Japan economy grows for 8th straight quarter, longest since 1980s

Gross domestic product figures fell short of expectations and represented a slowdown from the previous quarter, but analysts forecast continued growth nonetheless.

GDP expanded just 0.1 percent in the last quarter of 2017, the Cabinet Office said, a far cry from the 0.6 percent figure for July-September.

“The growth rate for the last quarter was very low compared with the bubble period but the economy is solid enough,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“The slowdown was due primarily to inventory adjustments and a decline in the contribution of net exports due to strength in imports,” added analysts at Barclays in a report.

“As such, it did not imply a pull-back in the momentum of economic recovery,” analysts Tetsufumi Yamakawa, Yuichiro Nagai and Yukito Funakubo wrote.

At an annualised rate, the world’s third largest economy grew 0.5 percent, also missing expectations.

“There are lingering worries over consumption but we can expect the economy to pick up further if ‘shunto’ wage hikes are better than the previous years,” said Minami, referring to collective wage negotiations between labour and management held every spring.

“The current expansion could be extended further,” he told AFP.

For the calendar year 2017, the economy grew 1.6 percent, against 0.9 percent in 2016.

Japan’s Minister for Economy, Trade and Industry Toshimitsu Motegi said the current expansion was solid compared with the more volatile “bubble” boom in the 1980s, according to Bloomberg News.

Speculative investment in land and stocks on low interest rates, pushed the Nikkei stock index to almost 40,000 in 1989 — nearly double its current level.

But the bubble burst at the start of the 1990s, ushering in a period of low or no growth known as the “lost decades”.

– ‘Bubble economy’ –

The current period of growth is good news for Prime Minister Shinzo Abe, who has been trying to fire up the economy with his pro-spending policy dubbed Abenomics since he took office in late 2012.

Junko Nishioka, chief economist at Sumitomo Mitsui Banking Corp., also said an uptick in income suggested the Japanese economy would expand further.

Abenomics is providing “a wide range of tax measures quite beneficial to Japanese firms”, she said, with the current expansion phase less reliant on exports.

“Compared to the bubble economy, the Japanese corporate sector is very cautious in its investment, in other words the signs of a bubble are contained compared to 30 years ago,” Nishioka added.

Bank of Japan Governor Haruhiko Kuroda, who looks set to stay at the helm until 2023, has vowed to maintain a loose monetary policy given still weak inflation.

The Japanese economy has enjoyed a period of largely export-driven growth, helped by a recovering global economy.

It has also got a shot in the arm from domestic demand spurred by infrastructure upgrades ahead of the 2020 Olympic Games.

However, with wage growth and consumption persistently lukewarm, the economy is still battling to make a clear break from deflation.

Minami, at Norinchukin, warned low wage hikes could derail the scenario of continuing growth.

“We have seen financial market turbulence in February. If companies take this as an excuse to resist wage hikes, it would darken the scenario for a long-lasting expansion,” he said.