Japanese Q4 economic growth figures revised downwards
The Cabinet Office today revealed the world’s no.2 economy grew at a slower rate in the fourth quarter than previous estimates showed.
According to official figures, the Japanese economy grew by 0.9% between the October and December period, rather than the 1.1% previously estimated.
On an annual basis, the Japanese economy grew at a rate of 3.8% in the final quarter of 2009, down from the initial estimate of 4.6%.
The downgrade was due, in part, to worse-than-expected investment in factories and equipment by companies.
The figures suggest the economy is recovering slower than previously thought – hampered by deflation and weak domestic demand.
Japan was one of the first major economies to emerge from recession in the second quarter of last year as a result of a rebound in exports.
However, deflation remains a problem for the economy. Core consumer prices fell 1.3% in January against a year ago, representing the 11th consecutive monthly fall.
The Bank of Japan has kept interest rates at the low level of 0.1% for many months now, in order to beat deflation.
It is anticipated that the central Bank will leave rates at the low rate until around 2012 as a result of deflationary pressures.
A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.
Deflation was a problem for Japan during its so-called “Lost Decade” in the 1990s in which the economy struggled with falling prices.
Comments (1)
Visited 1723 times, 1 so far today
Japanese style deflation: Deflation has been persistent in Japan for two decades due to very low unemployment rate in Japan for the very low GDP growth rate. If GDP growth rate decreases, unemployment rate should be increased since average annual household income can be maintained in that way. But Japan did not do that. Instead Japan maintained low unemployment rate compared with other developed countries. Therefore, an annual Japanese household income has been decreasing for two decades. The solution of the Japanese persistent deflation is to give much more flexibility in the labor market.