Japan's GDP returns to growth in October-December

The rising GDP was good news, but the economy faces headwinds as the U.S.-China trade war continues and a consumption tax hike looms. © Reuters

The rising GDP was good news, but the economy faces headwinds as the U.S.-China trade war continues and a consumption tax hike looms. © Reuters

Household spending and investment spark 1.4% increase after Q3 natural disasters

TOKYO -- Japan's gross domestic product grew in October-December after a sharp decline in the previous quarter, thanks to solid domestic consumption and business investment that offset weak exports.

Seasonally adjusted GDP rose at an annualized 1.4% in the fourth quarter, according to preliminary data released by the Cabinet Office on Thursday. The reading was in line with the forecast by economists in a recent Reuters poll.

Household spending and investments by businesses resumed after the economy was hit by a string of natural disasters in the July-September quarter. Companies have also been stepping up investments in automation to overcome a serious labor shortage.

But the rebound was not strong enough to fully recover from the 2.5% contraction in July-September. Export growth was sluggish in the face of weak demand from China as shipments of smartphones and semiconductors to the country fell sharply in December.

With the U.S. and China locked in talks to resolve their trade dispute, a further decline in exports -- which have previously spurred Japan's economic upturn -- may put more pressure on growth going forward.

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Japan is also planning to raise its consumption tax to 10% from the current 8% in October. The previous hike in 2014 was followed by a sharp contraction in GDP.

Source: Nikkei Asian Review, 14 Feb 2019