Japan’s economy shrinks faster than expected in Q3 .
As many analysts expected the world’s third-largest economy to recover in the quarter following the easing of coronavirus restrictions, deteriorating global production data increases export risks, on which Japan is heavily dependent.
“The contraction was much larger than expected due to supply chain constraints, which hit car production hard but also cost of capital,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.
“We expect the economy to recover this quarter, but the pace of recovery will be slow, as consumption did not start well even after the easing of restrictions on COVID-19 in late September,” he said.
Japan’s economy shrank 3% year-on-year in the July-September quarter, following a revised 1.5% increase in the first quarter, as preliminary data on GDP showed today.
These data show a greater deterioration than the average market estimate, which expected a contraction of 0.8%.
Japan’s weak GDP contrasts with the more positive trend of GDP in other developed economies, such as the US, where GDP grew by 2% in the third quarter after strong and accumulated product demand.
In China, industrial production and retail sales rose sharply in October, as data became known today, despite supply chain shortages and new restrictions on the spread of COVID-19.
At quarterly level, GDP decreased by 0.8% compared to market estimates for a decrease of 0.2%.
Some analysts point out that Japan’s significant dependence on the automotive industry meant that its economy was more vulnerable to disruptions to trade than other countries.
Shinichiro Kabayashi, chief economist at Mitsubishi UFJ Research and Consulting, said automakers make up a large percentage of Japan’s industrial sector, with subcontractors directly affected on a large scale.
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