In Japan, the economy grew by an annualized 0.9% during the third quarter, with a noticeable slowdown in growth compared to the previous three months due to tepid capital spending. The unexpected bright spot was the stronger private consumption, which exceeded market estimates and contributed to the overall growth.
The data revealed that private consumption, which constitutes more than half of Japan's economic output, saw a significant increase of 0.9%, outpacing expectations and reflecting positively on the overall economic performance. However, economists point out that this boost in consumption may be influenced by temporary factors such as the recovery in auto production post safety scandals and temporary income tax cuts.
Despite the positive growth in private consumption, capital spending, a crucial component of private demand-led growth, experienced a decline by 0.2% in the third quarter, matching expectations. Experts attribute this decrease to a slowdown in overseas economies impacting machinery investment, particularly in sectors like chipmaking equipment. Additionally, net external demand had a negative impact on growth, emphasizing the challenges posed by global economic conditions.
Looking ahead, the Bank of Japan is considering further rate hikes, as the stronger GDP growth and private consumption support the central bank's forecast of a solid recovery propelled by higher wages and consumption. However, concerns about potential risks from overseas economies and market volatility remain, indicating the need for caution despite the positive trends in Japan's economy.