Japan Economy Grows 1.3%, Less Than First Estimated (Update3) – Bloomberg.com

I think the word I’m looking for is “Oops.” Kinda overestimated the rebound in Japan it seems:

Dec. 9 (Bloomberg) — Japan’s economy expanded less than a third of the pace initially reported in the three months to September as companies slashed spending.

Gross domestic product rose at an annual 1.3 percent rate, slower than the 4.8 percent reported in preliminary figures last month, the Cabinet Office said today in Tokyo. The revision was deeper than the predictions of all but one of the 17 economists surveyed by Bloomberg News.

via Japan Economy Grows 1.3%, Less Than First Estimated (Update3) – Bloomberg.com.

The big reason? Falling prices. Again, from the article:

Today’s report added to evidence that falling prices are taking hold in the economy. In nominal terms the economy shrank 0.9 percent last quarter, compared with the government’s initial prediction for a 0.1 percent contraction. The GDP deflator, the broadest indicator of price declines, slid 0.5 percent. The gauge has only risen twice in the past decade.

As for the biggest downward driver in the revision? Investment – the forgotten GDP component:

Investment by companies drove the downward revision in last quarter’s growth. Capital spending fell 2.8 percent in the three months through September from the previous quarter. That compares with a 1.6 percent increase reported last month.

“The recovery in capital investment will be dull,” said Yasuhiro Onakado, chief economist in Tokyo at Daiwa SB Investments Ltd., whose 1 percent prediction for growth was the most accurate of analysts surveyed. “Capacity utilization levels are still low, meaning that companies are saddled with idle assets and have no room for new investment.”

Which speaks of overcapacity. We’ve got the same problem:



That shows the level of investment collapse we’ve seen. If you prefer percent changes, that one follows next:

So we’ve stopped declining and we’re now flat-lined. Well if I want to paint this in a positive light, it shows even investment can’t fall forever.

But back to Japan for a second. Twenty years and two Lost Decades later, they’re still overcapacity.

And to top it off, this will only make that pesky debt-to-GDP metric look a good bit worse.

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Filed under government, macro, Way Forward, You're kidding

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