Japan’s economic growth likely decelerated significantly in Q3, impacted by weak consumption and reduced capital investment, according to a Reuters poll. Analysts forecast Japan's inflation-adjusted GDP to have grown at an annualized rate of 0.7%, a sharp drop from the 2.9% growth in Q2. This slowdown could affect the Bank of Japan’s (BOJ) intentions for future rate hikes.
Private consumption, which constitutes over half of Japan's GDP, is projected to have grown just 0.2%, down from the 0.9% increase in Q2. Analysts attribute this to elevated prices diminishing wage gains, placing a strain on household spending and raising concerns among policymakers. Capital expenditure is expected to have declined by 0.2% following a 0.8% rise in the previous quarter. Factors such as a slowdown in global markets, disruptions due to a typhoon, and labor shortages have also impacted manufacturing investment and supply chain.
Net external demand likely contributed 0.1% to GDP, reversing a negative impact from the previous quarter. Despite the BOJ’s recent decision to maintain low interest rates, subdued demand could hinder its plans to phase out a decade of monetary easing.
Japan’s Cabinet Office will release Q3 GDP data on November 15, while consumer spending data for September is expected on November 8. Projections indicate household spending continued to decline, with a 2.1% year-on-year drop expected in September after a 1.9% decrease in August, illustrating ongoing reluctance among consumers to increase spending amid high living costs.