Investing.com-- Japan’s economy grew slightly more than expected in the third quarter, although growth slowed sharply from the prior quarter as steady private consumption only partially offset weakness in other sectors.
Japanese gross domestic product grew 0.9% year-on-year in the three months to September 30, government data showed on Friday. The reading was higher than Bloomberg estimates of 0.7%, but slowed sharply from the 2.2% seen in the prior quarter, which was also revised lower from a prior reading of 2.9%.
GDP grew 0.2% quarter-on-quarter, but slowed from the 0.5% in the prior quarter. The prior quarter’s reading was also slightly revised lower.
Private consumption as a component of GDP grew 0.9% q-o-q, much more than expectations of 0.2% and remaining steady from the prior month. Private spending was a key driver of the economy during the quarter, as a boost from bumper wage hikes seen earlier in the year continued to be felt across the country.
But other facets of the economy fared much worse, with external demand as a component of GDP falling 0.4% q-o-q, signaling weakness in Japanese exports.
Japan’s GDP price index also grew less than expected in the third quarter, indicating that inflation growth slowed after a brief pick-up earlier in the year.
Friday’s reading indicated that despite strong private consumption, the Japanese economy was still facing increased headwinds from weakness in other major sectors, especially exporters. Strength in the USD/JPY, through the third quarter, had also pressured local exporters, although the currency has since weakened substantially through October.
The middling GDP reading also raises some doubts over whether the Bank of Japan has enough headroom to raise interest rates further, especially in the face of heightened political uncertainty in the country after the Liberal Democratic Party’s recent election loss.
Any new government is likely to face more pressure to support the economy.