Japan’s fourth-quarter gross domestic product shrank a larger-than-expected 1.4 percent on an annualized basis, registering its second decline in three quarters.
Private consumption in the world’s third-largest economy fell 0.8 percent in the fourth quarter after rising 0.4 percent in the third quarter. Exports, a key driver of the country’s economy, dipped 0.9 percent in the fourth quarter on the back of the 2.6 percent growth registered the quarter before.
Naohiko Baba, an economist with Goldman Sachs, highlighted the significance of the consumption decline.
“Consumption remains lackluster. Special factors such as warmer winter temperatures had some impact on spending in October-December, but even if we exclude these, the underlying trend remains weak in our view,” he wrote in a note. “Going forward, we think consumption is poised to stabilize, given the relatively robust growth in employee compensation, and our forecast for a slowdown in cost-push inflation for food and daily necessities triggered by the weaker yen. Even so, we still see strong downside risks.”