Japan’s private sector is losing faith in prime minister Shinzo Abe’s “shock and awe” tactics to revive the world’s third biggest economy after worrying figures today showed business investment flat-lining in the latest quarter
Stalling spending by companies between July and September — compared with 0.2% growth in initial estimates — was the chief culprit behind a sharp slowdown in growth for the economy overall during the quarter. Official figures today revised Japan’s annual pace of growth for the period down from 1.9% to 1.1% — equivalent to a quarterly pace of less than 0.3% and less than half the pace of the previous quarter. In the first two quarters of the year, Japan’s economy grew at an annual pace of 4.3% and 3.8% respectively.
Analysts said the lower business investment figures revealed doubts in the corporate world over Abe’s “Abenomics” strategy of economic revival involving public spending, a huge programme of monetary stimulus to weaken the yen and boost exports as well as longer-term reforms to boost competitiveness. “Companies are quite cautious about the outlook for the economy,” according to Tokyo-based SMBC Nikko Securities chief economist Junichi Makino. Abe (pictured) is due to hike VAT by three percentage points next April to help address Japan’s poor public finances, but this will put a further handbrake on growth.
Japan’s central bank has been pulling out all the stops to reflate an economy blighted by two decades of inflation and hit a 2% inflation target by 2015.
Prices have just begun to rise, but this has been mainly attributed to rising fuel costs and imports.
This has hindered efforts to boost exports as the yen’s weakness and rising energy costs has pushed Japan’s current account deficit to its highest level since January and the worst for an October since 1985.