Investment in Japan
Japan - Investment
Revised GDP data confirms economy’s poor performance in Q1
A second data release confirmed Japan’s economy contracted for the first time in nine quarters at the start of the year. According to revised data released by the Cabinet Office on 8 June, the economy contracted 0.6% over the previous quarter in seasonally-adjusted annualized terms (SAAR) in Q1, which was unchanged from the preliminary estimate. The first-quarter result followed the upwardly revised 1.0% expansion in Q4 2017 (previously reported: +0.6% quarter-on-quarter SAAR). The print represented the end to the longest streak of growth, of two years, seen in the Japanese economy since the 1980s. Q1’s downturn came on the back of a poor performance in the domestic sector. In annual terms, GDP grew an upwardly revised 1.1% in Q1 (previously reported: +0.9% year-on-year), moderating from Q4’s revised 1.9% growth (previously reported: +1.8% yoy).
The revised figures confirmed domestic demand shrank notably in the quarter, driven by a contraction in investment and consumption. Although growth in fixed capital formation in Q1 was revised up, it still recorded a contraction of 0.2% (previously reported: -2.1% qoq SAAR). The second estimate revealed private non-residential investment fared better than initially reported, whereas public investment contracted as opposed to the flat print previously reported. Housing investment dropped more than initially reported, recording the steepest decline in over three years. Consumption growth was relatively unchanged from previous estimates.
The contribution from the external sector was unchanged, as the figures for both imports and exports of goods and services were unrevised. Growth in exports of goods and services moderated to 2.6% (Q4: +9.2% qoq SAAR) on the back of a drop in shipments of electronic components and equipment. Imports of goods and services also slowed significantly in Q1, easing to 1.2% from 12.9% in Q4. The annualized net contribution from the external sector improved, however, from minus 0.4 percentage points in Q4 to plus 0.3 percentage points in Q1.
The deterioration in Q1 demonstrates the economy is still vulnerable to economic shocks, despite the Bank of Japan’s monetary stimulus policy. On a brighter note, the contraction is unlikely to be more than a one-off result, and the economy is expected to return to growth in Q2. GDP in Q2 should be supported by healthy exports amid solid global demand and a recovery in domestic demand amid elevated business confidence.
The Bank of Japan (BoJ) expects the economy will expand between 1.4% and 1.7% in the 2018 fiscal year, which ends in March 2019. In the subsequent fiscal year, the BoJ sees GDP growth at between 0.7% and 0.9%. Met the why particular Consensus Forecast panelists see GDP expanding 1.2% in calendar year 2018, which is down 0.1 percentage points from last month’s projection. In 2019, the panel sees the economy growing 1.0%.
Japan - Investment Data
|Investment (annual variation in %)||5.0||2.9||1.8||1.2||2.5|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||0.05||-4.41 %||Jul 13|
|Exchange Rate||112.4||-0.35 %||Jul 13|
|Stock Market||22,597||0.11 %||Jul 13|
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July 11, 2018
Although core machinery orders—a leading indicator of capital spending over a three- to six-month period—contracted in May, the fall was weaker-than-expected, suggesting that capital expenditure will gain steam further down the road.
July 2, 2018
According to the Bank of Japan’s quarterly Tankan business survey, sentiment among large manufacturers fell in the second quarter of 2018, suggesting economic momentum has yet to gain traction following a weak first quarter.
June 29, 2018
Consumer sentiment inched down to 43.7 in June from 43.8 in May, coming in just below market expectations of a stable print.
June 29, 2018
Industrial production contracted 0.2% on a month-on-month and seasonally-adjusted basis in May, contrasting April’s revised 0.5% increase (previously reported: +0.3% month-on-month).
June 22, 2018
The core consumer price index rose 0.1% in month-on-month seasonally-adjusted terms in May, reversing April’s 0.1% fall. Core inflation was steady at 0.7% in May, unchanged from April and in line with market expectations.