November 6, 2019 / 4:21 AM / 15 days ago

Japan third-quarter GDP growth may slow, but domestic demand still solid: Reuters poll

TOKYO (Reuters) - Japan’s economy likely grew for a fourth straight quarter in July-September helped by solid domestic demand as consumers rushed to beat a sales tax hike, a Reuters poll found on Wednesday.

FILE PHOTO: A man chooses goods under signs telling customers about the rise in the national sales tax at a store in Tokyo, Japan September 25, 2019. REUTERS/Kim Kyung-Hoon/File Photo

But the pace of growth was seen slowing from the second quarter as a strong typhoon and rainy weather countered strong domestic spending and weak external demand hurt exports.

Analysts expect the economy could shrink in the fourth quarter as the effect of the sales tax hike filters through.

Gross domestic product (GDP) is expected to have risen an annualized 0.8% in July-September after a downwardly revised 1.3% in the second quarter, the poll of 15 economists showed.

That would translate into 0.2% growth on a quarter-on-quarter basis, compared with a revised 0.3% in the April-June quarter, according to the poll.

“Private consumption helped the economy but economic growth was likely limited as exports remained weak and firms reined in their factory output operation,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

Private consumption, which accounts for about 60 percent of GDP, was seen rising 0.6% for the quarter, the same rate of growth as in the second quarter, the poll showed.

Capital spending likely rose 0.9% in the third quarter after a 0.2% gain in April-June, it found.

“Firms’ capital spending stance has become slightly cautious on weak exports and factory output, but spending demand for labor-saving and automation due to a labor shortage remained strong,” said Yasunari Tanaka, researcher at Mitsubishi Research Institute.

External demand - or exports minus imports - likely subtracted 0.1 percentage point from growth in the third quarter, the poll showed. In the second quarter, it subtracted 0.3 percentage point from growth.

The Cabinet Office will publish GDP data on Nov. 14 at 8:50 a.m. Japan time (2350 GMT, Nov. 13).

Consumer confidence in October improved for the first time in 23 months but the level remained low, data by the Cabinet office showed last month.

Japan rolled out a twice-delayed increase in the sales tax to 10% from 8% on Oct. 1, a move considered critical for fixing the country’s tattered finances but that could tip the economy into recession by dampening consumer sentiment.

The Bank of Japan kept monetary policy steady last month but gave the strongest signal to date that it may cut interest rates in the near future, underscoring its concerns that overseas risks could derail a fragile economic recovery.

Reporting by Kaori Kaneko; Editing by Jacqueline Wong

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