Japan Oct.-Dec. GDP Shrinks for 1st Time in 5 Qtrs.

Tokyo, Feb. 14 (Jiji Press)--Japan's gross domestic product in
October-December contracted for the first time in five quarters due to
sluggish consumption and a slump in exports, government data showed Monday.
In the third quarter of fiscal 2010, the country's seasonally adjusted
GDP shrank 0.3 pct from the previous quarter in price-adjusted real terms,
or 1.1 pct on an annualized basis, registering the first negative growth
since July-September 2009, the Cabinet Office said in a preliminary report.
In nominal terms, Japan's October-December GDP shrank 0.6 pct quarter on
quarter for annualized contraction of 2.5 pct, the Cabinet Office said.
Private spending suffered a setback after enjoying a major boost from
some temporary factors in the previous quarter including strong sales of
eco-friendly vehicles ahead of the Sept. 30 expiration of a government
subsidy program and robust demand for cigarettes before the Oct. 1 tax hike,
an official of the government agency said.
Exports declined after six straight quarters of growth as shipments to
the European market fared poorly due in part to the yen's appreciation,
according to the official.
"The latest GDP report confirmed that the Japanese economy was at a
standstill," Economic and Fiscal Policy Minister Kaoru Yosano told a press
conference.
"But there are signs of recovery, such as a bottoming out of automobile
production and sales," Yosano added. "Although some weakness could remain in
place, we expect the Japanese economy to pick up on the back of a global
economic recovery."
In October-December, private consumption, which accounts for more than 60
pct of Japan's GDP, dropped a real 0.7 pct quarter on quarter, falling for
the first time in two quarters.
The decline came after a 0.9 pct rise in July-September, when the
spending figure was boosted by temporary demand for eco-friendly vehicles
and cigarettes.
Last-minute buying of home electronics, especially television sets,
before the scaleback on Dec. 1 of a government incentive program for
energy-efficient electronics helped limit the overall spending fall in
October-December.
Corporate capital spending increased 0.9 pct, the fifth consecutive
expansion. Housing investment went up 3.0 pct, the second straight growth.
Exports shrank 0.7 pct, marking the first fall since January-March 2009,
reflecting sluggish shipments of automobiles and ships. Imports declined 0.1
pct, falling for the first time since April-June 2009.
Domestic demand made a 0.2-percentage-point negative contribution to the
quarter-on-quarter real GDP fall of 0.3 pct, while external demand, or
exports minus imports, made a 0.1-point negative contribution.
The GDP deflator, a comprehensive measure of price changes, dropped 0.4
pct from the previous quarter, extending its downward march to a third
quarter.
In calendar year 2010, Japan's GDP grew 3.9 pct from the previous year in
real terms, and 1.8 pct in nominal terms, the Cabinet Office said.
Japan's nominal GDP in 2010 came to 479,223.1 billion yen, or 5,474.2
billion dollars, falling below China's 5,878.6 billion dollars to be the
world's third biggest. Japan slipped to third place for the first time in 43
years.
Kyohei Morita, chief economist at Barclays Capital Japan Ltd., said
Japan's GDP will unlikely continues to shrink in the coming quarters.
"I expect Japan's real GDP to mark annualized growth of around 3 pct in
January-March and in April-June, led by exports, public investment and
inventories' build-up," Morita said.
"The latest GDP figures did not come out as bad as expected and thus
indicated that the Japanese economy stays on a recovery trend," said Hideki
Hayashi, global economist at Mizuho Securities Co.
But as the continued fall of the GDP deflator suggests that the country
remains stuck in deflation, the Bank of Japan's monetary easing policy will
likely remain intact, Hayashi said.
The Cabinet Office said Japan's real GDP would achieve the
government-projected 3.1 pct growth in fiscal 2010, which ends in March, if
it grows 0.5 pct in January-March.
The government is slated to announce revised October-December GDP data on
March 10.

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