Japan’s economy contracted at a slower-than-expected pace in the final quarter of 2015, declining 0.3% in real terms to leave the annualised rate at -1.1%.
The annual figure, an improvement on the 1.4% contraction reported previously, topped expectations for a deeper decline of 1.5%.
In five of the past nine quarters, economic growth in the nation has now contracted.
According to the Cabinet Office, the modest upward revision was driven by a smaller decline in private demand driven by an upward revision to private inventory levels.
Over the quarter, domestic demand lopped 0.5 percentage points (ppts) off growth, led by a steep 0.9% decline in private consumption. This was partially offset by a 1.5% increase in business investment, something that added 0.2ppts to GDP, while private inventories were revised up from a decline of 0.1ppts to flat.
Public demand came in flat while net exports added 0.1ppts to the final GDP figure.
While the small upwards revision offers some consolation to Japanese policymakers, recent economic data outside of the labour market has been hardly stellar, suggesting that the weakness in Q4 2015 may have extended into the current quarter.
“It’s better than expected but this doesn’t change the whole picture of Japan’s anaemic recovery,” Takashi Shiono, an economist at Credit Suisse Group told Bloomberg. “I expect some rebound this quarter but it’s not going to be an impressive one.”
In an attempt to break the cycle of deflation and tepid economic growth that has plagued the nation for over a quarter of a century, the Bank of Japan has unleashed an unprecedented wave of monetary policy stimulus in recent years to help bolster domestic demand.
However, that success hasn’t translated into actual economic growth.
Despite its checkered track record on that front, it is becoming increasingly likely that the Bank of Japan will add to existing monetary policy easing in the period ahead, perhaps as soon as this month.
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