Japan’s economic expansion proved to be better than first calculated during the third quarter of 2019; however, this better-than-expected performance does not reflect the impact of October’s increase in consumption tax; in fact, consumer spending fell by 5.1% year on year during October, posting its first decline for 11 months.
- Confidence amongst Japanese manufacturers deteriorated
- Japan announced a stimulus package to support economic growth
- Australia’s Q3 economic growth was disappointing
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Japan’s economic expansion proved to be better than first calculated during the third quarter of 2019. Growth was boosted by strong capital expenditure and private consumption which helped to mitigate the impact of weaker export activity. The country’s economy grew at an annualised rate of 1.8% during the period, compared with an earlier estimate of only 0.2%. However, this better-than-expected performance does not reflect the impact of October’s increase in consumption tax; in fact, consumer spending fell by 5.1% year on year during October, posting its first decline for 11 months.
"Japan’s Cabinet approved a fiscal stimulus package worth over 13 trillion yen”
The Nikkei 225 Index rose by 1.6% during December, but posted an annual increase of 18.2% over 2019. The broader-based Topix Index rose by 1.3% during the month and by 15.2% during the year, while medium-sized Japanese companies – represented by the TSE Second Section Index – climbed by 0.5% during December and by 16.6% over 2019.
The Bank of Japan’s (BoJ’s) quarterly Tankan survey found that confidence amongst large Japanese manufacturers deteriorated over the three months to December. Optimism fell to its lowest level for over six years, dampened by the ongoing trade conflict between the US and China and a wider global economic slowdown.
Japan’s Cabinet approved a fiscal stimulus package worth over 13 trillion yen during the month in a bid to shore up slowing economic activity. In a statement, Prime Minister Shinzo Abe said: “These economic measures are founded on the following three pillars: recovery and reconstruction from disasters … support to people seeking to overcome the downward risks of the economy, and investing in the future and maintaining and improving economic vitality … beyond next year’s Olympic and Paralympic Games”.
Elsewhere in the region, Australia’s third-quarter economic growth came in below the long-term average. While the country’s economy expanded at an annualised rate of 1.7% during the period, quarter-on-quarter growth slowed from 0.6% in the second quarter to 0.4%. Net exports made up 0.2% of this quarterly growth, but government spending was primarily responsible for the balance. This factor – alongside an increase in the household savings ratio to 4.8% – suggests that, despite tax cuts and an increase in household gross disposable income, Australian households are reluctant to spend. During December, the ASX All Ordinaries Index fell by 2.1% as devastating wildfires took their toll. Over 2019 as a whole, the index rose by 19.1%.
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