Japan's Revised Q3 GDP Shows Stronger Growth Driven by Capital Investment and Exports

TOKYO - Japan's economy has shown stronger growth in the third quarter of 2023 than previously estimated. This growth is attributed to upward revisions in capital investment and exports.

According to revised data from the Cabinet Office, the gross domestic product (GDP) rose at an annualized rate of 1.2% for the three-month period ending in September. This is an improvement over both the economists' median forecast and the initial estimate of 0.9% growth.

The revised figures indicate that the economy experienced a quarter-on-quarter growth of 0.3% when adjusted for prices, compared to a preliminary growth figure of 0.2% released on November 15.

While the increase in domestic consumption is a positive signal for policymakers, there is still some uncertainty surrounding the economy's recovery. This uncertainty has been influenced by concerns regarding U.S. President-elect Donald Trump's proposed tariffs and their potential impact on international trade.

Many economists remain skeptical about the possibility of increasing borrowing costs at this time, given the economy's still tentative recovery, which is reflected in recent weak household spending figures.

However, some analysts believe that the Bank of Japan (BOJ) could adjust interest rates as early as this month. They point to past instances where the BOJ made rate changes in March and July, even when faced with disappointing consumption data.

The capital expenditure component of Japan's GDP, which serves as an indicator of private demand strength, fell by 0.1% during the third quarter. This figure has been revised from an earlier estimate of a 0.2% decline, while economists had projected a slight increase of 0.1%.

In contrast, private consumption, which represents more than half of the Japanese economy, increased by 0.7%, although this is down from the preliminary figure of 0.9% growth.

On the external side, demand, calculated as exports minus imports, detracted 0.2 percentage points from GDP growth, compared to a 0.4 percentage point drag recorded in the initial reading. Meanwhile, domestic demand contributed positively with a 0.5 percentage point increase.

Japan, GDP, Economy