The Japanese economy slowed down in the third quarter, with GDP growth declining to +0.2% q/q (-0.3 pp) – a pace that is expected to continue in the fourth quarter. However, it is worth highlighting the acceleration in private consumption (+0.9% q/q, +0.2 pp). Conversely, investment figures were negative, both for the residential component (-0.1% q/q, -1.5 pp) and the non-residential component (-0.2% q/q, -1.1 pp). The largest negative contribution (-0.4 pp) came from net exports, with growth in imports (+2.1% q/q) significantly exceeding the exports one (+0.4% q/q).
November's activity surveys have showed little change. The Jibun Bank PMI fell marginally in the manufacturing sector and is now in contraction territory for the fifth month in a row (49.0, -0.2 pp). On a positive note, the deterioration in the new export orders sub-component eased (49.2, +3.9 pp). Furthermore, in the services sector, activity edged back into expansion territory (50.2, +0.5 pp). Therefore, the improvement in the composite PMI remained modest (+0.2 pp to +49.8).
Although core inflation (which excludes unprocessed food) fell very slightly, by 0.1 pp to +2.3% y/y in October, prices started to rise again month-on-month (+0.6% m/m), after a fall in September due to the return of subsidised energy bills. Also of note is the acceleration in services prices in year-on-year terms for the first time since June (+1.5% y/y, +0.2 pp).
The situation on the wages front is mixed. On the one hand, in terms of scheduled contractual wages, nominal wage growth accelerated again in September, hitting a 30-year high of +2.5% y/y (+0.1 pp). On the other hand, the measure for full-time employees, which is considered to be more relevant for underlying pressures, remained stable at +2.7% y/y. Real wages fell again to -0.4% y/y. However, the unemployment rate fell to 2.4% (-0.1 pp), which suggests a tight labour market that will help to support wages.
The Bank of Japan (BoJ) meeting on 30-31 October kept the uncollateralized overnight call rate unchanged, at +0.25%. The associated publication of the Q4 Outlook for Economic Activity and Prices reports slightly adjusted forecasts by the members of the Monetary Policy Committee for growth (+1.1% compared with +1.0% in Q3) and core inflation (+1.9% compared with +2.1% previously) for the 2025 fiscal year. This does not alter the BoJ's intention to continue hiking its key rate as per its central scenario.
Article completed on 25 November 2024