People are silhouetted in front of a show window at a shopping district in Tokyo, Japan Dec 8, 2022. REUTERS/Kim Kyung-Hoon/File Photo
TOKYO – Japan’s economy likely swung back to growth in the October-December period, helped by a slight pickup in external demand, though analysts warned private consumption remains fragile, a Reuters poll showed on Friday.
The expected return to expansion, albeit modest, would come at a time when the Bank of Japan is debating the likelihood of a near-term exit from its massive stimulus program, and is closely monitoring upcoming wage talks and consumer spending.
Gross domestic product (GDP) in the world’s third-largest economy was expected to have expanded by an annualized 1.4 percent in the fourth quarter, after contracting 2.9 percent in July-September, according to the median forecast of 16 economists in the poll.
On a quarter-on-quarter basis, the economy grew 0.3 percent in October-December period.
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“The recovery is not strong enough to regain from the 0.7 percent decline (annualized -2.9 percent) in July-September,” said Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting.
‘Recovery not strong enough’
The moderate reading expected likely reflected weak growth in capital expenditure and soft consumption as inflation continued to outpace wage growth. At the same time, an increase in external demand thanks to solid performance in service exports boosted the overall figure, analysts said.
Consumption probably rose 0.1 percent in October-December from the previous quarter after slipping 0.2 percent in the July-September period, the poll showed.
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Capital expenditure was believed to have risen 0.3 percent in the fourth quarter after slumping 0.4 percent in July-September, according to the poll.
External demand was projected to have contributed 0.3 percentage point in the fourth quarter after shaving 0.1 percentage points off, the poll showed.
For the January-March quarter, high prices will continue to weigh on consumer spending, while a slowdown in overseas economies could pressure exports, analysts at Mizuho Research and Technologies said.
The government will release the preliminary October-December GDP data at 08:50 a.m. on Feb. 15 (2350 GMT on Feb. 14).