Japan's third quarter GDP was revised with a deeper-than-expected contraction due to slumps in private consumption and public investment.
On Wednesday (08/December), the Japanese Cabinet office released Japan's Final GDP data for the third quarter which fell 3.6 percent on an annual basis. This figure is lower than the initial GDP release which was only -3.0 percent. In fact, the Japanese economy grew 1.5 percent in the second quarter.
On a quarterly basis (Quarter-over-Quarter), Japan's GDP fell 0.9 percent, worse than forecasts for a 0.8 percent decline. The Japanese economy is contracting deeper and deeper due to the decline in private consumption. So far, this sector has contributed more than half of Japan's GDP.
Private spending shrank 1.3 percent in the third quarter due to COVID-19 restrictions imposed by the Japanese government in September. Meanwhile, public investment also slumped 2.0 percent, worse than the 1.5 percent drop in the initial estimate. Capital spending decreased by 2.3 percent, and the export sector, which has been Japan's mainstay, failed to make a significant contribution to the final third quarter GDP.
For information, Japan's export sector has been hit quite hard in the midst of various obstacles such as global supply chain bottlenecks to the scarcity of semi-conductor products. This has made Japan's automotive and engine exports plummet in recent months.
Market Prefers Wait and See
In general, the release of Japan's GDP Final data has been anticipated by the market so that it will not have a high impact on the movement of the Yen. At the time of writing, the USD/JPY pair is trading at around 113.53, not far from the daily Open area.
The movement of USD/JPY today is relatively calm and reflects the wait and see attitude of market participants ahead of the release of US inflation data. The inflation figure is expected to provide further clues regarding the outlook for the Fed's monetary policy, particularly regarding faster-than-expected interest rate hikes.
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