After a surprising spurt of strong growth in the first half of the year, the Japanese economy seems to be running out of steam as exports and consumer spending show signs of weakening.
Preliminary figures released this week indicated that growth in Japan's gross domestic product slowed to an annualised 1.9 per cent in the third quarter of 2013, down from 3.8 per cent in the second quarter. Growth had benefited from a bold monetary and fiscal push by Prime Minister Shinzo Abe's government to stimulate the economy.
The latest growth rate exceeded the average 1.6 per cent rate predicted by a Nikkei poll of economists, which also forecast growth to pick up somewhat in the fourth quarter. Still, the slowdown takes some of the shine off what had been a bright spot for an otherwise lacklustre year for the global economy. On a quarterly basis, the Japanese economy grew 0.5 per cent from the previous three months.
A slowing economy puts more pressure on Mr Abe to deliver on his much-promoted effort to improve Japan's long-term growth prospects. Recent delays on measures that would liberalise Japan's labour market or level the playing field for internet-based start-ups have raised questions over how committed Mr Abe remains to his proposals, especially when they encroach on powerful vested interests.
One reason for the recent slowdown was a drop in net exports. Ever since Japan was effectively forced to close its nuclear reactors after the Fukushima nuclear disaster in 2011, its energy import costs have soared, hurting its balance of trade. And exports to Asia slowed amid concerns over growth there.
In the three months to September, however, a surge in smartphone shipments to Japan also made a dent in its trade balance. The popularity in Japan of Apple's new iPhone 5S is likely behind that jump in shipments, Kyohei Morita, a Barclays chief economist, wrote in a report this week. Imports grew by 2.2 per cent, while exports fell 0.6 per cent, according to figures released by the government's cabinet office.
A drop in private consumption to just 0.1 per cent growth, down from 0.6 per cent in the previous quarter, was also behind the fall-off. A breather from the feverish rally on the Tokyo sharemarket in the first half of 2013 slowed luxury purchases. More worrisome, companies have been averse to raising wages despite profits rebounding, a reluctance Mr Abe complains about.