Japan GDP Turns Negative Again in Q1 (Comprehensive)

Q3 Economic Growth Rate Records -0.8%
Falls More Sharply Than Initial Forecasts

[Image source=AP Yonhap News]

[Asia Economy Reporter Kwon Jaehee] Japan's third-quarter economic growth rate has turned negative again after just one quarter. This marks the fifth decline in the past eight quarters, raising concerns about the loss of economic recovery momentum as the drop was larger than expected.

On the 15th, Japan's Cabinet Office announced that the real Gross Domestic Product (GDP) for the third quarter (July to September) decreased by 3% on an annualized basis and by 0.8% compared to the previous quarter. The growth rate had turned positive from -1.1% in the first quarter to 0.4% in the second quarter but has now reverted to negative. This decline is even steeper than the initial forecast of a 0.7% decrease. Excluding the lowest point during the COVID-19 pandemic, the real GDP is at its lowest since 2014.

By detailed components, private consumption expenditure fell by 1.1%, or 4.5% on an annualized basis. Private capital investment decreased by 3.8%, and capital expenditure dropped by 14.4%. In contrast, government spending increased by 4.7%. The nominal GDP growth rate for the third quarter recorded -0.6%.

Bloomberg reported that the contraction in private consumption was significantly influenced by the Japanese government's declaration of a state of emergency as a measure against the COVID-19 pandemic this summer. Additionally, the semiconductor supply shortage that hit the global market disrupted the supply chains of Japanese manufacturers, which was also cited as a major cause of the economic growth rate deterioration.

Shinichiro Kobayashi, a researcher at Mitsubishi UFJ Research and Consulting, stated, "This is a much more disappointing result than expected due to the real economy contraction caused by COVID-19 and supply chain disruptions," adding, "The Japanese economy should be recovering, but there are many potential factors that support a negative outlook."

Accordingly, there is an assessment that Prime Minister Fumio Kishida's cabinet stimulus measures have gained justification. According to Nihon Keizai Shimbun, the stimulus package is expected to exceed 40 trillion yen (approximately 414 trillion won). Earlier, Prime Minister Kishida announced that a COVID-19 support payment of 100,000 yen would be provided to all citizens under 18 years old. The current measures are also expected to include wage increases for caregivers, tax benefits for companies that raise wages, and the resumption of subsidies for promoting domestic travel (Go To Travel campaign).

Meanwhile, the International Monetary Fund (IMF) forecasted that among the Group of Seven (G7) countries, Japan will continue to experience the slowest growth in 2022.

This content was produced with the assistance of AI translation services.