Japan’s July-September GDP growth accelerates to 2.2%

Japan's economic growth unexpectedly accelerated in the July-September period, expanding for a third straight quarter as exports recovered, even as sagging consumer prices and declining living standards cast doubt on hopes for a sustainable economic recovery.

The world's third-largest economy expanded at an annual rate of 2.2 per cent in the third quarter of 2016 on the back of a 0.7 per cent increase in April-June, preliminary estimates released by the Cabinet Office showed.

The growth rate more than doubled compared with the second quarter and for a country like Japan where growth has averaged less than 1 per cent over the last two decades, the latest GDP figures could be seen as high.

For Japan, which has been struggling to lift a lackluster economic growth rate and escape the trap of deflation, there is no certainty, however, that this will create a lasting growth momentum.

Much of this growth came from exports which grew 8.1 per cent during the quarter and accounted for the largest share of the increased output, according to the Cabinet Office data.

Other important parts of the economy barely moved - domestic consumer spending, the biggest component of GDP, rose just 0.2 per cent and business investment increased by a meager 0.1 per cent.

By contrast, exports were boosted by improved demand overseas, easing of China's slowdown and the weakness of the yen in August.

The Japanese currency, which had been gaining strength through the year against both the dollar and the euro has eased off again since August.

Growth, however, was not dependent on the government's stimulus spending, which was almost nil during the July-September 2016 quarter. There will also be no stimulus until at least next year when the proposed 28 trillion yen ($260 billion) programme announced in September kicks in.

And, despite Prime Minister Shinzo Abe's stimulus programmes during his nearly four years in office, public investment actually declined in the last quarter.