Economy Japan

Economy Japan

The Japanese government have announced that the nation's economy grew 0.3% during the period from July to September. This figure is actually down from the initial estimation of 0.5%. What this revised percentage equates to is an annual growth rate of 1.1%, considerably lower than the initial projection of 1.9%.

The far eastern economic powerhouse has been suffering years of economic stagnation, particularly when set against the boom years of the 1990s. In order to combat this deterioration, Japan has unveiled various measures aimed to revive their economy as aggressively as possible.

According to analysts many of these steps are already beginning to have considerable impact on Japan's economy. Indeed, it seems likely that the nation's financial fortunes look set to pick up the pace in the next quarter, despite that downward revision.

Yasuo Yamamoto, a senior economist at Tokyo's Mizuho Research Institute, commented: “there are already signs that exports and capital expenditure are recovering so I am not pessimistic about the outlook. Economic growth should start accelerating again in the fourth quarter as domestic demand strengthens before the sales tax increase”.

Last October the Japanese prime minister, Shinzo Abe, stated the government would raise the rate of sales tax from 5% to 8% from 1 April 2014. Economists have put forward the case that such an increase is necessary to help reduce the nation's overall public debt – currently standing at around 230% of Japan's gross domestic product. This figure actually means that Japan has the largest such debt amongst the major industrialised nations. These economic measures rarely pass without a counter argument; indeed there have been concerns raised that upping the sales tax rate might impinge of domestic demand.

The government has reacted to these fears, and in order to lessen the impact of the 3% rise in sales tax, a stimulus package has just been announced. This will see ¥5.5 trillion being injected into the market. Economic analysts have stated that this move is likely to neutralize any negative impact the rise in sales tax might have on the domestic market.