Japan GDP Grows Less Than Estimated In Q2

Japan downwardly revised its economic growth for the second quarter, to reflect a steeper fall in domestic demand that was partly offset by a faster growth in exports, an official report showed Friday.

The Cabinet Office revised down the quarterly growth in the gross domestic product for the second quarter to 0.6% from 0.9% reported on August 17. Economists had expected the growth figures to be left unchanged from the preliminary numbers.

Domestic demand contracted 1% sequentially in the second quarter, faster than a 0.7% fall estimated earlier.

Private demand contracted 1.7%, quicker than a 1.3% decline initially recorded. This reflected the slower growth of 0.7% in private consumption compared to a 0.8% growth estimated initially. Further, business investment contracted at a faster pace of 4.8% compared to a 4.3% fall estimated earlier.

Public demand grew at a slower pace of 1.1% compared to a 1.2% growth in the preliminary estimates. Within this, the growth in investments made by the public sector eased to 7.5% from 8.1% initially.

Gross fixed capital formation fell at a quicker pace of 3.1% than a 2.6% fall estimated earlier. Core machinery orders dropped 9.3% in July, reversing a 9.7% rise in the preceding month, official reports showed Thursday, indicating firms were still cutting investments.

Exports rose 6.4%, faster than a 6.3% growth seen in the preliminary estimates, but imports fell 5.1%, unchanged from its initial reading.

On an annual basis, the economic growth was reduced to 2.3% from the initial estimate of 3.7%. Economists expected the growth figure to be held at 3.7%.

In the meantime, other reports seems to point that the Japanese economy is on the road to recovery. The leading index, which measures the direction the economy will take, rose for the fifth consecutive month to 83 in July from 80.9 in June. Moreover, the coincident index, which measures the current state of the economy, increased for the fourth consecutive month to 89.6 from 88.6.

Earlier this week, the Cabinet Office kept its economic assessment for the economy unchanged and said the world’s second largest economy was showing signs of picking up, even as it faced record high unemployment. On the basis of the latest figures, the jobless rate stood at 5.7% in July, up from 5.4% in June.

Further, the rating agency Fitch Ratings affirmed Japan’s long-term foreign and local currency Issuer Default Ratings or IDRs at ‘AA’ and ‘AA-’, respectively, with a stable outlook.

“Japan’s sovereign ratings reflect a balance between the country’s exceptionally strong external balance sheet and its deteriorating public finance position, which is already among the weakest of the advanced economies,” the firm noted.

Elsewhere, the Bank of Japan’s board member Miyako Suda pointed out that the need for extraordinary measures were diminishing as the corporate financing conditions showed improvements.