Japan economy grows 1.9 per cent in July-Sept, slowing despite strong housing, public spending

TOKYO – Japan’s economy slowed in the third quarter as consumer spending remained sluggish despite government efforts to energize growth with public works and lavish monetary stimulus.

The government said Thursday that the world’s third-largest economy grew an annualized 1.9 per cent in the July-September quarter, half the pace of the previous quarter. The annualized growth rate was 3.8 per cent in April-June and 4.3 per cent in the first quarter.

Prime Minister Shinzo Abe is trying to end two decades of stagnation with his “Abenomics” prescription of easy money, a weak yen and longer-term reforms to boost competitiveness, but corporate investment and personal incomes have yet to rebound.

The preliminary data for the third quarter showed that the economy expanded 0.5 per cent from the second quarter, slowing from 0.6 per cent growth in April-June.

Nonetheless, top officials welcomed the latest figures as a sign Japan’s economy is on its way out of deflation, as sustained falling prices that are a symptom of economic decline are known.

“We believe domestic demand is stable and the economy continues to improve,” Economy Minister Akira Amari said in a statement.

He said emergency economic measures lifted public works investment, while low interest rates and improved confidence encouraged purchases of new homes.

Consumer spending is expected to moderately increase ahead of a 3 percentage point sales tax increase to 8 per cent in April, he said.

The government will push measures to ensure growth in corporate profits and investment which leads to salary increases and more employment opportunities to “ensure the path out of deflation and economic recovery.”