Domestic Demand Slumps While Exports Boom... Japan GDP Turns Negative in Q4 After Several Quarters

4th Quarter GDP -2.9%
Impact of Sluggish Personal Consumption
Current Account Surplus Drives Growth

Japan's economic growth rate for the third quarter of this year recorded an annualized rate of -2.9%, returning to negative growth for the first time in four quarters. During the same period, private consumption stagnated due to rising prices, while the current account balance improved significantly, leading to a pattern where external demand drove GDP growth.

[Image source=Yonhap News]

On the 8th, Japan's Cabinet Office announced that GDP for the third quarter (July to September) decreased by 0.7% compared to the previous quarter. Assuming this trend continues for a year, the annualized growth rate was calculated at -2.9%. Japan's GDP growth rate had maintained growth for three consecutive quarters on an annualized basis since the fourth quarter of last year (0.1%), but growth weakened this quarter.

Private consumption slowed significantly, pulling down the GDP growth rate. Personal consumption, which accounts for more than half of Japan's GDP, decreased by 0.2% compared to the previous quarter. Due to the impact of rising prices, consumption of durable goods such as food and clothing dropped by 3.2%, and consumption of non-durable goods like food decreased by 0.3% compared to the previous quarter. Capital investment also declined by 0.4% compared to the previous quarter, marking negative growth for two consecutive quarters.

On the other hand, the current account balance announced on the same day showed a surplus of 2.5828 trillion yen (approximately 23.5 trillion won), the highest since 1985 and a record high in 38 years. The current account balance has been on the rise for nine consecutive months since February, driving GDP growth. According to Nihon Keizai, while the contribution of domestic demand to overall GDP growth was negative 0.6 percentage points, the contribution of external demand was relatively better at negative 0.1 percentage points.

The surplus increased significantly due to a rise in the service balance, driven by the recovery of the travel industry. Last year, the current account balance recorded a deficit of 149 billion yen, but this year, with an increase in tourists, the service balance recorded a surplus of 343.8 billion yen. The income balance, which refers to interest and dividend income, also recorded a surplus of 3.0508 trillion yen, increasing the current account surplus.

Regarding the trade balance, a deficit of 472.8 billion yen was recorded, but the deficit narrowed by 74.8% compared to the same month last year. The decline in energy prices such as liquefied natural gas and coal significantly reduced raw material import costs.

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