Japan's economy likely contracted in Q4 on consumer weakness

TOKYO: Japan's economy likely contracted in the final quarter of last year, a Reuters poll showed on Friday, having dodged recession in the previous quarter and dragged down by weakness in consumer spending and firms' capital expenditure.

The economy is expected to have shrunk at an annualised rate of 1.2 percent in October-December, the poll of 19 analysts showed.

That follows a 1.0 percent expansion in July-September and a 0.5 percent of contraction in April-June.

The expected annualised figure would translate into a quarterly contraction of 0.3 percent, according to the poll.

"Domestic demand probably sharply declined, notably consumer spending," said Hidenobu Tokuda, senior economist at Mizuho Research Institute in the survey.

External demand contribution continued to stay positive in the fourth quarter but it was not strong enough to offset falls in domestic demand, he said.

"We expect the economy will return to a moderate recovery from January-March," Tokuda said. "But we need to pay attention to downside risks to consumer spending and exports due to the yen's appreciation and stock falls since early this year, and firms could postpone their capex due to growing uncertainties."

Private consumption, which accounts for about 60 percent of GDP, likely fell 0.6 percent in the fourth quarter, the poll showed, having grown 0.4 percent in the previous quarter.

Capital spending probably slipped 0.2 percent quarter-on-quarter in October-December after it grew 0.6 percent in the previous quarter.

External demand is expected to add 0.2 percentage point to the economy in the quarter compared with a 0.1 percentage point contribution in the third-quarter. The Cabinet Office will release GDP data on Feb. 15 at 8:50 a.m. JST (2350 GMT Feb. 14).

The poll found the current account balance likely posted a surplus of 987.0 billion yen ($8.46 billion) in December due to a decline in imports from the falling oil price.

This would mark 18 straight months of surplus.

The corporate goods price index (CGPI), which measures the prices companies charge each other for their goods and service, likely fell 2.8 in percent in the year to January, the poll showed, after a 3.4 percent drop in December.

The finance ministry will release the current account balance at 8:50 a.m. on Monday and the Bank of Japan announces CGPI on Wednesday.