.

“The package will be a mixed bag of short-term and long-term growth measures, and the focus may be blurred, so it won’t have much of an impact in the short term,” Norinchukin’s Minami said.

Consumption fell by 1.1% in July compared to the previous quarter in July, after rising by 0.9% in April and June.

Capital expenditure also fell 3.8 per cent after a 2.2 per cent rise in the previous quarter.

Goods costs

Domestic demand reduced GDP growth by 0.9 percentage points.

Exports lost 2.1 per cent in July and September compared to the previous quarter as a result of trade chip shortages and supply chain cuts.

Analysts surveyed by the Reuters news agency expect the Japanese economy to expand by 5.1 percent in the current quarter, as consumer activity and car production have increased thanks to the decline in COVID-19 cases and supply disruptions.

Japanese companies still face commodity costs and supply button risks, which threatens to weaken short- and medium-term economic forecasts.



[ad_2]

Source link

Related Articles

Back to top button