Japan Revises Q3 GDP Higher Driven by Capital Expenditure and Exports

TOKYO (Reuters) - Japan's economy has shown stronger growth in the third quarter of 2023 than previously estimated, largely due to adjustments in capital investment and exports.

According to revised data released by the Cabinet Office, the country’s gross domestic product (GDP) rose at an annualized rate of 1.2% in the three months ending September, surpassing both economists' median forecasts and the initial estimate of 0.9% growth.

This adjustment reflects a quarter-on-quarter growth of 0.3%, revised from an earlier forecast of 0.2% issued on November 15.

Such an increase in domestic demand is a positive sign for policymakers; however, the Bank of Japan (BOJ) may view the ongoing recovery differently due to uncertainties surrounding potential tariffs proposed by U.S. President-elect Donald Trump.

While there is some skepticism among economists regarding the feasibility of raising borrowing costs amid indications of a tentative economic recovery, recent household spending data remains sluggish.

Conversely, some experts believe the BOJ could consider rate adjustments as early as this month, pointing to past instances in March and July when the bank acted despite weak consumption indicators.

Notably, the capital expenditure component of GDP, which measures private sector demand, was slightly revised. It showed a decrease of 0.1% in the third quarter, an improvement from the initial estimate that reported a 0.2% decline, despite economists predicting a 0.1% increase.

Meanwhile, private consumption accounts for over half of Japan's economic output and rose by 0.7%, a decrease from the preliminary estimate of 0.9% growth.

On the trade side, external demand—calculated as exports minus imports—detracted 0.2 percentage points from GDP growth, an adjustment from the preliminary report showing a decline of 0.4 percentage points. Domestic demand, however, contributed 0.5 percentage points to overall growth.

Japan, GDP, Economy