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Japan Revises Q3 Economic Growth Estimate

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Japan has revised its preliminary estimates of growth in the third quarter of 2016, with the new figure being significantly lower than initially revealed. The economy grew 1.3 percent year on year, which is less than the 2.2 percent previously announced. The Cabinet Office also revealed that the growth over the previous quarter in the preliminary report of 0.5 percent had now been changed to 0.3 percent. The growth in public spending had to be revised down from 0.4 percent to 0.3 percent. The other negating factor was the increase in exports, with the initial estimate of 2 percent being off from the actual 1.6 percent. Capital expenditure was down by 0.4 percent, as steel and real estate companies invested less in the quarter. However, household consumption and private residential investment in real estate were higher than initially thought.

The Japanese economy has had a rocky few years. Many hoped that Prime Minister Shinzo Abe’s economic agenda would work. Since he took over office in 2012, ‘Abenomics’ has not gone according to plan. His strategy to grow the economy by increasing foreign investments, government spending and removing red tape has yielded very little in terms of actual growth. His cabinet is hoping that with the improvement in the dollar following Donald Trump’s victory and the decline in the Yen, exports would increase. “With a stronger dollar and potentially higher demand in the US, companies are returning to their investment planning boards, which would fill the missing link in Japan’s current recovery,” said Martin Schulze from the Fujitsu Research Institute in Tokyo. A similar expectation was shared by David Kuo, CEO of Motley Fool Singapore, who said “The revised economic growth numbers are disappointing, but a new US president, a higher US dollar and a lower yen could be all it needs to tip a finely balanced Japanese economy into growth.”