Japan GDP Falters

Econintersect:  Weak exports shot a hole in Japan’s GDP growth in 4Q/2014.  The quarter-over-quarter gain came in at 0.3%, less than half of what had been expected.  The latest result matched the growth achieved in each the second and the third quarters.  A negative balance of trade subtracted a huge 3.1% because imports growing by 3.5% in the fourth quarter simply swamped the meager growth of exports by 0.4%.  Japan’s surge in imports is driven by the large increase in energy imports as a result of the shutdown on the nation’s nuclear facilities in response to the nuclear plant disaster at Fukushima almost three years ago.  This increase is aggravated by a 30% drop in the value of the yen in U.S. dollar exchange over the past 18 months.  Energy is priced in dollars.

Domestic growth in the fourth quarter was strong, especially from the private sector.  Consumer spending was up 0.5% for the quarter, company capital investment rose by 1.3% and housing investment was up 4.2%.

The numbers today are the first preliminary release of data and will be revised with later updates in March and April.

John Lounsbury

Sources:

• Tables of GDP and its components (Economic and Social Research Institute, Cabinet Office, Government of Japan, 17 February 2014)

• Japanese quarterly GDP growth disappoints (Jonathan Soble, Financial Times, 17 February 2014)

• XE Currency Charts (USD/JPY)