Japan’s economy grew Slower Than Anticipated in December Quarter

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source: Noriko Hayashi

Capital spending sharply contracted, raw materials piling up, ready products stacked by companies contributed to slowing expansion.

The Japanese economy has contracted at a slower rate than initially reported over the last three months. With companies tightening expenditure for plants and machinery and sharply cutting inventories as coronavirus demand reached the pandemic in Japan,

According to Cabinet Office data released on Tuesday, the economy expanded an annualized 11.7 per cent in the fourth quarter of last year, which was lower than the initial report of 12.7 per cent annualized expansion.

The declining trend was experienced mostly because of the quicker decline in private inventory and capital expenses. Simultaneously, the export grew substantially, which was lower than the previously anticipated rate in the fourth quarter of 2020.

Separated statistics found that household consumption in January was down somewhat more annually than the previous month, which showed that people were careful about shopping in the context of the COVID-19 pandemic.

The updated estimate was lower than the median estimate of economists for a 12.8 per cent increase, which results in an actual 2.8 per cent increase from October to December relative to a preliminary 3 per cent increase in the quarter to quarter.

The previous year, investment expenditure increased by 4.3%, less than the tentative estimation of a 4.5% increase by the government, which was outstripping analysts' median projections of a 4.1% increase.

Private inventories, which include raw materials and finished goods detracted 0.6 percentage points from the updated GDP growth rate, worsening a negative provisional addition of 0.4 percentage points.

Private spending, which accounts for the majority of GDP, increased by 2.2 per cent in the last three months, matching the preliminary reading.

Net exports, or exports minus imports, boosted GDP growth by 1.1 percentage point, while domestic demand raised it by 1.8 percentage point, less than the provisional contribution of 2 percentage points.

As the pandemic pressures it to keep its radical stimulus program in place longer than anticipated, the Bank of Japan will pursue a study of its policy instruments next week to make them more "effective and sustainable."