Japan's economy grows annualized 1.9 pc in Q2

Mae Love
August 12, 2018

The country's big automakers, including Toyota, Nissan and Honda, are anxious about US President Donald Trump's threats to impose tariffs on auto imports.

In terms of real gross domestic product, meaning the total value of goods and services produced in the country adjusted for inflation, economic growth equates to a 0.5 percent expansion from the previous quarter, the Cabinet Office said.

The outlook for trade is a looming uncertainty, given the heavy reliance of Japanese manufacturers on demand from factories in China. But growth has remained weaker than hoped for.

Private consumption, which accounts for some 60% of Japan's GDP, rose 0.7%, recovering from a 0.2% decline in the first quarter.

Mizuho Research Institute senior economist Kentaro Arita said that the USA tariffs could cost Japan's auto industry as much as US$10 billion.

On an annualized basis, GDP was up 1.9 percent - again topping expectations for 1.4 percent following the 0.6 percent contraction in the previous three months. "It's a question of how much".

Many industries face labour shortages due to a rapidly ageing population. "The signs point to a slower pace of overall growth".

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Chart showing quarterly growth in Japan.

The external environment, however, was less favourable, even without any direct impact to exports from increasing trade hostilities between the United States and its major trading partners over the quarter.

Top U.S. and Japanese trade officials said they better understood each other's positions after talks on Thursday, while Tokyo appeared to stick to its position of avoiding a bilateral free-trade agreement.

Marcel Thieliant, senior Japan economist at Capital Economics, said that growth similar to the second quarter could be penciled in for the third and fourth quarters, but also warned about "downside" risks from trade disputes.

Trump is trying to re-negotiate the USA trade relationship with other countries to curb practices which he says are unfair to US companies and workers.

Japan has repeatedly said it prefers multilateral trade negotiations, which put it at loggerheads with the United States.

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