Research Dept. News
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Monthly Report, num 352 - December 2011
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International review - Japan
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Japan: a recovery with an expiry date
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Japan grows by a minimal 1.5% in the third quarter and confirms its recovery.
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After three consecutive quarters of decline, the Japanese economy confirmed its recovery from the effects of the tsunami and nuclear crisis in March. Third quarter GDP was higher than expected, up 1.5% quarter-on-quarter, leaving it just 0.2% below the level of the same period a year ago. This recovery was based on robust growth in private consumption, up by 1.0% quarter-on-quarter, and on the recovery in exports, growing by a resounding 6.2% but from a very low starting point. However, the latest figures raise doubts as to whether this expansion can go much further.
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But growth will not improve. Industrial production is falling and exports will suffer from the global weakness.
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Monthly indicators for September point to quarterly growth being concentrated in the months of July and August. Industrial production, which had regained more than two thirds of the 15.2% it had lost with the tsunami in March, fell by 3.4% in September compared with August and showed some signs of exhaustion, also confirmed by machinery orders, an early indicator of investment spend. In the case of exports, what had been lost in August was made up again in September but the recovery looks unlikely to continue. Exports have already reached pre-tsunami levels so that, together with the slowdown in world growth, especially in Asia, which is where half of Japanese exports end up, there is little leeway left. The appreciation of the yen doesn't help either, with most exporters seeing their profits eroded more than in industry as a whole.
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Demand weakens and prices fall again.
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Retail sales also joined the retreat being made by industry in September, as well as automobile sales in October and housing, which in September saw an end to the increases of July and August. Along the same lines, prices also turned somewhat deflationary in nature. In September, the CPI fell back to its level of a year ago, while the core CPI, the general index without energy or food, took another step backwards, down 0.4% year-on-year.
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