Japan Forecast to See "Zero Growth" in Q3... Downward Pressure from Surging Crude Oil Imports

Nikkei Survey of 10 Private Sector Economists

Experts predict that Japan's economy will effectively experience 'zero growth' in the third quarter.

According to a survey conducted by Nikkei on the 9th with ten private-sector economists, Japan's Gross Domestic Product (GDP) for the third quarter of this year (July to September), when adjusted for inflation, is expected to remain flat, both quarter-on-quarter and on an annualized basis.

This survey follows the previous day's upward revision of preliminary figures by the Japanese Cabinet Office. The Cabinet Office raised the second quarter real GDP growth rate, initially reported as 0.3%, to 0.4%. On an annualized basis, the figure was revised from 1.1% (preliminary) to 1.4%.

On Friday the 4th, a citizen stands in front of an electronic billboard of a securities firm in Tokyo. Tokyo (Japan) = AP Yonhap News.

Based on this recent revision, the economists’ forecasts for third-quarter growth, on an annualized basis, ranged from an increase of 0.4% to a decrease of 1.1%. However, according to their average estimate, Japan’s economic growth is expected to hover near zero percent, effectively indicating zero growth.

Nikkei identified the main reason as increased imports resulting from alternative crude oil procurement. In the second quarter, instability in the Middle East disrupted the Strait of Hormuz, leading to unstable crude oil supply. Experts analyzed that this had a temporary positive effect on GDP. During this period, imports decreased by 1.7%.

However, Nikkei explained that the Japanese government’s efforts to secure alternative supplies, due to factors such as a shortage of naphtha, have recently led to a recovery in crude oil import volumes. According to preliminary statistics on oil imports, Japan’s crude oil imports in July increased by 17% compared to the same month the previous year. As a result, experts predict that imports will increase by 2.0% quarter-on-quarter.

In addition, the sluggish recovery in consumer spending, which drives domestic demand, has also been cited as a cause. Although real wages have maintained year-over-year growth, rising prices for food and beverages as well as electricity and gas fees in the autumn are expected to act as a drag on the recovery of consumption. Takayuki Miyajima, a senior economist at Sony Financial Group, told the Nikkei, “Even if the actual income environment improves, it will likely be difficult to translate that into consumer spending.”

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