Japan GDP grew at an annualized 6.0% in the July-September period. This spike of growth was expected as a rebound following for the March earthquake. It does not unfortunately shake off the poor long term GDP trend in Japan. Japan real, or price-adjusted, gross domestic product would increased at an annualized 5.9% from the previous quarter.
Japan 2nd Quarter GDP falls at annualized 2.1% with a nominal fall of 1.5% which indicates a persistent deflation at an annualized rate of -0.6%. After the great Tohoku earthquake this as not unexpected. GDP stagnation or fall is unfortunately predictable for the next quarters with the forecast tax hikes. Reconstruction spending on Tohoku will limit the fall or even spur little growth but not enough to take Japan out of economic stagnation. Population aging is the worse in developed country and there is not much to drive economic growth. Japan is after the US and Europe entering a de-industrialization phase without a powerful service sector to take over.
Yoshihiko Noda, has been elected on August 30th the 6th prime minister of Japan in 5 years.
What to expect? Not too much except an increase in the consumption tax to go from current 5% to 10% in the next few years. This is a nice way to create a bit of inflation of Japan an reign in the huge public deficit over 200% of GDP. Beside that, I doubt that he will have enough leadership to open Japanese market by signing free trade agreement. This would require to lower agricultural barriers and the farm lobby is too strong in Japan. Impact on our foreign consulting and outsourcing clients at JMC: not much! Business will be slow as usual.