TOKYO (MNI) – Japan’s negative output gap — excess capacity vs.
slack demand — widened to 3.8% in the October-December quarter from a
revised 3.5% (preliminary 3.1%) in Q3, reflecting a temporary slump in
economic growth in Q4, Cabinet Office data released on Monday showed.
But the gap is expected to narrow again in the first quarter as the
economy is forecast to rebound by around 1.1% at an annualized pace,
above its potential growth rate, backed by overseas demand.
The economy shrank an annualized 1.1% in real terms in Q4, marking
the first contraction in five quarters, as it was hit by what appears to
be a temporary dip in consumer spending and slumping exports.
The Cabinet Office calculated the output gap on the assumption that
Japan’s potential economic growth rate is +0.4%.
The output gap, which influences prices with a lag of about 12
months, has been generally improving after hitting a revised -9.2% in Q1
of 2009. Core CPI (excluding fresh food) has also been improving after
marking a record drop of -2.3% y/y in Q3 of 2009.
The Q4 output gap will be reviewed next month after revised (second
preliminary) GDP for the quarter is released on Mar. 10.
tokyo@marketnews.com
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