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MNI: Japan Govt Official Warns Of Outlook For Consumption

(MNI) TOKYO

Japanese private consumption rebounded in Q3 from its second quarter drop, but consumption lacks strong momentum, while the private consumption environment remained weak, a senior official at the Cabinet Office warned on Wednesday.

“Real wages remained in negative territory. The key point for private consumption is whether wages rise beyond price rises. In addition, consumer sentiment is marking time now on the back of high prices, although the sentiment has risen around mid-this year,” the official told reporters.

Government data showed real wages continued in negative territory for the 18th straight month in September as wage hikes failed to catch up with price rises.

The official added private consumption will likely not gain sharp upward momentum due to elevated prices. It is unknown whether the rise in expected inflation rates will contribute to boost spending or restrict spending as Japanese people have suffered from deflation for decades, she added.

She added that it is unlikely that private consumption gains upward momentum sharply, given that Japanese prices are expected to stay at high levels.

The official also warned that it is unknown whether the rise in expected inflation rates will contribute to boosting spending or restricting spending as Japanese people were suffering from deflation for decades.

Japan's economy for the third quarter posted the first contraction in three quarters in the wake of weak private consumption and capital investment, preliminary GDP data released by the Cabinet Office showed on Wednesday.

The Q3 GDP fell 0.5% q/q, or an annualized -2.1% following a revised 1.1% q/q. or an annualized 4.5% for the second quarter.

The Q3 growth was weaker than the MNI median forecast that pointed to a drop of 0.1% q/q, or an annualized -0.3%.

Private consumption, which accounts for about 60% of Japan's GDP, fell 0.0% q/q in Q3, after a revised 0.9% fall in Q2. The median forecast was for a 0.2% q/q rise.

Business investment fell 0.6% q/q in Q3 following an unrevised 1.0% fall in Q2. The median forecast was for a 0.3% rise.

The official also said, while capital investment plans remained solid, capex in GDP has fallen as many businesses become cautious amid concern over the U.S. and Chinese economies.

Japan’s exports posted the second straight growth for Q3 as exports of driven by automobiles following eased supply-side restrictions.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

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