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Japan downwardly revised its economic growth for the third quarter on Wednesday to reflect a marked worsening of domestic demand in the country.
The Cabinet Office announced that gross domestic product expanded just 0.3% quarter-on-quarter in the third quarter, revised down from the 1.2% growth estimated initially. Economists had expected the GDP growth rate to be revised to 0.7%.
Domestic demand contracted 0.1% sequentially in the third quarter, in contrast to the 0.8% rise estimated earlier.
Private demand edged up 0.1%, markedly slower than the 1% growth initially recorded. This was mainly due to a 2.8% decline in private non-residential investment compared to the 1.6% rise estimated initially. Private residential investment was reported to have fallen 7.9% compared to the 7.7% decrease estimated earlier. This was partially offset by a 0.9% increase in private consumption, revised upwards from 0.7% growth.
Public demand shrank 0.4% in the third quarter compared to the 0.1% increase estimated preliminarily. Within this, government consumption slid 0.1%, reversing the 0.4% increase reported earlier, while the decline in public investment was revised down to 1.6% from 1.2%.
Gross fixed capital formation, which comprises residential investment, private non-residential investment and public investment, fell at a markedly quicker pace of 3.2% compared to the 0.3% decrease estimated earlier. Exports growth was revised up to 6.5% from 6.4%, while imports growth was revised down to 3.3% from 3.4%.
On an annual basis, GDP was up 1.3% - again missing expectations for a 2.8% increase after the preliminary report showed a 4.8% jump.
Meanwhile, nominal GDP was down 0.9% on quarter, steeper than the 0.1% decline in the preliminary report. The GDP deflator was down 0.5% on year after the initial reading of a 0.2% increase.
The Cabinet Office's GDP revision highlights the risk of the economy slipping back into recession and justifies yesterday's announcement by the government of a JPY 7.2 trillion stimulus package to boost the ailing economy.
The government plans to provide JPY 3.5 trillion to bolster regional economies and around JPY 600 billion to help the job market. Another JPY 800 billion is planned for environment related measures. The package consists of measures that provide subsidies for eco-friendly cars and household appliances, while a further JPY 1.2 trillion is set aside to raise funds for companies.
The additional spending would be financed by the second extra budget for the fiscal year ending March. Finance Minister Hirohisa Fujii said the Cabinet is expected to pass the supplementary budget next week.
Fujii said that the sale of new government instruments would take the total debt issuance to JPY 53.5 trillion for the current fiscal year. Tax revenue is seen at around JPY 36.9 trillion, down from the earlier estimate of JPY 46 trillion, while debt issuance is set to exceed tax revenue of the government this year. Fujii told reporters that the government may issue construction bonds to fund part of the extra measures.
The Japanese yen remained stable against its major rivals following the release of the final third quarter GDP report.
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