Japan's economic growth handily beat expectations in the July-September period, expanding for a third straight quarter as exports recovered. But, as Sonia Legg reports, weak domestic activity cast doubt on hopes for a sustainable economic recovery.
Its talent for exporting goods kept Japan's economy surprisingly buoyant. It's beaten expectations for a third straight quarter, expanding at 2.2 per cent, well over double the expected rate. (SOUNDBITE) (Japanese) JAPAN'S CHIEF CABINET SECRETARY, YOSHIHIDE SUGA, SAYING: "Japan's economy continues to be on the path of moderate recovery based on improvements in employment and incomes, even though they're seen as weak." The Bank of Japan's Governor also acknowledged private consumption was "somewhat lacking". (SOUNDBITE) (English) CHIEF MARKET ANALYST AT CMC MARKETS, MICHAEL HEWSON, SAYING: "Demand still remains very weak and ultimately prices also remain fairly subdued so although the headline number it is encouraging but it doesn't give me any indication that the Japanese economy is in any better shape than it was three to six months ago." Weak domestic demand also means private companies are reluctant to raise prices. That makes an inflation target of 2 per cent a tall order, although few expect further stimulus any time soon. (SOUNDBITE) (English) CHIEF MARKET ANALYST AT CMC MARKETS, MICHAEL HEWSON, SAYING: "I think what they did in September they are likely to keep a watching brief on. Certainly they will want to try and increase the slope in the yield curve and I think they will be broadly successful in that only because global bond markets across the world are pretty much doing the same thing. But ultimately what Japan needs is significant domestic reform." The BoJ sees wage negotiations next year as crucial, and is calling on firms to boost pay packets. With an export-reliant economy he's also got an eye firmly on the yen. At one point last week the dollar sank as low as 101 as investors sought safe havens after Trump's victory. To the relief of Japan's policymakers it didn't stay there.