Japanese Growth Outstrips Australia

By Glenn Dyer | More Articles by Glenn Dyer

So how weak was Australia’s March quarter GDP?

Why, weaker than heavily indebted Japan where while they have full employment (thanks in part to a population which is shrinking remorselessly) and there’s no wage growth, weak retail sales but solid exports and investment.

In many ways, it’s similar to Australia’s current economic state, and yet Japan is at the moment traveling far better than we are.

That’s despite huge budget deficits and very high government debt and negative interest rates from the Bank of Japan.

Unemployment in April was 2.4%, more than half of Australia’s 5.2% rate in the same month.

The big saving grace is the still strong trade account and the inflow of returns from the government’s vast offshore investments in countries such as Australia where Dulux – the paint company – is being taken over by Nippon Paint.

On Monday Japan reported economic growth of 0.6% for the March quarter from the December quarter (up from 0.5%).

The annual rate was 2.2%, up from 2.1% in the first estimate and a 1.6% rate in the 4th quarter of 2018.

That means no more boasting from Scott Morrison and Josh Frydenberg about how Australia’s growth was outstripping other advanced economies. It’s not and we get another test of the economy’s position on Thursday with our May jobs report and unemployment rate.

The second estimate of March quarter growth in Japan showed capital spending rose 0.3% from the previous quarter, instead of the initially released 0.3% contraction.

But while a solid turnaround it was still much weaker than the 2.7% quarterly rise in the December quarter.

The revised figures reaffirmed that imports fell faster than exports in the first quarter, underlining rising pressure across the economy as consumers remain slow to spend.

Net exports – or exports minus imports – added 0.4 percentage point to growth, while domestic demand contributed 0.1 percentage point to GDP – both unchanged from the initial reading.

Private consumption though eased fell 0.1% in the first quarter from the previous three months, which was also unchanged from the preliminary reading.

Private or household consumption accounts for nearly 60% of gross domestic product (as in Australia).

In fact, Japan is probably in a stronger position for all its oceans of debt than Australia with low debt and deficits. Australia’s population rate is rising by around 1.7% a year (that’s growth in the labour force as well this year) which boosts growth (but not so much in the March quarter).

Japan’s population is shrinking, with the rate of decline quickening. The government last week revealed that on a preliminary basis, deaths exceeded births in 2018 by 444,085. Economists said it was the first time deaths had exceeded births by more than 400,000.

The number of deaths was 1,362,482, up 22,085 from the previous year, recording the highest since the end of World War II. The number of births was 918,397, down 27,668 from the previous year, marking the lowest since statistics began in 1899.

As a result, the natural decrease was the largest ever, increasing by 49,753 from 2017. The number of marriages reached a postwar low of 586,438 in 2018, down 20,428 from the previous year.

With population, a negative for the economy and household consumption (and GDP) the country’s performance is actually far stronger than Australia’s at the moment.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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