The Japanese government said that against the background of sluggish consumer spending, it decided to revise down its view on the economy (for the first time in three months). The government also lowered its estimate of consumer spending (for the first time in two years), warning that a pickup seems to be "stalling."
The revision of forecasts followed GDP data, which showed last week that the economy contracted by 0.4% per annum in the 4th quarter after falling by 3.3% per annum in the 3rd quarter. Economists had expected GDP growth of 1.4% per annum. The figures also indicate that the country has lost its position as the world's third-largest economy to Germany. The latest figures were the first reading of Japan's economic growth for the 4th quarter and could still be revised.
"The economy is recovering moderately though it appears to be stalling recently," the government said, adding that the revised estimate of consumer spending was due to a pause in the recovery of spending on services and a drop in spending on short-term goods due to factors such as rising prices.
In addition, the government cut its view on industrial output for the first time since March 2023, citing the suspension of some auto production and shipments. The government said that although industrial production is expected to increase, "manufacturing activity has declined recently."