Why Japan’s Economy Posted Surprisingly Strong Growth
TOKYO — Japanese economic growth accelerated strongly in the third quarter. Japan has the world’s third-largest economy, but it has been struggling to lift a lackluster growth rate and escape the trap of deflation — sagging consumer prices associated with weak output and declining living standards. So what went right last quarter? And will it last?
Japanese gross domestic product increased by 2.2 percent in annualized terms in the three months through September, the Cabinet Office said in a preliminary estimate. That counts as rip-roaring growth in normally sluggish Japan. The country has averaged less than 1 percent over the last two decades. The growth rate more than doubled compared with the second quarter and was more than twice as high as the average forecast by economists.
Where Did the Growth Come From?
Foreigners. Exports accounted for by far the largest share of the increased output, according to the Cabinet Office data. They surged 8.1 percent in annualized terms, while other important parts of the economy barely budged. Domestic consumer spending, the biggest component of G.D.P., rose just 0.2 percent. Business investment ticked up by a meager 0.1 percent. By contrast, a rosier economic picture overseas helped exporters: The American economy grew robustly in the quarter, while a slowdown in China appears to have eased. A weaker yen probably helped, too. The Japanese currency had been gaining strength this year — bad news for companies selling in dollars or euros — but it has eased off again since August.
Is the Government Growth Push Working?
Government spending took a back seat last quarter. Prime Minister Shinzo Abe has introduced a number of stimulus programs during his nearly four years in office, but the latest one — announced in September and worth 28 trillion yen, or about $260 billion, over several years, according to government calculations — will not kick in until next year, and public investment actually declined last quarter. More broadly, Japanese officials have started to re-examine a stimulus strategy that has relied heavily on the central bank. The bank’s ultraloose monetary policy has kept borrowing costs down, but so far that has not translated into much new spending by consumers or businesses.
What Does Trump Mean for Trade?
Mr. Trump’s protectionist views have alarmed Japanese government officials and business leaders. On the campaign trail, he often lashed out at Japan as a country where the United States gets “killed on trade,” though he saved specific threats to retaliate by increasing tariffs for Mexico and China. Mr. Trump also accused Japan of keeping the yen artificially cheap, which could make it awkward for Japan to take financial steps that might be seen as influencing the currency market. On the upside, Mr. Trump has promised to spend big on infrastructure in the United States. If he follows through, that could lift the American economy — and by extension, demand for Japanese and other foreign goods. That is why Japan’s stock market has risen since Mr. Trump’s victory last week.
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