Fears for Japan's economy
Sunday, 9 December 2007
David Pilling in Tokyo and Daniel Pimlott in New York, FT Syndication Service
Concern that Japan's economy could be heading for another lull or worse sharpened Friday when growth for the third quarter was sharply revised down to an annualised 1.5 per cent from the original estimate of 2.6 per cent.
Japan's economic output data are notoriously volatile, but the downward revision matches an emerging consensus that the economy is faltering and that things could get worse before they get better.
Together with the June quarter, when the economy contracted, Japanese gross domestic product grew by just 0.1 per cent in the first half of the fiscal year, or at an annualised 0.3 per cent.
The revision came as data revealed that the US economy continued to add jobs last month, although employment fell in construction, real estate and financial services, suggesting that the housing downturn and credit crisis remain contained.
The rise in jobs signals a slowing but not collapsing economy, reducing pressure on the US Federal Reserve to drastically cut interest rates when it meets next week.
The numbers of employed people in the US rose by 94,000 in November, following a 170,000 surge in October. The unemployment rate remained at 4.7 per cent. Economists had expected 80,000 jobs to be created and unemployment to rise to 4.8 per cent, after recent reports had pointed to a deteriorating jobs environment.
The Japanese downturn heightened worries over the release next week of the Bank of Japan's widely followed Tankan survey of corporate sentiment.
Goldman Sachs said that it expected this to show deteriorating business confidence and a widening disparity between big business and small enterprises less able to cope with rising cost of raw materials, including oil.
Mamoru Yamazaki, economist at Royal Bank of Scotland, said: "Profits have been worse than we thought and many companies, especially smaller ones, will become more cautious about increasing wages and capital spending."
In recent months, economists have been revising down growth estimates for the year to March 2008.,
In the latest revision, output grew at 0.4 per cent quarter on quarter in the third quarter. Net exports pushed GDP up 0.5 points, with the domestic economy making a negative contribution of 0.1 point. That underlined Japan's continued reliance on exports, leaving it vulnerable to an external downturn.
Mr Yamazaki said that the third-quarter export performance was "unsustainable" and that exports would slow along with global demand.
The domestic economy is not likely to fare any better, partly because of the effects of stricter building codes, which pushed housing starts down 45 per cent in September and 35 per cent in October.
Concern that Japan's economy could be heading for another lull or worse sharpened Friday when growth for the third quarter was sharply revised down to an annualised 1.5 per cent from the original estimate of 2.6 per cent.
Japan's economic output data are notoriously volatile, but the downward revision matches an emerging consensus that the economy is faltering and that things could get worse before they get better.
Together with the June quarter, when the economy contracted, Japanese gross domestic product grew by just 0.1 per cent in the first half of the fiscal year, or at an annualised 0.3 per cent.
The revision came as data revealed that the US economy continued to add jobs last month, although employment fell in construction, real estate and financial services, suggesting that the housing downturn and credit crisis remain contained.
The rise in jobs signals a slowing but not collapsing economy, reducing pressure on the US Federal Reserve to drastically cut interest rates when it meets next week.
The numbers of employed people in the US rose by 94,000 in November, following a 170,000 surge in October. The unemployment rate remained at 4.7 per cent. Economists had expected 80,000 jobs to be created and unemployment to rise to 4.8 per cent, after recent reports had pointed to a deteriorating jobs environment.
The Japanese downturn heightened worries over the release next week of the Bank of Japan's widely followed Tankan survey of corporate sentiment.
Goldman Sachs said that it expected this to show deteriorating business confidence and a widening disparity between big business and small enterprises less able to cope with rising cost of raw materials, including oil.
Mamoru Yamazaki, economist at Royal Bank of Scotland, said: "Profits have been worse than we thought and many companies, especially smaller ones, will become more cautious about increasing wages and capital spending."
In recent months, economists have been revising down growth estimates for the year to March 2008.,
In the latest revision, output grew at 0.4 per cent quarter on quarter in the third quarter. Net exports pushed GDP up 0.5 points, with the domestic economy making a negative contribution of 0.1 point. That underlined Japan's continued reliance on exports, leaving it vulnerable to an external downturn.
Mr Yamazaki said that the third-quarter export performance was "unsustainable" and that exports would slow along with global demand.
The domestic economy is not likely to fare any better, partly because of the effects of stricter building codes, which pushed housing starts down 45 per cent in September and 35 per cent in October.