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Economy

Natural disasters and trade war seen slowing Japan economy

July-September slump is temporary, economists believe

A woman is buffeted by winds from Typhoon Jebi in Tokyo on Sept. 4. Japan has been hit by a series of natural disasters in recent months that are expected to weigh on the economy.   © Reuters

TOKYO -- Japan's economic growth is expected to slow in the July-September quarter due to a string of natural disasters this summer, as well as crossfire from the U.S.-China trade war.

Real gross domestic product grew by its fastest clip in nine quarters in April-June, an annualized 3%, according to revised figures released by the Cabinet Office on Monday. Capital investment and consumer spending helped lift the figure, which was revised upward by 1.1 points from the preliminary growth rate reported in August.

But real GDP is likely to increase just 0.1% in July-September, or an annualized 0.5%, according to the average projection by 16 private-sector economists. Their forecasts ranged from negative 0.6% to positive 1.1%.

The economists cited the flooding and landslides caused by heavy rains in western Japan in July, as well as the typhoon in the Kansai region and a magnitude-6.7 earthquake in Hokkaido, which hit within days of each other earlier this month.

While capital investment grew 3.1% in April-June, the figure is projected to rise only 0.1% in July-September. "The impact of these disasters on shipments and supply will weigh down production and exports," said Yoshimasa Maruyama, chief economist at SMBC Nikko Securities.

For now, the slowdown is expected to be a temporary blip in what could be Japan's longest economic recovery since World War II. GDP growth will bounce back in October-December, according to Taro Saito, director of economic research at the NLI Research Institute. "It is unlikely that natural disasters will put an end to economic recovery," he said.

But the U.S.-China trade war could deal an even heavier blow on Japan's economy. Further escalations "could cause Japan's big corporations to postpone their plans for capital investment," said Ryutaro Kono, chief Japan economist at BNP Paribas Securities (Japan).

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