MNI BRIEF: Japan Economy Not Weak Despite Q3 Contraction - Gov

The Japanese economy is not weak as a trend, although gross domestic product for the third quarter posted the first contraction in six quarters, a senior Cabinet Office official said.

“The GDP contraction was due mainly to temporary factors, such as the drop of housing investment caused (by the government’s rules), and the reaction to the front-loaded export rise in Q2,” the official told reporters.

Japan's economy for the July-September period fell 0.4% q/q, or an annualized -1.8% for the first contraction in six quarters due to weak private consumption and housing investment in addition to net exports, preliminary GDP data released by the Cabinet Office showed on Monday.

The Q3 contraction was better than the MNI median forecast that pointed to a drop of 0.7% q/q, or an annualized -2.7% and showed the reaction to the front-loaded demand rise for the second quarter wasn’t big.

Private consumption, which accounts for about 60% of Japan's GDP, rose 0.1% q/q in Q3 following an unrevised 0.4% rise in Q2. 

Business investment rose 1.0% q/q in Q3 for the fourth straight rise following a revised 0.8% rise in Q2.

Exports fell 1.2% in Q3 for the first drop in two quarters, hit by a decline in automobiles shipped to the U.S., where autos made up 27.7% of total exports.

Private consumption and capital investment, the major components of the economy, are likely to firm in or after the fourth quarter, the official said.

Private consumption, particularly non-durable goods, was hit by high prices and scorching weather in Q3, but is undergoing a moderate recovery supported by improving consumer sentiment, the official added.