TOKYO (AP) — Japan’s economy picked up some momentum in the last quarter of 2018 but still slowed from the growth seen in the previous year.
The 1.4 per cent rebound in annualised growth for October-December contrasted with a revised 2.6 per cent contraction in the previous quarter, according to data reported yesterday by the Cabinet Office.
It showed a recovery in consumer demand, investment and government spending in the world’s third-largest economy.
But the 0.7 per cent expansion in the full year was much slower than the 1.9 per cent annual growth logged in 2017.
Gross domestic product, or the total value of a nation’s goods and services, had contracted during the July-September quarter.
Chief Market Economist at SMBC Nikko Securities Yoshimasa Maruyama said risks remain, such as trade friction with the United States (US) over Japan’s exports of autos and auto parts, and a hike in the sales tax planned for October.
US President Donald Trump has imposed tariffs on imports from China that are due to increase if talks underway in Beijing this week fail to make progress on longstanding, difficult issues related to technology and other broad structural problems. Higher tariffs on Chinese exports could hurt Japanese manufacturers both directly and indirectly.
Trump has also complained over Japan’s trade surplus with the US, adding to the uncertainty.
On the domestic front, the plan to raise the consumption tax in October from eight per cent to 10 per cent could crimp consumer spending.
Raising that tax has been a major policy challenge for Prime Minister Shinzo Abe, who has twice postponed the increase. The feared social backlash could figure in upcoming elections.
Consumer demand helped boost the economy late last year and might remain relatively strong as shoppers try to beat the tax increase.
Despite the improved numbers for the October to December quarter, industrial output was flat compared with a year earlier, Marcel Thieliant of Capital Economics said in a commentary.