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Japan cuts 3Q GDP growth estimate to 1.3%

(Agencies)
Updated: 2009-12-09 11:23

TOKYO: Japan's economy in the third quarter grew sharply less than initial estimates as cautious companies decided to save, not spend.

Real gross domestic product expanded at an annual pace of 1.3 percent in the July-September period, the government said Wednesday, much lower than its preliminary figure of 4.8 percent provided last month.

The result corresponds to 0.3 percent growth from the previous quarter instead of the 1.2 percent reported initially.

The big downward revision stems largely from capital investment, which fell 2.8 percent from the previous quarter after the government incorporated additional data. The Cabinet Office had estimated that companies increased spending by 1.6 percent.

The marked change in GDP figures adds to recent signs that Japan's economic recovery may be losing steam. The world's second biggest economy faces intensifying deflation and a strong yen, on top of a still uncertain global outlook.

Growing concerns led Prime Minister Yukio Hatoyama to unveil a fresh $81 billion stimulus package Tuesday to keep Japan from lurching back into recession and bolster its prospects ahead of upper house elections next year.

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Despite shrinking tax revenue, the administration agreed to 7.2 trillion yen ($80.6 billion) in new spending after days of negotiations with coalition partners. The package includes measures to bolster employment, extend consumer incentives to buy eco-friendly products and provide support for small and medium-size firms hurt by the strong yen.

Analysts doubted whether the new government spending would do much to bolster growth.

Ryutaro Kono, chief economist at BNP Paribas in Tokyo, expects Japan's economy to hit a mild "soft patch" in the second quarter of 2010. While strength in Asian exports will help fend off recession's return, he said, persistent internal weakness will likely slow momentum.

"The fact that manufacturers are saddled with excessive capacity and employment that cannot be undone by a cyclical upturn means cost cutting will continue for some time, depressing nonmanufacturers' sales and households' income," he said in a report Wednesday.

In the government's latest report, capital investment declines overshadowed slightly better figures for consumer spending and exports.

Private consumption, which accounts for 60 percent of the economy, rose 0.9 percent in the third quarter, up from a preliminary estimate of 0.7 percent. Exports were up 6.5 percent, compared with 6.4 percent in last month's report.

GDP, or the total value of the nation's goods and services, rose at a revised annual pace of 2.7 percent in the April-June period after posting a record decline in the first quarter.