Japan’s Economy Boosts In Third Quarter

Japan's economy expanded more than forecast in the three months through September, with a rebound in exports compensating for weak spending by people and companies.

The Japan's economy beat expectations in the third quarter thanks to exports, according to government data. Good news for the Abe administration, though a slowdown is expected in the fourth quarter.

Japan’s economy contracted in the last three months of 2015, before bouncing back in January-March with a 0.5 percent rise quarter-on-quarter and 0.2 percent expansion in April-June.

The world’s third-largest economy expanded 0.5 percent on-quarter between July and September, and 2.2 percent gain on an annualised basis, the Cabinet Office said.

That easily beat market expectations for a 0.2 percent growth rate, or an annualised rate of 0.8 percent.

Mr. Abe has tried to lift growth with a combination of monetary and fiscal stimulus since taking power in late 2012, but growth has since been uneven. He recently introduced a new package of government spending and other stimulus measures.

Bank of Japan Governor Haruhiko Kuroda maintained his optimistic view of the economy, saying it was on track for a moderate expansion as exports and output rebounded thanks to an expected improvement in the global economy.

But he acknowledged that private consumption was "somewhat lacking momentum" and making some companies hesitant to raise the prices of their goods and services - potentially delaying achievement of the central bank's 2 percent inflation target.

"Risks to both economic activity and prices are skewed to the downside," Kuroda told business leaders on Monday in the central Japan city of Nagoya, stressing his resolve to ease again if the economy loses the momentum to hit his price goal.

Private consumption, which accounts for roughly 60 per cent of GDP, rose 0.1 per cent, unchanged from the second quarter, a sign the effects of Prime Minister Shinzo Abe's stimulus drive dubbed Abenomics are yet to spread to households due to tame wages.

Capital expenditure, a key component of GDP, was flat, following a 0.1 per cent decline in the second quarter, with worries about the global outlook and renewed yen gains weighing on business investment.

Net exports, or shipments less imports, added 0.5 percentage point to GDP, due to a bounce in exports from the prior quarter, and falling imports caused by yen gains, oil price declines and weak domestic demand. It marked the biggest contribution since April-June 2014.

"Consumption is barely there, and in capital expenditure there no growth ... so Japan is relying very much on the outside," Takuji Okubo, chief economist of Japan Macro Advisers, told the BBC.

The Bank of Japan has for more than three years embarked on a bond-buying stimulus programme to try to keep interest rates ultra-low and increase borrowing and spending.

But the bank said it now expects to hit two percent inflation by March 2019 -- four years later than its original target.