Japan sidestepped recession last quarter: Revised data released Tuesday showed its economy grew at an annual 1.0 percent pace instead of shrinking. A previous estimate had shown the world’s third-largest economy contracted 0.8 percent in the July-September quarter, after shrinking 0.5 percent in the previous quarter. Two consecutive quarters of contraction are considered a recession.
The revised growth figure makes it less likely that Japan’s central bank will deploy further monetary stimulus anytime soon, despite slow progress toward its goal of 2 percent inflation. The data show stronger corporate investment and a slightly higher pace of growth in exports than earlier reported. But the major change was an upward revision in inventories to 1.5 trillion yen ($12.2 billion) from a preliminary estimate that inventories fell 1.9 trillion yen ($15.4 billion). That may not auger well for future growth if manufacturers are overshooting demand from companies and consumers.
“Actually, relative to the impressive gain in income, private domestic demand … remains quite low,” Masamichi Adachi of JPMorgan said in a research note. He described the inventories situation as a “wild card.” On a quarterly basis the economy expanded 0.3 percent from the previous quarter instead of contracting 0.2 percent as the earlier estimate showed. Economists are forecasting about 1.5 percent growth in the current quarter.
Japanese companies are investing heavily overseas while holding back on wage increases and factory upgrades at home, despite repeated entreaties by Prime Minister Shinzo Abe to do more to help the recovery along. Foreign companies, likewise, have not heeded Abe’s efforts to attract more investment. Data reported Tuesday showed total foreign direct investment in the past year was only 4 billion yen ($32.5 million), less than 0.001 percent of its GDP.