Japan's gross domestic product for the July-September quarter, the second in fiscal 1997 (April 1997 to March 1998), grew by a disappointing 0.8% in real terms from the previous quarter, or at an annual rate of 3.1%. The Economic Planning Agency noted that these figures confirmed that the economy is having trouble climbing out of the hole created by plummeting consumption following the April 1 hike in the consumption tax, which shrank the GDP by an annualized 10.6% in the fiscal year's first quarter.

Although personal consumption, which accounts for some six-tenths of GDP, did rebound 1.6% from the April-June quarter (which was in turn a 5.3% drop from the last quarter of fiscal 1996), it continues to record negative growth in year-on-year comparison, as shown in department-store sales and other figures.

The EPA, recognizing that this stagnation in personal consumption has continued longer than expected, noted that Japan could not yet rely on an upswing in consumption to get its economy back on track.

Private plant and equipment investment marked an encouraging 1.6% quarterly growth, but net exports (exports minus imports) shrank by 6.6% from the previous quarter. Private housing investment, meanwhile, plummeted 10.5%, its third straight quarterly decline.

The contribution of domestic demand to the quarterly GDP marked 0.9 points, an improvement from the minus 3.8 points of the April-June period. Contribution from the external demand component, however, marked minus 0.1 points--its first negative figure in five quarters.

	1996			1997
	II	III	IV	I	II	III
Real GDP	-0.3	-0.4	1.1	2.0	-2.8	0.8
Personal consumption	-1.0	0.2	0.9	4.0	-5.3	1.6
Private housing investment	5.9	1.0	2.5	-5.1	-10.6	-10.5
Private plant and equipment investment	1.4	2.9	2.9	1.2	-1.7	1.6
Increase in private inventories	-48.1	-34.5	-70.0	-86.9	4725.0	4.1
Government consumption	0.1	0.2	1.0	-0.9	-0.9	0.7
Government investment	2.1	-12.6	-5.2	-3.2	0.5	1.3
Increase in public inventories	-58.3	-64.0	-37.5	309.0	-29.5	-65.5
Net exports of goods and services	-82.0	562.4	110.2	18.3	127.5	-6.6
Exports of goods and services	0.1	2.4	4.8	1.4	5.8	-1.3
Imports of goods and services	1.8	0.1	2.0	0.5	-2.3	-0.4

Ministry of Foreign Affairs

Japan Information Network

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