Japan growth seen bouncing back as shoppers spend up before next year’s tax hike
(Reuters) – Japan’s economic growth may have slowed in July-September as consumer spending and exports moderated, but growth will quickly bounce back as shoppers spend up before a sales tax hike next year, a Reuters survey found.
Capital expenditure was also expected to have slowed in the July-September period, the survey found. This cooling, however, could be temporary as service firms plan to ramp up investment to meet improving domestic demand.
A tighter labor market and signs of rising wages should also support consumer spending in coming quarters, which bodes well for Prime Minister Shinzo Abe’s push to foster self-sustaining growth and end 15 years of mild deflation.
“This is more an adjustment in speed, because gains in consumer spending in the first half of the year were not sustainable,” said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute. “But there is no reason to expect consumption to weaken any further. Growth can quickly bounce back.”
The median estimate from a Reuters poll of 25 economists saw Japan’s economy growing 0.4 percent in July-September from the previous quarter.
That would be the second consecutive quarter that growth has slowed. The median estimate translates into an annualized increase of 1.6 percent. (The Cabinet Office will release the data on November 14 at 8:50 a.m. — November 13 at 2350 GMT).
Private consumption, which makes up about 60 percent of the economy, was seen growing 0.1 percent, according to the poll, down from 0.7 percent growth in the previous quarter as falls in Japanese shares weighed on consumer sentiment.
Some individual investors also cut back on spending after a cashing in on a stock market rally earlier this year to buy luxury goods.
