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Senior Economist Alvin Liew at UOB Group gave his opinion on the latest Japanese GDP figures for the July-September period.

Key Quotes

“Japan’s 3Q 2019 GDP growth slowed visibly to 0.1% q/q (0.2% annualized rate) from 0.4% q/q (1.8% annualized rate) in 2Q as the growth pace of both private and public demand slowed but still managed to offset the drag from net exports and private inventories”.

“Despite the underwhelming 3Q GDP outcome, it was still much better than our expectations (-1.1% q/q). As such, we revise our 2019 GDP growth forecast for Japan higher to 0.7% (from 0.5% previously). We still expect trade headwinds and more importantly, a collapse of private spending in 4Q 2019 and extending into 2020, will consequently drive Japan into a recession next year. And notwithstanding the Tokyo Olympics next year, we believe that Japan’s GDP will contract by 0.8% in 2020″.

“The next revision of 3Q 2019 GDP (the 2nd preliminary estimate) will be on 9 Dec 2019. This bears watching as a sizeable downward revision to any major GDP component such as business spending, could swing 3Q GDP into a sequential q/q contraction and that may put Japan at risk of a technical recession if 4Q GDP contracts as well”.