Prime Minister Sinzo Abr - Photo by Japan Government

JAKARTA (TheInsiderStories) – Japan’ economy bounce back 0.3 percent in the last quarter (4Q) of 2018 compared to previous quarter, as business and consumer spending recovered from the impact of natural disasters, the Cabinet Office said on Thursday (02/14).

On a yearly basis, the nation’ economy climbed 1.4 percent after sinking 2.5 percent in the third quarter of last year. Nominal gross domestic products GDP was up 0.3 percent on quarter, following the 0.7 percent drop in 3Q of 2018.

In September a large earthquake triggered a blackout in the northern island of Hokkaido, which followed severe typhoons that damaged airports and transport infrastructure in western Japan. But, businesses were quick to resume normal after these disasters.

Real exports rose 0.9 percent from the previous quarter, the fastest growth in a year. Despite the increase in shipments, economists remain concerned that exports will weaken this year if the United States (US) and China do not resolve their trade dispute.

Trade frictions and a proposed sales tax hike are expected to hinder growth in 2019. Its means weaker exports. Some observer rated, Japan’ overall growth in this year won’t be as quick as last year or the year prior.

The office noted, capital expenditure was the biggest driver of growth during 4Q 2018, rising 2.4 percent as companies spent on manufacturing equipment and heavy construction machinery. That compares with as 2.7 percent contraction in the previous quarter, a smaller fall than initially estimated. Capital expenditure was expected to rise 1.8 percent.

While, Private consumption, which accounts for about 60 percent of GDP, was the second-biggest driver of growth. Consumption rose 0.6 percent in the last three months, less than the 0.8 percent increase expected and followed a 0.2 decline in the previous quarter.

External demand shaved 0.3 percentage point of GDP, less than the estimate of minus 0.4 percent. A breakdown of the data showed a 2.7 percent jump in imports due to increased shipments of mobile phones and clothes from overseas more than offset the increase in exports.

Despite the rise in exports, the trade war between the US and China, the world’s two largest economies, is seen as a major risk for Japan’ exports of car parts, electronics, and heavy machinery to China, which are used to make finished goods destined for the United States and other markets.

Furthermore, exports for January-March will deteriorate as shipments of information technology-related products to Asian nations, especially to China, will likely fall as the adverse impact from trade conflict appears. The economy for 1Q of 2019 is expected to grow amid the global economic slowdown.

Another risk is the Japanese government’ plan to raise the nationwide sales tax to 10 percent from 8 percent in October. Reportedly, the government needs the extra tax revenue to pay for rising welfare costs, but some policymakers and economists worry the tax hike could hit consumer spending and weaken sentiment.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com