Saturday 11 September 2004

Japanese economy slowing faster than expected

Japan's second quarter GDP growth was revised downward yesterday, indicating that the economy is slowing faster than previously expected.

Japan pares forecast amid signs of slowdown
The Japanese government on Friday unexpectedly lowered its estimate for second-quarter economic growth to an annual rate of 1.3 percent from an initial estimate of 1.7 percent, quelling hopes that the robust expansion seen earlier in the year might continue... Financial markets rarely pay much attention to revisions to the gross domestic product data because they are not thought to reveal much about the future direction of the economy. But stock prices fell sharply following the report Friday. The Nikkei 225 average declined 87.73 points to finish at 11,083.23.

Investors may have taken fright because the growth revision seemed to confirm recent, more forward-looking economic data that also points to a slowdown for Japan's two-year-old recovery. On Thursday, the government reported that machinery orders fell a surprisingly steep 11.3 percent in July from the month before amid weak demand by manufacturers of cars, transportation equipment and semiconductors.

One hopeful sign from yesterday, however, is an improvement in Japanese consumer sentiment.

Japan consumer sentiment in August highest in over 13 yrs
Consumer sentiment in Japan for August hit the strongest level in more than 13 years, reflecting a brighter outlook in all four components surveyed, the government said Friday. The Cabinet Office said the unadjusted consumer confidence index for nationwide households, excluding single-person households, rose 0.5 point from July to 49.2, the highest reading since 49.4 marked in June 1991. The index gained 3.8 points to 48.7 in July.

Much of Japan's earlier growth had depended on improved final demand from the US. The hope must be for a sustained rise in Japanese consumer spending to turn the economic recovery into a prolonged growth trend.

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