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.