TOKYO—Japan’s third-quarter gross domestic product surged 3.9 percent but the growth was widely attributed to short-term stimulus measures rather than underlying economic strength.
Japan’s Cabinet Office said Monday that real GDP rose 3.9 percent on an annualized basis for the July to September period while it grew 0.9 from the previous quarter.
Chiwoong Lee, an economist with Goldman Sachs, noted that the third-quarter data is “stronger than it looks” as the government also upward revised the previous two quarters. According to Goldman, the market forecast was for 2.6 percent growth in the third quarter.
Private consumption rose 1.1 percent from the second quarter of the year, as consumers took advantage of government incentives to buy more fuel-efficient cars. But that phenomenon won’t carry over to next quarter.
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“We expect consumption to make a large negative contribution in [the fourth quarter]. We note that auto sales have fallen sharply since the expiry of eco-car points in early September,” Lee said.
Third-quarter export growth slowed to 2.4 percent from 5.6 percent in the second quarter and 7 percent in the first quarter.
The continued strength of the yen has been curbing the competitive edge of Japan’s key exports like cars and electronics. The unfavorable exchange rate comes at a time when many Japanese companies are looking to expand their international business to compensate for sluggish demand in aging Japan.
“The latest export statistics, for the first 20 days of October, show some improvement from previous slowdown and we see some upside risk for our [fourth-quarter] export forecast since the global manufacturing cycle is looking a little brighter lately,” Lee said.
Last quarter, China eclipsed Japan to become the world’s second largest-economy. Just this weekend at the Asia-Pacific Economic Cooperation summit in Yokohama, Japan’s prime minister Naoto Kan said it’s important for his country to forge stronger ties with emerging countries in the region.
“We have to grow with the fast-developing economies of Asia Pacific. Without that connection, we can’t count on our prosperity,” Kan said.