MNI BRIEF: Japan Q3 GDP To Fall 0.7% Q/Q; Annualised -2.7%

Japan’s economy is expected to have contracted for the first time in six quarters in the July-September period, as weaker private consumption and capital investment offset earlier front-loaded gains, according to private economists.

Preliminary estimates suggest GDP fell 0.7% quarter-on-quarter, or an annualised 2.7%, reversing from a 0.5% q/q (annualised 2.2%) expansion in the April-June quarter.

Private consumption, which accounts for around 60% of GDP, is projected to have inched up 0.1% q/q, slowing from a 0.4% rise in the previous quarter. Capital investment is also seen rising just 0.1%, down from a 0.6% increase in Q2.

The Cabinet Office will release the preliminary GDP data for the July-September quarter at 0850 JST on Monday, Nov 17 (2350 GMT on Sunday, November 16).

Net exports of goods and services are expected to have subtracted 0.3 percentage points from overall GDP growth, after contributing 0.3 pp in the second quarter. Public investment likely fell 0.6% q/q, matching the previous quarter’s decline.

Looking ahead, economists expect GDP to rebound by 0.7% in the October-December quarter, though the recovery would not fully offset the third-quarter drop.

However, analysts doubt a serious downturn will occur, noting the recent trade deal between Japan and the U.S. has reduced some uncertainty, while corporate capital investment plans remain broadly solid.