Japan’s economy posted less than expected growth in the July-September quarter, but is expected to ramp up in the current quarter with consumer spending on the rise to offset the tax rise next year. However, business investment was much below the market forecasts, reports Reuters.

Mixed numbers

According to the data, July September quarter witnessed an increase of 0.5% compared to an estimated 0.4% increase, and 0.9% growth in April-June.

Annualized third quarter growth was recorded at 1.9%, which was above median forecast of 1.7%. Private consumption, which contributes around 60% in the growth of the economy, climbed 0.1% in July September, in line with the median estimate, and revised 0.6% growth in April-June affected by the decline in Japanese shares.

External demand came down 0.5 percentage point from GDP in July- September, which was more than the average estimate of 0.4% point.

Best run in three years

Japanese economy grew for the fourth straight quarter, which is a record over the past three years. Economists are of the opinion that consumption will rise on the back of shortage in the labor market and rising wages.

Retail sales is expected to grow prior to the increase of sales tax in April, and stimulus spending will act as a catalyst to the growth, which will be in line with the Prime minister’s Shinzo Abe efforts to bring self-sustaining growth and bring staggering 15 years of mild deflation to an end.

Growth in capital expenditure dropped 0.2% in July-September quarter, which was less than the average estimate of 0.8%, which shows that the companies are not willing to make more investment to ensure a sustained recovery.

Economist optimistic

Junko Nishioka, chief economist at RBS Securities, said that the economic growth is expected to get better in the last quarter of this fiscal. Nishioka added that even though the numbers are soft, there is no need to be pessimistic about the outlook.

“The government’s stimulus package is likely to help boost capital expenditure. The ball is in the government’s court so I don’t think the Bank of Japan will come under pressure for further monetary easing any time soon.”

Southeast Asia witnessed massive outflow of capital due to which the export declined, but economists are expecting the condition to improve in the next fiscal on account of recovery in oversees economy.