Japan GDP -- very slow growth over the long term

15 Nov 2010 by Jim Fickett.

Over the last 17 years real GDP growth in Japan has averaged about 1%. The latest quarter saw annualized growth of 3.9%, but this was due to one-time government incentives and growth will likely slow again.

Today Japan reported GDP growth for the third quarter. Econompic provided a useful long-term, inflation-adjusted graph:

Econompic comments:

Longer term we see the remarkable fact that Japanese GDP in nominal terms is right where it was in Q3 1993 (yes 17 years ago), while real GDP is just 18% higher over that same time frame (less than 1% annualized growth).

The government data shows that, in the third quarter, GDP grew at an annual rate of 3.9%, driven to a considerable extent by household durable goods purchase growth at an annual rate of 26.3%. Bloomberg notes the contribution of a government automobile purchase incentive that was about to expire. So the rapid Q3 growth is unlikely to continue:

Consumption, accounting for about 60 percent of GDP, led the gain as households stepped up purchases of fuel-efficient cars ahead of the expiration of a subsidy program and as smokers stocked up before an Oct. 1 tobacco-tax rise. The yen’s climb to a 15-year high will probably damp growth this quarter as companies from Sharp Corp. to Nikon Corp. cut profit forecasts.

“Japan can’t be wild with joy over the stronger-than- expected GDP figure,” said Susumu Kato, chief economist for Japan in Tokyo at Credit Agricole CIB and CLSA. “There will be a huge payback in the fourth quarter as the waning effects of the government’s incentive programs and the impact of the yen’s gain should materialize.”