Japanese economy sees expansion in Q3
Official data today revealed Japan’s economy grew strongly in the July to September period after the expiry of a Government incentive prompted a rush of car buyers and a sharp rise in cigarette sales before a new tobacco tax was levied.
In addition, the hottest summer ever boosted sales of air conditioners and other related items, fuelling growth.
The world’s third largest economy grew 0.9% on a quarterly basis, while on an annualised basis, growth of 3.9% was recorded – almost double the rate of growth seen in the US in the same period.
While the annual growth was much higher than forecasts of 2.5%, there are risks ahead, analysts have warned.
Furthermore, there have been fears of a double-dip recession as exports, a crucial driver for economic growth, continue to slow.
In addition, a strong yen could be damaging for the economy. A stronger yen has meant demand for exports has weakened.
The Bank of Japan recently took action to weaken the currency – it was the first time in six years that such action had been taken.
In addition, deflation remains a serious threat to the economy. 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.
Capital Economics said it expects the Japanese economy to contract in the last quarter of the year as consumer spending and exports struggle.