Following Decline, Can Japan Get Back on Track?

Japan Prime Minister Shinzo Abe has recently reshuffled his cabinet in order to boost the economy - will this be enough to stave off another recession?

Andy Brunner 13 October, 2015 | 10:15AM

The last few months have seen a near continuous diet of disappointing data and downward revisions to growth forecasts. The results tend to suggest flat GDP in the third quarter and indeed, JP Morgan have lowered their forecast to -1.0% q/q annualised from +0.8% previously.

Outlook

Third quarter GDP estimates plunged during September with most now around zero although, as noted earlier, JP Morgan is forecasting a contraction of 1% quarter on quarter annualised. Following the decline in the second quarter Japan would be back in technical recession, albeit an acceleration is expected in the last three months of the year.

Improving labour and income conditions should at least support household spending, although private business investment may grow only modestly while exports look set to remain weak. Overall, the decline in Q2 and Q3 should be temporary rather than be the start of a real as opposed to a technical recession.

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About Author

Andy Brunner

Andy Brunner  is Head of Investment Strategy, Morningstar UK

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