Japan GDP grows 11.7% in Q4, less than preliminary figure

Tokyo

JAPAN'S economy expanded at a slower-than-initially-reported pace in October-December 2020, with firms turning more cautious about spending on plant and equipment as the impact of the coronavirus pandemic weighed on the economic outlook.

The slower growth was mainly due to weaker capital expenditure and public spending, which both expanded less than previously thought in the fourth quarter, even as exports remained solid.

Separate data showed household spending was hit by a bigger annual drop in January than in the prior month, a sign the Covid-19 pandemic was keeping consumers cautious about shopping.

The economy grew an annualised 11.7 per cent in October-December, weaker than the preliminary reading of 12.7 per cent annualised growth to mark the second straight quarter of growth, latest data from the Cabinet Office showed on Tuesday.

The reading, which was weaker than economists' median forecast for a 12.8 per cent gain, translates into a real quarter-on-quarter expansion of 2.8 per cent from October-December, versus a preliminary 3 per cent gain.

Capital spending grew 4.3 per cent from the previous quarter, lower than a preliminary 4.5 per cent rise, but outpacing the median forecast for a 4.1 per cent increase.

Private consumption, which accounts for more than half of gross domestic product, rose 2.2 per cent from the previous three months, matching the preliminary reading.

Net exports - or exports minus imports - added 1.1 percentage points to revised GDP growth, while domestic demand lifted it by 1.8 percentage points, weaker than a preliminary contribution of 2 percentage points.

The worse-than-expected GDP revision comes after exports and factory output picked up in January, signalling a stronger recovery in global demand following last year's deep coronavirus slump.

Household spending, however, fell 6.1 per cent in January compared with the same month a year earlier, official data showed on Tuesday.

Some analysts are worried that a cold spell in corporate investment and household spending could last longer than expected, boding ill for demand and threatening to leave the world's third-largest economy without a domestic growth driver.

The Bank of Japan (BOJ) will conduct a review of its policy tools next week to make them more "effective and sustainable" as the pandemic forces it to keep its radical stimulus programme in place longer than originally expected.

Also on Tuesday, data showed that Japan's currency in circulation and bank deposits rose at a record annual pace in February, as uncertainty over the pandemic continued to prod companies and households to pile up savings.

The data highlights how slow vaccine rollouts and sluggish consumer spending could delay Japan's economic recovery, even as markets price in prospects of stronger global growth.

Japan's M3 money stock - or currency in circulation and deposits at financial institutions - jumped 8 per cent in February from a year earlier, marking the biggest increase on record, BOJ data showed. The rise topped a 7.8 per cent gain in January.

Bank deposits surged a record 15.8 per cent in February, while cash in circulation grew 6.1 per cent, the data showed.

"Households' deposits are rising, suggesting that consumers are holding back on spending," Takashi Nagahata, head of the BOJ's economic statistics division, told a briefing.

If infections continue to rise, households may pile up savings and corporate demand for funds could increase in sectors vulnerable to Covid-19 such as restaurants and hotels, he said.

"The outlook largely depends on developments over the pandemic," said Mr Nagahata. REUTERS